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Senior managers split about role of 50p tax rate and VAT hike, in promoting business growth

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A VAT cut should be prioritised over quantitative easing as a means of stimulating the stuttering economy, say senior managers and directors polled by Interim Partners.

More than half (56%) of the 900 senior managers and directors polled said VAT should be cut to boost the economy, compared to 45% who said that more quantitative easing was necessary.

The research also showed that their directors were split on the 50% tax rate with 49% saying it should be reversed. But the majority (70%) agreed that the rate does not act as a disincentive for senior managers to work hard.

Doug Baird, MD of Interim Partners, said: "Many people think that the case for action to boost the UK's stuttering economy is getting stronger by the day, and senior business leaders say that a cut to VAT would be the most effective way to pump-prime the economy."

VAT was increased from 17.5% to 20% on 4 January this year. On 6 October, the Bank of England announced that it would extend its quantitative easing programme by £75 billion.

Baird added: "Senior managers and directors saw the impact of the VAT increase on businesses' turnover first hand. They now think the time has come for VAT to be cut."

"The Government's deficit reduction plan makes tax cuts difficult. But without a stimulus of some kind the economy could plunge back into recession, lowering the tax take, and widening the deficit further. UK businesses think that makes a VAT cut very attractive."

While they were lukewarm on quantitative easing, an overwhelming majority (83%) of senior managers and directors approved of the Bank of England's current policy of holding interest rates at 0.5%, saying the rate should be held for the rest of the year.

Baird said: "There's a strong consensus among business leaders that now is definitely not the time to start raising interest rates.

"Interestingly, senior managers and directors said that the 50% tax rate does not impinge on staff motivation. I would like to think that this is because at the senior management level may staff are motivated by other factors such as the quality of their work as much as by their take home pay.

"However, I should note that could also be a little to do with self-interest on the part of the interim managers who took part in the survey. Many of them work through their own limited liability company and will avoid the 50% tax rate - this is often seen as a big advantage of working as an interim executive."