THE SELECTIVE EMPLOYMENT TAX AND THE LABOUR MARKET
| Published date | 01 March 1966 |
| Author | K. Hartley,J. P. Hutton |
| DOI | http://doi.org/10.1111/j.1467-8543.1966.tb00933.x |
| Date | 01 March 1966 |
THE SELECTIVE EMPLOYMENT TAX
AND THE LABOUR MARKET
J.
P.
HUTTON* AND
K.
HARTLEY**
INTRODUCTION
THE
British Government has introduced proposals for
a
Selective Employ-
ment Tax.’ The introduction of these proposals will be explained against
the background of some
of
the major problems
of
the economy. The pro-
posals themselves will then be described and their effects analysed. Finally,
we will suggest an alternative to the present proposals. Throughout the
discussion, detailed condderation will be given to the relationship between
the proposed new fiscal device and the labour market.
THE
ECONOMY
In his Budget Speech, Mr Callaghan stated that there were three
objectives
of
the government’s economic policy: first,
a
strong pound;
second, industrial growth; and third, full employment. As he subsequently
admitted, during the recent past the maintenance of the present foreign
exchange rate for sterling has been the dominant objective of policy.
In
other words, policy has largely been concerned with, and dominated by,
the balance of payments and here the National Plan objective is to achieve
a
Enoom. surplus on current account
by
1970. In this context, the evidence
seems to indicate that the concern of successive governments with maintain-
ing and protecting the present exchange rate against frequent ‘crises
of
confidence’ reflects the fact that the relative costs and prices of our goods
and services are out
of
line with those of other nations in the world’s trading
community. Basically, if our relative costs and prices are out
of
line with
those of the rest of the world, British exports become less, and imports
become more, attractive, with a consequent deterioration in our balance
of
payments position
-
a fact which
is
reflected in the foreign exchange market
for sterling. Thus,
it
would seem that the solution to our balance of pay-
ments problem lies in readjusting our relative cost/price position and this
can be achieved through such measures as devaluation or/and deflation.
However, the present government has rejected the former possibility and
has indicated its desire to avoid a substantial deflation (of the traditional
‘stop’ type). In these circumstances,
it
would seem that the government
is
*
Lecturer in Social and Economic Statistics, University of York
**
Lecturer in Economics, University
of
York
1
We are indebted to Professor
A.
T.
Peacock and
Mr
P. Burrows
for
comments on this article;
the authors alone are responsible
for
the views expressed. This article was written before the Bill
had passed through Parliament.
289
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