Clause 15

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 10th May 1977.

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Photo of Mr John MacGregor Mr John MacGregor , South Norfolk 12:00 am, 10th May 1977

I agree with my hon. Friend. That is also a problem in attracting people back to this country. I am sure that we are all well aware of examples of this. ICI is a substantial example in point. Large numbers of middle managers overseas are being paid so much more in net take-home pay than their senior directors in this country that there is no possibility of attracting them back.

The majority of managers agree that the lack of financial reward is causing them to be less efficient and less enthusiastic in their work. The ORC survey found that dishonesty is on the increase, and that is a factor of the tax levels which greatly worries me. It is particularly disturbing among this group, which has been one of the most law-abiding groups in the community. Nevertheless, it is beginning to be regarded in that group as legitimate to find ways around the tax system simply to protect one's standard of living. I deplore that, but I fear that the fault lies largely with the Government and with us in this House.

A tenth of managers are now moonlighting. Basically, they are spending a great deal of their time doing jobs sometimes for gain, but sometimes at home on a do-it-yourself basis. They are carrying out tasks for which they would previously have employed people but which they now find it more cost-effective to do themselves. They do that work at the expense of the effort they should be making in the export drive and for their companies at home.

The high level of direct tax has caused a concentration of fringe benefits. I dislike too much of a concentration of fringe benefits. I would much prefer to see a higher level of pay associated with lower tax so that people could spend their money as they wished. However, because of our high rates of tax, fringe benefits have become one of the inevitable ways of seeking to keep management working within a company or in the country. Last year's attack on fringe benefits simply made the situation worse.

That is a brief rundown of the main elements in the survey, and it reveals a most disturbing situation. It is clear that the Government's modest improvement, which puts managers back to roughly where they were last year—or perhaps makes them a little better off—is nothing like enough to deal with the rapid rundown in morale.

I readily concede that alterations to income tax are not the only answer. The incomes policy during the last two years, particularly the cut-off point at £8,500, has hit senior management hard. I accept that British management is sometimes not good enough, but we should be rewarding the brightest managers better and keeping them in this country. I fear that we are losing the brightest and that in some instances we are left with those who are content just to coast along. That is not what we require as a country.

Some loss of morale was caused by the majority report of the Bullock Commmittee. It left many managers thinking that they were left out. Many of the Government's interventionist policies have not helped. Tax has made a big difference and the higher that one is up the incomes scale, the worse one's situation is. I am concerned not just about the rapid loss of morale among management but that the brightest and best of management, many of them young people, will go abroad and that many senior managers at home will make less effort.

It is clear from the survey that I mentioned that the better qualified are more likely to go abroad. Those higher up the scale with more responsibility are more likely to be better. The situation has become much worse during the last two or three years.

Tax measures of the kind proposed in this amendment will help. It is therefore right that we should put these amendments forward in order to draw attention to the problem and to urge upon the Government that what they have done is a start on the right road, but that it does not go anywhere like far enough.