Dr Patrick Nolan: Reducing family breakdown requires fairer incentives within families

Dr Patrick Nolan is Chief Economist of Reform.

Earlier this week Reform issued a new 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.

This means that current arrangements for parental leave are short-changing the families who need it most.  While professionals and managers can rely on generous employer help and afford time off, those in casual and low skilled jobs receive the least pay and take the least maternity leave.

Mothers earning £50,000 and taking six months leave receive nearly £8,000 from the taxpayer.  Mothers earning the minimum wage (£12,000 per year) receive only £4,500. Two thirds of professional/managerial mothers also receive employer based support, while around 10 per cent of mothers in lower skilled occupations receive no maternity pay at all.

British fathers are ‘invisible men’ in the current system, with fathers having few rights to parental leave.  Politicians and commentators have raised a chorus of concern about the absence of the father in the modern home. Policy has largely been limited to campaigns to raise awareness of the value of fatherhood, without tackling the financial disincentives for fathers to take greater responsibility in the home. This is in spite of evidence that families are stronger and fathers more likely to read to their children if they take paternity leave.

The British system also forces mothers to make an “either / or” decision about working or staying at home.  Mothers who want to stay in touch with the workplace without returning full-time are likely to forfeit their maternity pay.  These arrangements are out of touch with modern employment and reflect an outdated idea that what counts is hours spent at work rather than work achieved – that presenteeism matters more than productivity.

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.

These changes 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). These changes would also remove unnecessary bureaucracy facing employers and address a major cause of the disadvantage facing women in the labour market. And families where one parents wants to remain at home would also be provided with the space and flexibility to do this. A more flexible system is better for all families.