After the Budget SIR,-Mature reflection from most quarters has sug-
gested that the Selective Employment Tax is a subtle way of dampening home demand. without over- stimulating wage claims. However, there has been
little recognition that the SET could have more effect on the balance of payments if it were reversed.
The NEDC report Growth of the Economy (March 1964) demonstrated that in almost all the main UK manufacturing industries, productivity (output per employee) is very highly correlated with total output That is, industry is most efficiently staffed at peak output, and over-staffed for average output. It would therefore seem sensible to use the SET to encourage manufacturers to down-staff to the most efficient level, and beat world prices by the use of labour- saving plant
Man-power could then be diverted into the service trades that usually have to function by people rather than equipment to provide transport and distribution, earn the all-important 'invisibles,' and expand the tourist trade. Most important of all, support could be given to the services where Britain's exporters are believed to be at their greatest disadvantage to European and American competitors, namely mar- keting, market research and sales promotion.
London, SW1
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