House of Commons - Social Security - Appendices to the Minutes of Evidence

Select Committee on Social Security Appendices to the Minutes of Evidence

APPENDIX 17

Memorandum submitted by the National Council for One Parent Families (PL 18)

EXECUTIVE SUMMARY

1. INTRODUCTION

As part of the Parental Leave Campaign we support the points made in the joint submission to the Committee which argues for leave which is paid, promoted and operated flexibly. In addition to the arguments put forward in that submission, we make the following specific points in relation to lone parents:

2. PARENTAL LEAVE FOR ONE PARENT FAMILIES SHOULD BE PAID, BECAUSE:

— it promotes genuinely family-friendly employment. Parental leave represents a key staging post along the road to genuinely family friendly employment. The absence of such employment currently creates a barrier to labour market participation for lone parents. If paid, and actively promoted, this leave will provide concrete evidence of the Government's good intentions in this area;

— it ensures that lone parents are not excluded as a group from the new parental leave rights. A large proportion of working lone parents are found in the low wage economy and are simply unable to take the financial risk of having time off with no pay. There is no possibility of a second wage to cushion the impact of such a risk and claiming Income Support in these circumstances is by no means straightforward. In other words, unless it is paid, parental leave for most lone parents amounts to a right on paper only;

— it meets the Government's welfare to work objectives. As sole carers, lone parents put their children's needs first and usually give this as the main reason for postponing economic activity. Paid parental leave would add some flexibility into the home/work equation and would make it possible for more lone parents to prioritise parenting alongside paid work;

— it improves lone parents employment prospects and job security by reducing stress and insecurity at work. Many lone parents report that employers penalise those who have to limit their hours, take time off or rush home when a child is ill. In emergencies, time off may have to be disguised as employee sickness. Along with employment protection and a right to return to a particular job, paid leave sends an important signal to employers that such family time is legitimate and sanctioned by government and depending on the method of payment presents few financial risks for employers;

— it promotes sex equality. Lone parents tell us that despite sex discrimination legislation, the need to take time off is often hinted at in job interviews and absenteeism can be the cause of dismissal. Lone parents feel they are seen as a poor risk and unreliable. Lone parents, the majority female, need to be put on an equal footing with other employees;

— it can increase the amount of parental time available to each child. If made available to non-resident parents and other significant child-carers, it can increase the amount of care available to each child. If other carers, such as grandparents, are not included some children will only have one person eligible to spend time with them. Couples would have the option of two people with paid leave entitlements;

— it puts the needs of children first. By recognising a child's right to more parental time, paid parental leave fosters both good child care practice and healthy child development. As such it should form a key objective in any family policy;

— it meets the government's objectives in relation to tackling child poverty by ensuring that one parent families, the families at greatest risk of poverty, are not exposed to financial insecurity through attempting to take care of their children.

3. THE METHOD OF PAYMENT

Flat-rate or percentage of earnings model: earnings need to be replaced at all income levels for it to be feasible for lone parents to take it. Even lone parents on moderate income levels will find it hard to take leave and many will not have access to an employer-led scheme. Therefore, a reasonable level of flat-rate payment or one based on a high percentage of earnings would be well targeted on all lone parents.

A flat-rate payment could be based on minimum wage levels or minimum income standards. However, any benefit set below previous earnings would act as a disincentive to take parental leave. This would conflict with one of our key objectives for the scheme which is that leave should be actively promoted. The chosen delivery mechanism could either be benefit office based or employer administered. In view of our phased proposal below, the employer-led option is likely to be the more feasible option

Tax Credits model

In view of the current Government preference for Tax Credits, this may prove to be the best delivery mechanism, especially in the short term. This would be politically timely as tax credits are the Government's chosen vehicle for addressing low pay and child poverty issues.

It would provide equity between poorer parents and the more affluent parents who are more likely to have access to contractual arrangements.

From this October, many working lone parents will already be in receipt of tax credits and this may therefore provide the most practical way of delivering payments to one parent families. The tax credit could either be an exact replacement of income based on information already known to the Inland Revenue, or it could be a tax credit based on a flat-rate or percentage of earnings as described above. The advantage of this is that it would meet our priority concern which is that lone parents on low incomes should not be excluded from the new leave entitlement.

Another advantage is that mechanisms are already being put in place to administer such a scheme and this might allow its rapid adoption without significant extra expense or administrative machinery. The necessary information on earnings, entitlement and time taken would already be held centrally by the Inland Revenue.

Phasing-in

In our view using tax credits as a first step need not prevent the government from expanding the scheme from this basic model to cover other income groups at the same time or at a later stage. If the tax credit is based either on a flat-rate or percentage of earnings, this would make it possible for this to form the basis for a wider scheme available to all employees whether or not on low earnings. This could be recoverable by employers up to a certain level, topped-up or replaced by employers through contractual schemes or added to by parental leave accounts.

Thus a phased development of parental leave payments could begin, delivered initially to those on low incomes through tax credits and then expanded to all income levels through a combination of Government and employer-led payment systems.

1. INTRODUCTION

Since 1918, the National Council for One Parent Families (NCOPF) has been a unique national centre of expertise on lone parenthood. Throughout our history, the organisation has been dedicated to campaigning for equality of opportunity for one parent families and tackling the exclusion, poverty and prejudice they so often face. There are currently about 1.7 million lone parents in the UK today who care for approaching three million children[71]. It is estimated that by the turn of the century, at any one point in time, nearly a quarter of children will live with just one of their parents and between a third and a half will experience life in a one parent family before they reach adulthood. Nine out of 10 lone parents are women.

2. THE CASE FOR PAID PARENTAL LEAVE FOR ONE PARENT FAMILIES

The National Council for One Parent Families are keen to press the case for making such leave a paid entitlement at least for all low income parents. We see this as an essential element in the Government's welfare to work strategy. We are keen supporters of an active employment strategy for lone parents and have argued consistently for the removal of the barriers to paid work. The New Deal for Lone Parents represents an essential element in this strategy and in the government's overall welfare to work objectives. We believe paid parental leave would both support and strengthen this policy.

To date, one of the key barriers to paid work has been the absence of any significant family friendly initiatives designed to help parents to combine paid work with the responsibilities of looking after children. The National Childcare Strategy along with the proposed adoption of the EU Parental Leave Directive now mark major steps in this direction. For lone parents this is vital recognition of the fact that they carry sole responsibility for childcare, often with little help. Their children may need additional support, particularly following the trauma of their parents's separation. We therefore applaud the decision to introduce Parental Leave in this Parliament

However, lone parents currently risk their own job security at those times when they need to provide this support and for some this means leaving work and returning to Income Support in order to prioritise their children or deciding not to risk taking a job. Thus, for some, the lack of family friendly terms and conditions risks jeopardising the aims of the government's employment strategy. For this reason, we make the case for paid parental leave.

2.1 PAID PARENTAL LEAVE PROMOTES FAMILY-FRIENDLY EMPLOYMENT

Lone parents' situation could be seen as the mirror image of the situation faced by fathers in couples. For lone mothers, participation in paid work is problematic because the demands of employment conflict with the demands of providing adequate parenting time as a sole parent. For fathers the demands of work and the breadwinner role win out and for lone parents the needs of their children take precedence over economic activity both as a matter of priority and because often there is no-one with whom to share this responsibility. In both cases paid parental leave provides a way to redress the balance between work and child care making it possible to combine both earning and caring.

Like many women in couples lone parents often prefer to work part-time in order to combine employment with childcare responsibilities. This preference is clearly linked to constraints imposed by children's needs and the availability of suitable childcare. Changes in lone parents's working patterns have not necessarily mirrored the changes for other women. Between 1979 and 1996 the number of married women with children in paid work increased by over a quarter, whereas there has actually been a decline of about one tenth in the proportion of lone parents in paid work over the same period[72]. The steepest decline has been in the number working full-time (which has fallen by over a quarter) while the number in part-time work has remained fairly static.

In one study, when asked what were the most important factors that would help them into paid work, lone parents gave reliable child care, good wages and job security as the top three most important work incentives (only one in 20 saw family credit as the major incentive to paid work).[73] One in 10 also saw "convenient hours" and being "able to take time off" as the most important incentives. Lone parents working part-time were the most likely to feel that convenient hours were very important to fitting work around childcare or school hours.

Parental leave represents a key staging post along the road to genuinely family friendly employment. The absence of such employment currently creates a barrier to labour market participation for lone parents. If paid, and actively promoted, this leave will provide concrete evidence of the Government's good intentions in this area.

— Parental leave should be paid because it promotes genuinely family-friendly employment.

2.2 PAID PARENTAL LEAVE PREVENTS THE EXCLUSION OF LONE PARENTS

Poverty, debt and hardship are everyday experiences for most lone parents despite trying their utmost to protect their children from its worst effects. Three in five lone parents (or 63 per cent) live in poverty (defined as having incomes below half the average income after housing costs) and as such are the group at greatest risk of poverty in the UK.[74] This proportion of lone parents living in poverty has increased from 19 per cent in 1979. The number of individuals in one parent families living in poverty rose from 437,000 in 1979 to 2.8 million in 1996.

Typically, lone parents's incomes are less than half those of two-parent families, with average net incomes a little over £100 a week.[75] Fifty-nine per cent of lone parent families are living on gross weekly incomes of less than £150 per week compared to just 7 per cent of married couples and 18 per cent of cohabiting couples.[76] Less than two-thirds of lone parents rely on Income Support (IS) as their main source of income and about one quarter (more than half of the remainder) claim Family Credit (FC).[77] Just over half of all FC claimants are lone parents.

For many working lone parents having a job is no guarantee of being free of poverty. In fact, the income of some 29 per cent of lone parents in paid work falls below half the national average.[78] The contribution made by earnings to lone parent incomes is actually quite small with wages representing only 37 per cent of gross household income on average, while benefits make up 50 per cent.[79] For the eight out of ten lone parents on means-tested benefits, benefit income makes up three-quarters of their income.[80]

Recent evidence suggests that in addition to the unemployment and poverty traps, lone parents are strongly affected by a "hardship trap" where those experiencing the most severe hardship on benefit are more likely to be out of work for longer. One study showed that those in severe hardship in 1991 were less likely to have jobs even four years later in 1995.[81] So experience of hardship makes it harder to join and to stay in the labour market.

Nearly 80 per cent of women who work part-time have gross earnings below the Council of Europe's Decency Threshold[82]. In these poorer paying jobs the chances of wage improvement or earnings progression is limited thus raising questions about lone parents's ability to prosper in these circumstances. In fact, many lone parents are unable to sustain FC employment and return to Income Support within a relatively short period.[83]

Half of lone parents in paid work are claiming FC. Lone parents make up 51 per cent of all families claiming FC.[84] The average number of hours worked per week on FC is 25, compared to nearly 34 hours a week for claimants in couples. The remuneration for this work is small with 40 per cent in receipt of the maximum FC available. This may be partly explained by the fact that lone parents are concentrated in traditionally low-paying jobs such as clerical work, selling, catering, cleaning, hairdressing, personal services and repetitive assembling. When last reported, they made up about 69 per cent of all lone parent occupations on FC.[85] Perhaps unsurprisingly, these occupations figure prominently in some of the poorest paid jobs in the UK.

A large proportion of working lone parents are found in the low wage economy and are simply unable to take the financial risk of having time off with no pay. There is no possibility of a second wage to cushion the impact of such a risk and claiming Income Support in these circumstances is by no means straightforward. In other words, unless it is paid, parental leave for most lone parents amounts to a right on paper only.

— Parental leave should be paid because it ensures that lone parents are not excluded as a group from the new parental leave rights.

2.3 PAID PARENTAL LEAVE MEETS KEY WELFARE TO WORK OBJECTIVES

Taking paid work is one way of finding a route out of poverty and towards a better standard of living for lone parents and their children. However, the move into employment means trying to earn enough to compensate for the lack of a potential second wage-earner, to cover the costs of children, childcare and other work-related expenses from one wage. It means compensating for the associated reduction or loss of certain benefits (such as free school meals, Housing Benefit or mortgage interest payments in IS) as well as coping with an increase in work-related expenses (such as travel, clothes, meals and childcare). It also means trying to carry the sole responsibility for parenting along with holding down a paid job.

We know that the government is looking at ways of tackling the problem of housing costs in its review of Housing Benefit and the Childcare Tax Credit will make a significant contribution towards childcare costs from October. Paid parental leave is another crucial step towards removing these significant barriers to entering paid work.

In Britain rates of employment for lone parents are far below most other European countries—40 per cent are in work here compared with over 70 per cent or 82 per cent in Sweden or France respectively.[86] However, lone parents in the UK have very high childcare costs compared to other countries because of the low level of public subsidies. International research into lone parent employment in 20 countries identified the high costs of childcare as the primary reason, along with housing costs, for our low rates of lone parent employment.[87]

However, although 90 per cent of lone parents say they would like to work at some point, this does not mean that they are "work-ready" straight away. It is estimated that about 3 in 10 is already working nearly full-time, 3 in 10 are ready to work, 3 in 10 will work one day and 1 in 10 will never be able to work. Those planning to work at some point in the future often cite the age of their child or settling them in school at a certain age as the key determinant of when work will be a feasible option. The key point is that there are enormous problems faced by lone parents who wish to take paid work when caring for children alone. It should be noted that nearly 40 per cent of lone mothers has a child under the age of five years, a figure which rises to just over 50 per cent of lone parents on Income Support.[88]

As sole carers, lone parents put their children's needs first and usually give this as the main reason for postponing economic activity. Paid parental leave would add some flexibility into the home/work equation and would make it possible for more lone parents to prioritise parenting alongside paid work.

— Parental leave should be paid because it meets the Government's welfare to work objectives.

2.4 PAID PARENTAL LEAVE IMPROVES EMPLOYMENT PROSPECTS

Many lone parents report that employers penalise those who have to limit their hours, take time off or rush home when a child is ill. In emergencies, time off may have to be disguised as employee sickness. Along with employment protection and a right to return to a particular job, paid leave sends an important signal to employers that such family time is legitimate and sanctioned by government and depending on the method of payment presents few financial risks for employers. As one lone parent told us: "work is so difficult for lone parents (due to) childcare issues/hours of work vs. school day/stress and the difficulty of running a home and working. Lone parents often have very little social life."

— Parental leave should be paid because it improves lone parents employment prospects and job security by reducing stress and insecurity at work.

2.5 PAID PARENTAL LEAVE PROMOTES EQUALITY BETWEEN THE SEXES

Over ninety per cent of lone parents are women and as such they suffer the same levels of discrimination both direct and indirect as other women. On average women still earn 80 per cent of male adding to the problems of in-work poverty faced by many lone parents.[89] Women make up 77 per cent of those earning below the Lower Earnings Limit for National Insurance (nearly 2 million women compared to 0.6 million male employees).[90] Three-quarters of the low paid are women and two-thirds of low paid workers are part-timers.[91] Over half of low paid workers are women part-time workers. We hope that the minimum wage will have some impact on this.

In addition to these financial differences, there is some evidence that lone parents suffer discrimination in employment because of their parenting role. Lone parents tell us that despite sex discrimination legislation, these issues are often hinted at in job interviews and can be the cause of dismissal. Lone parents feel they are seen as a poor risk and unreliable. Lone parents, the majority female, need to be put on an equal footing with other employees.

— Parental leave should be paid because it promotes sex equality.

2.6 PAID PARENTAL LEAVE HELPS TO INCREASE PARENTAL TIME

Caring for children alone is a demanding job, the more so if you are also trying to hold down a paid job. As sole carers and responsible parents—lone parents have to balance the needs of their children with the demands of paid work. For example, many need to spend considerable time with their children following the trauma of separation and three in 10 non-working lone parents state that their own ill-health or disability makes it difficult for them to take paid work. A quarter of lone parents say that a child has a long-term illness or disability of some kind. For these and many other reasons, part-time working is often the preferred first option when considering joining the labour market.

If made available to non-resident parents and other significant child-carers, paid parental leave can increase the amount of care available to each child. If other carers, such as grandparents, are not included some children will only have one person eligible to spend time with them. Couples have the option of two people.

— Parental leave should be paid because it can increase the amount of parental time available to each child.

2.7 PAID PARENTAL LEAVE PUTS CHILDREN'S NEEDS FIRST

By recognising a child's right to more parental time, paid parental leave fosters both good child care practice and healthy child development. As such it should form a key objective in any family policy.

— Parental leave should be paid because it puts the needs of children first.

2.8 PAID PARENTAL LEAVE HELPS TO TACKLE CHILD POVERTY

On separation or divorce, mothers and children usually see a substantial fall in their income of about £20 a week on average; compared to fathers who are likely to see an increase of about £10 a week.[92] This, despite the fact that many will have been living on a relatively low income with their former partner. Like women in couples, lone parents find that caring for young children affects their ability to take paid employment and some prefer to be full-time mothers or work part-time. The difference is, that without a partner's income (and their help with childcare) many lone parents have to rely on state benefits to top-up their income. With the exception of widows' benefits help for one parent families has always been through means-tested benefits paid at subsistence levels. For lone parents in paid work wages are often low and about half claim family credit to top-up their wages at present.

Lone parents are disproportionately affected by poverty for a number of reasons. Chief among these are the cost of having children and the loss of earning power that results. The fact that, at present, most lone parents are women is key to understanding the prevalence of poverty in one parent families. They are likely to earn significantly less than men, to be in low paid work and are more likely to be employed in the non-standard or "flexible" economy. As a result, children in one-parent families are much more likely to be poor and to go without than children in two-parent families irrespective of whether or not their parent is working.[93] Lone mothers themselves are 14 times more likely than other mothers to go without food themselves in order to meet the needs of their children.

Paid parental leave helps to ensure that one parent families, the families at greatest risk of poverty, are not exposed to financial insecurity through attempting to take care of their children.

— Parental leave should be paid because it meets the government's objectives in relation to tackling child poverty.

3. THE METHOD OF PAYMENT3.1 GENERAL

— income must be replaced in full to make parental leave a viable option for most lone parents;

— there should be no lower income restriction based on earnings or National Insurance (unless those earning below the lower earnings limit are credited-in);

— there should be no or minimal length of service requirement

3.2. TYPE OF PAYMENT AND DELIVERY METHOD

Payment options:

— a flat-rate payment perhaps at minimum wage level, or

— a percentage replacement of earnings, or

— an income-related payment targeted at low earners, or

— based on individual parental leave accounts.

Delivery method options:

— paid by the state as a benefit; or

— payments replaced or matched by good enough employer schemes; or

— paid by employers as a tax credit or paid as an employer administered benefit (as for SMP) and re-claimed from the state; or

— a combination of the above.

3.3 THE FLAT-RATE OR PERCENTAGE OF EARNINGS MODEL

Earnings need to be replaced at all income levels for it to be feasible for lone parents to take it. Even lone parents on moderate income levels will find it hard to take leave and many will not have access to an employer-led scheme. It would have to be available to full and part-time employees alike. Therefore, a reasonable level of flat-rate payment or one based on a high percentage of earnings would be well targeted on all lone parents. A flat-rate payment could be based on minimum wage levels or minimum income standards. However, any benefit set below previous earnings would act as a disincentive to take parental leave. This would conflict with one of our key objectives for the scheme which is that leave should be actively promoted. However, the cost of such a scheme with high replacement rates might prove unattractive to government and instead, payments above a certain level might be topped-up by employers or through the promotion of individual parental leave accounts.

The chosen delivery mechanism could either be benefit office based or employer administered. In view of our phased proposal below, the employer-led option is likely to be the more feasible option and can be built on for all employees. The disadvantage here is the visibility of payments to employers and the potential for discrimination against those seen as adding to administrative burdens. From this point of view, the anonymity of the benefit office might be preferred. However, on balance, employers may be in a better position to deal with the administration of leave in a flexible way as they already have information about time taken and leave owing.

3.4 THE TAX CREDITS MODEL

In view of the current Government preference for Tax Credits, this may prove to be the best delivery mechanism for low income families, especially in the short term. This would be politically timely as tax credits are the Government's chosen vehicle for addressing low pay and child poverty issues. This would provide equity between poorer and more affluent parents who are more likely to have access to contractual arrangements.

Some disadvantages of employer administration remain and a mechanism is needed to avoid the rigidity imposed by the six-monthly period of payment for WFTC. The parental leave credit could be triggered within a period of entitlement, authorising employers to pay a tax credit to replace earnings up to a certain level.

3.5 PHASING-IN

In our view, adopting Tax Credits as the initial phase would not prevent the government from expanding the scheme from this basic model to cover other income groups at the same time or at a later stage. If the tax credit is based either on a flat-rate or percentage of earnings, this would make it possible for this to form the basis for a wider scheme available to all employees whether or not on low earnings. In this way a model similar to SMP could be achieved where leave paid to other employees could be paid up to a level of subsidy set by the government and then topped up by employers of individual leave accounts above this level perhaps alongside tax credits. Of course, the basic level would have to be high enough so as not to act as a disincentive to take leave for those on slightly higher earnings. In this way, it ought to be possible to tie-in the two systems. This could be recoverable by employers up to a certain level, topped-up or replaced by employers through contractual schemes or added to by parental leave accounts.

71 Ford R and Millar (Eds)(1998) Private Lives and Public Responses, PSI. Back

72 ONS (1998) Living in Britain: Results from the 1996 General Household Survey, London: The Stationery Office, Table 5.2. Back

73 Ford R, Marsh A and McKay (1995) Changes in Lone Parenthood, DSS, London: HMSO. Back

74 DSS (1998) Households Below Average Income Figures: 1979-1996/97, Gov. Statistical Service. Back

75 Marsh A, Ford R and Finlayson L (1997) Lone Parents, Work and Benefits, DSS, London: The Stationery Office. Back

76 (1998) Living in Britain: Results from the 1996 General Household Survey, Table 2.8, London: The Stationery Office. Back

77 Own estimates based on Haskey J, (Spring 1998) One Parent Families and their dependent children in Great Britain, Population Trends 91, ONS; Ford R and Millar (Eds) Private Lives and Public Responses, PSI; DSS, Income Support Quarterly Statistics Enquiry, November 1998; and DSS, Family Credit Quarterly Statistics Enquiry, November 1998. Back

78 Kemp M, Webb S and Millar J (1997) The Changing Face of Low Pay, The New Review, Low Pay. Back

79 ONS (1997) Social Trends 27, London: The Stationery Office. Back

80 Marsh A, Ford R and Finlayson L (1997) Op C. Back

81 Bryson A, Ford R and White (1997) Making Work Pay, York: Joseph Rowntree Foundation. Back

82 Pile H and O'Donnell C (1997) from: Britain Divided, London: CPAG Ltd. Back