Select Committee on Social Security Appendices to the Minutes of Evidence


Memorandum submitted by Ms Ruth Kelly MP (PL13)



  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.
Take-up in last year
Take-up in last 2 years
Take-up in last 5 years
Bank of England
1 or 2 where the women earns more

  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 parentFemale
CouplesMale sole-earner
Female sole-earner

  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

100 per cent
90 per cent
50 per cent
30 per cent

  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.

£ million
£60 a week
£100 a week

10 per cent
15 per cent
20 per cent
25 per cent
30 per cent

£ million
£60 a week
£100 a week

30 per cent
40 per cent
50 per cent
60 per cent
70 per cent

  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.


  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

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