APPENDIX 13
Memorandum submitted by Ms Ruth Kelly
MP (PL13)
PAID PARENTAL
LEAVE
Introduction
A central challenge for the Government over
the coming years will be to portray itself as the party of the
family. Parental leave from work will soon become a right for
workers in the UK, as it is already for employees in most other
European countries. But for most employees—particularly,
the low paid and fathers—time off will only be taken if
it is paid. Paid parental leave, if carefully formulated and implemented,
could form part of a package of reforms putting the family firmly
back at the heart of the political agenda.
The British debate on parenting has often assumed
that there is an inherent conflict between "family"
policy and equity between men and women. It was assumed that the
former was aimed primarily at encouraging women to stay at home
to look after the children, and the latter at encouraging women
to move out of the home and into the workforce. It need not be
so. Indeed, it is now essential for policy-makers to recognise
that the traditional family model based on one bread-winner and
a stay-at-home mother is breaking down for both financial and
social reasons. Many families now combine two earners, with an
increasing number having two full-time workers.
The changing pattern of family life has already
been recognised by the Government, with family policy so far concentrating
on making work pay for low income families, and enabling them
to have access to good quality, affordable childcare. The record
is impressive. The Working Families Tax Credit tops up the income
of low-income households with children, and the minimum wage sets
a floor under earnings. The Childcare tax credit will subsidise
childcare places for the first two children on a sliding scale
in low to middle-income families. The record increase in child
benefit will also make the option of one parent staying at home
to look after the children more economically viable, and the continued
universality of such payments ensure that they do not exacerbate
any "poverty trap" in which benefits are foregone when
people choose to take up work.
The proposals to make work pay have gone hand
in hand with a strategy to encourage lone parents back into work—with
the primary motivation being to decrease dependency and create
a working role model for children in such households, widening
the horizons of the next generation. All of these are essential
to any policy for the family. But it is time now to move on. Central
to any strategy for the family must be policies to alleviate some
of the pressures placed on relationships by long hours and heavy
demands at the workplace for both men and women, squeezing the
amount of time they are able to spend at home with the children.
This "parenting deficit" can result in insecure relationships
and attachments between parents—especially fathers—and
their children, and has increasingly been associated with children's
behavioural problems later in life as well as juvenile crime.
The Government's "Fairness at Work"
legislation starts off this important process, helping men and
women combine work and family life. As well as provision for parents
to take time off for domestic emergencies, the package includes
an entitlement to three months parental leave, which is intended
to enable "fathers, as well as mothers, to play an active
role in raising their children and [help] to encourage a workplace
culture where it is acceptable for them to do so." [49]Currently
just 3 per cent of employers offer any arrangements for parental
leave—and the new arrangements provides a real opportunity
to help people balance the demands of the workplace with the need
to spend time with their children. The problem is that, if unpaid,
leave is unlikely to be taken up in sufficient quantities to make
a real difference to people's lives and is highly unlikely to
be taken up by single parents, the low-paid or fathers.
What will be the impact of unpaid parental leave?
Unpaid parental leave—as outlined in the
EC directive shortly to be implemented in the UK—will clearly
bring benefits to some families. It entitles both parents to leave
of at least three months per child to be taken before the child
reaches the age of eight.
Unpaid leave is useful to workers in some contexts.
There will be some working parents who face near crisis point,
insufficient to take domestic incidents leave but sufficient for
them to be unable to work for a short period. They are likely
to be lone mothers, or mothers with working partners, who are
low-paid and receive no annual leave beyond the statutory minimum.
The right to return and protection from detriment will give them
job security during this time.
A few working mothers with working partners
who are either able to save their income or who are genuinely
earning income which is only marginal to the family budget may
be able to afford to take unpaid parental leave. But this is only
a small group of women.
Fathers are particularly unlikely to take parental
leave, if it is not paid. There is some limited experience of
the take-up of unpaid leave in the UK. The table below looks at
the experience of the financial sector.
| Institution |
Take-up in last year |
Take-up in last 2 years
| Take-up in last 5 years
|
| Bank of England | Nil
| Nil | 1 or 2 where the women earns more
|
| Barclays | 15
| 16 | 42
|
| Lloyds/TSB | 7
| | |
| | | |
|
Source: "Parental Leave" in the finance sector—do
men take unpaid leave? TUC, November 1998
These banks alone employ 130,000 people, but the take-up
has been almost negligible. The scheme at Barclays is available
only to male employees—but over the past five years only
42 men have chosen to take it up. There are two other employers
(Bank of England and Lloyds/TSB) who provide a form of "parental
leave", but in reality it amounts to nothing more than allowing
married couples to share the unpaid element of the mother's maternity
leave.
Indeed, men are unlikely to take unpaid leave even for short
periods immediately surrounding the birth of their child. According
to a survey from the Equal Opportunities Commission, about one
third of workforces employing men have paternity leave arrangements;
paid leave averaged four days and "whilst some companies
offered unpaid leave, it was rarely used".
International experience also suggests that take-up of unpaid—or
even means-tested—leave by men is minimal. The contrasting
experience of Sweden, which offers leave paid at 86 per cent of
previous earnings, and the Netherlands, which only offer unpaid
leave, illustrates the point. In Sweden, 78 per cent of men take
some leave and 90 per cent of women. By contrast, in the Netherlands,
only 40 per cent of women take some leave, and only 9 per cent
of men. In the United States, parents are entitled to 24 weeks
unpaid leave—but the culture is such that estimates suggest
that less that 4 per cent of employees take any at all.
It is possible, under a system of unpaid leave, that larger,
"good" employers will, in fact, start themselves to
offer paid parental leave as a perk to their employees. The business
case for family-friendly policies is increasingly being recognised,
reducing turnover, increasing commitment to the firm, and reducing
stress among employees. Smaller companies, however, could find
the burden of offering even unpaid leave difficult, and argue
that it would bear down disproportionately on their cost base
and add to the "red tape" on business.
Indeed, even given the ability of some firms to offer to
pay employees during their parental leave, the Department of Trade
and Industry assumes that only 35 per cent of mothers and 2 per
cent of fathers are likely to take any of their parental leave
entitlement, as the framework stands. [50]
In summary, three main categories of people may take advantage
of unpaid parental leave:
— the low-paid, particularly single mothers, at
crisis points;
— women whose income is marginal to the family income,
or who have saved specifically for the purpose;
— women (and a few men) employed in those large
companies, which choose to pay staff on parental leave.
The result is that a whole tier of Britain—particularly
fathers—will be unable or unwilling to benefit from unpaid
leave.
Should parental leave be paid?
Before considering whether the state should pay for an element
of parental leave, it is essential to assess any proposals against
the objectives:
— to enable, both well-paid and low-paid men and
women to spend more time with their children;
— to enable parents out of work to be able to work
if they so wish;
— to encourage those who can to save for parental
leave;
— to encourage "good employers" to top
up the rates offered; and,
— to be simple to administer.
A tax credit?
One option which has been proposed by the Low Pay Unit is
to use the tax credit system. The Low Pay Unit argues that the
new Working Families Tax Credit (WFTC) would be "an ideal
vehicle for the delivery of paid parental leave, and would minimise
administration costs". Certainly there would be some advantages
to such a system. Under the WFTC, the tax credit received from
the Inland Revenue will be calculated in relation to earnings
and family circumstances—requiring details of the partners'
earnings and employment details—and paid by the employer
on top of wages. It would be fairly simple for the Revenue to
top up an individual's wages with a family leave credit.
But using the tax credit system has serious drawbacks, when
assessed against the full objectives. In particular, by only providing
for paid leave for families in receipt of WFTC, it ignores most
parents. Take a look at the breakdown of the recipients of WFTC,
by family type
| Family Type | | Number of recipients
|
|
| Lone parent | Female | 580,000
|
| Male | 30,000
|
| Couples | Male sole-earner |
480,000 |
| Female sole-earner | 100,000
|
| Total | | 1,400,000
|
|
| | |
Estimates for 2000-1, the first full year of the Working
Families Tax Credit
Source: Hansard, 13 May 1999, WPQ HMT REF: 1757N 98/99
Clearly, a parental leave tax credit based on the WFTC would
help single parents in work and help those single parents who
wish to get back into the jobs market, but are afraid of not being
able to cope with the demands on their time from children. It
would also help up to 100,000 women who are the main earners in
two-income families, who wish to take time off. The only men likely
to be tempted to take leave would be those in dual-earner couples,
who are not the main breadwinner. The fact is that a tax credit
system based on the WFTC is unlikely to attract many men and would
do nothing to encourage lower to middle income families to use
the leave.
There are two other main payment possibilities: a percentage
of earnings along the lines of Statutory Maternity Pay, and a
flat rate payment.
A percentage of earnings?
Paying leave at a percentage of previous earnings would be
relatively straightforward to administer, as a system of statutory
maternity pay (SMP) is already up and running. Any system which
met the objectives of enabling lower-income parents to take the
leave, however, would be relatively expensive, as the percentage
rate would have to be set at a high level. It is also only under
a high earnings replacement rate that men start to take parental
leave.
A high rate has the further advantage of encouraging "good"
employers to top it up. Experience suggests that employers are
keener to top up higher level SMP from 90 per cent to 100 per
cent (first six weeks) of pay than they are to top up lower level
SMP, for example.
The table below sets out some costs of an entitlement of
13 weeks of parental leave for different rates of earnings replacement,
assuming take-up of 90 per cent for women and 50 per cent for
men.
| Rate of Earnings Replacement | £ million
|
| Mothers
| Fathers |
|
| 100 per cent | 830
| 2,610 |
| 90 per cent | 745
| 2,350 |
| 50 per cent | 415
| 1,305 |
| 30 per cent | 250
| 785 |
|
Source: Hansard, 17 May 1999, WPQ 1460/1998/99.
A flat rate?
A flat rate payment has several advantages. Depending on
the level at which it is set, is could help both men and women
to take time off work to spend time with their children—particularly
in poor families. It would probably have to be set at around the
level of the minimum wage, if it were not to penalise taking time
off work for parental leave. It if were set at the level of the
minimum wage, wealthier families would be encouraged to save for
parental leave, and "good employers" to top up its value.
A flat rate payment would also certainly have the benefit of simplicity
and ease of administering. It would also help employment policy,
maintaining the incentive to work before childbirth and easing
the transition to work for poor parents.
The table below sets out the potential costs involved, assuming
different rates of take up for mothers and fathers and different
rates of payment.
|
| Fathers | £ million
|
| Take-up | £60 a week
| £100 a week |
|
| 10 per cent | 30
| 55 |
| 15 per cent | 50
| 80 |
| 20 per cent | 65
| 110 |
| 25 per cent | 80
| 135 |
| 30 per cent | 95
| 160 |
|
| Mothers | £ million
|
| Take-up | £60 a week
| £100 a week |
|
| 30 per cent | 75
| 125 |
| 40 per cent | 100
| 165 |
| 50 per cent | 125
| 205 |
| 60 per cent | 150
| 250 |
| 70 per cent | 175
| 290 |
|
Source: Hansard, 17 May 1999, WPQ 1461/1998/99
On a realistic estimate, assuming 15 per cent of men take
up their parental leave entitlement and 50 per cent of women,
the total cost of providing a flat-rate payment of £100 a
week would be £285 million. This could be a building block
for more generous entitlement in the future.
Conclusion
Paying for parental leave is one way the Government could
bolster family life, by alleviating some of the pressure on parents
today. Both a flat rate and an earnings replacement method could
achieve that objective. A flat rate would have the advantage of
being less costly, and could act as a staging post on the way
to more generous entitlement in the future. Much more difficult
than paying for leave, however, will be promoting a radically
different culture in society and in the workplace which recognises
and values the role of both mothers and fathers in parenting and
accepts that parents must have flexibility and support to bring
up their children properly.
June 1999
49
Hansard, 21 January 1999: Column 542 Back
50
Hansard, 12 May 1999, WPQ No 98/2003 Back
| 
