By Patrick Nolan, Chief Economist, Reform
The government has revived the proposal for fathers to be eligible for six months of paternity leave while their baby’s mother returns to work. The government is not alone in looking for ways to help reconcile the challenges facing working families with young children, with the Liberal Democrats proposing 19 months of more generous parental leave (able to be taken by any parent) and the Conservative Party proposing flexible parental leave to help make Britain more family friendly.
The government’s proposal has, understandably, caused concern among business groups. One reason for this concern is the costs to businesses of administering this proposal – as it will require employers to monitor the leave use and entitlement of the spouse that does not work for them.
Indeed, the costs of administering the proposal alone were identified as between £8.4 million to £12.2 million in the first year, with businesses facing £1.8 million to £5.6 million of these costs. This is before we add in the direct costs of paying extra paternity pay, which could be around £500 million per year.
In an era when the UK is facing the toughest spending cuts for 20 years, this proposal is quite simply unaffordable. But more importantly this proposal also illustrates that current policy on reconciling work-life balance is stuck in a rut. Spending more money and extending the existing offer will not address the underlying problems in the existing system of statutory maternity and paternity pay – a new approach is needed.
Last year Reform issued a report, Productive parents, on Britain’s support for families with new children. The report concluded that these arrangements, especially maternity pay and leave, are unfair, anti-dad and bad for business. The study showed that fathers are treated as an irrelevance and that government maternity pay is more generous for rich mothers than poor.
Given these outcomes, Reform investigated what would be required to develop a system where parents are provided with the financial means to organise their lives flexibly and are given the room to choose what is best for them. To do this Reform proposed:
- Turning maternity pay into a flat rate ‘parental payment’ of £5,000, payable monthly and shared between the mother and the father. That equates to £192 per week, compared to the current basic statutory maternity pay of £123 per week.
- Providing six months of unpaid leave to each of the mother and the father, during the first year of a child’s life, to be taken at the same time or one after the other.
- Giving the parental payment regardless of the length of leave taken.
- Abolishing ‘gimmick’ programmes such as the health in pregnancy grant, the healthy start scheme and the employer supported childcare schemes, saving £275 million per year.
- Reforming flexible working regulation to make it easier to introduce.
- Reducing regulation on childcare provision.
- Accelerating reform of education, skills, health and welfare provision in order to help unemployed parents keep in touch with employment.
The introduction of parental pay could be made easily, using existing administration for the Child Benefit or Child Tax Credit, and at no cost to the taxpayer (or even with a cost saving). Further, by changing existing maternity pay into a flexible parent pay that working parents receive at the same rate, bureaucracy can be removed and new flexibility can be introduced. With the payment going to families and not being paid for taking time off, employers can be exempted from costly and bureaucratic meddling.
By reducing bureaucracy and costs to business, Reform’s proposals would encourage greater business support for flexibility in employment. This flexibility would provide an important stimulus to the economy and lead to a fairer outcome for families. This would also address a major cause of the disadvantage facing women in the labour market (when employers are reluctant to hire mothers due to the hassle of complying with maternity leave requirements). A simpler and less costly system is better for everyone.
