Patrick Nolan, Chief Economist, Reform.
Earlier today the Deputy Prime Minister, Rt Hon Nick Clegg MP, argued that Britain needs a better system of parental leave for families with a new child. He is right. As Reform showed in a 2009 report, Productive parents, Britain’s support for families with new children, especially maternity pay and leave, is unfair, anti-dad and bad for business. Fathers are treated as an irrelevance and government maternity pay is more generous for rich mothers than poor.
Yet, as I noted when this issue was raised early last year, the proposal to allow couples to share leave has, understandably, caused concern among business groups. One reason for this concern is the cost 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. With the difficult trading environment facing many businesses, and the uncertain state of the labour market, this is not the time to be increasing the regulatory burden facing businesses.
Given this there is a need to develop a system where parents are provided with the support to organise their lives flexibly, while fiscal costs are reduced and bureaucratic meddling eliminated. As Reform has shown this could be done through moving to a system where parents are provided with a flat rate ‘parental payment’ and making leave unpaid. As the payment would be no longer tied to taking time off employers could be exempted from costly and bureaucratic meddling (the Reform proposals are discussed in greater detail here).
Although well-intentioned, government policy on parental leave is stuck in a rut. Rather than an expensive and complex extension of existing arrangements a new approach is required. Given the state of the public finances and outlook for the labour market this is more important than ever. As the Nobel Prize winning physicist Lord Earnest Rutherford once said: “we don’t have the money, so we’ll have to think.”