Better time-off deal is cold comfort for new parents - Tax - Money - The Independent

Better time-off deal is cold comfort for new parents

Maternity leave reform is criticised for not going far enough, reports David Prosser

More help for working families is likely to be a strong theme of Chancellor of the Exchequer Gordon Brown's Budget on Wednesday. The Government has just begun consulting on more generous benefits for mothers and fathers when their children are born. And Brown remains convinced tax credits for parents are the right way to help families in work.

More help for working families is likely to be a strong theme of Chancellor of the Exchequer Gordon Brown's Budget on Wednesday. The Government has just begun consulting on more generous benefits for mothers and fathers when their children are born. And Brown remains convinced tax credits for parents are the right way to help families in work.

However, while parents have welcomed improvements to maternity and paternity rights, some families are disappointed the latest reforms do not go further. And while tax credits are helping many families on tight budgets, the balance between earning a salary and paying childcare costs remains tough.

The Government's latest proposal to help is an increase in the time new mothers may take off work while still claiming salary and benefits. Mothers are currently entitled to six months of paid maternity leave. Assuming Labour is re-elected, this will be extended to nine months from April 2007.

However, many parents may struggle to take advantage of the extra three months, because they will only receive statutory maternity pay during the extension. The period for which employers must pay at least 90 per cent of salary to staff on maternity leave will remain at six weeks. Thereafter, mothers will only be entitled to the state minimum, currently £102.60 a week, but rising to £106 from next month.

Lucy Anderson, a senior policy adviser at the Trades Union Congress (TUC), says the result will be only a small rise in the number of mothers taking their full maternity leave allowance.

"Some employers are already more generous and will continue to do more than the minimum, but for low and medium-paid workers, it is just not possible to get by on statutory pay," Anderson warns. "We welcome the extra three months of paid leave, but it would have been better to extend the period during which 90 per cent of salary is payable."

Ros Hampson, a policy adviser at the Maternity Alliance, a charity that works with parents, is also underwhelmed. She says: "Mums need a living wage, rather than this very low flat rate, because they are otherwise forced back to work."

The charity is campaigning for the introduction of a flat rate of statutory maternity pay worth £224 a week, the equivalent of £6.40 an hour for a 35-hour working week.

However, Hampson is more positive about the Government's plans to give new fathers a better deal.

They are entitled to two weeks off work following the birth of their child, during which time they can claim benefit. From April 2007, however, mothers who go back to work will be able to transfer some of their maternity rights to fathers.

Chris and Virginia Walker, from Bristol, are one couple who would welcome more help for fathers. When the Walkers had their first child two years ago, Chris was delighted to be able to take three months off work to get to know his new daughter Adassa. At the time, he worked for the management consultancy Accenture. The company gave him two weeks off at full pay, but agreed he could also take a further unpaid leave of absence.

"Even when I went back to work, Accenture was very flexible," Chris adds. "I had quite a bit of leave accumulated and I was allowed to take it one or two days at a time so I came back on a part-time basis."

Chris and Virginia are now expecting a new brother or sister for Adassa, who will be two in April. But Chris doesn't expect to be so fortunate with paternity leave this time around. He has since moved job and now works at insurer Axa. It also has a relatively generous policy on paternity leave, but Chris has yet to qualify for full rights there. "Having only been at Axa for a year, it's going to be harder to be so flexible," he says. Chris thinks Axa would be unlikely to allow him to take a long period of leave, even if it was unpaid. But in any case, the couple could not afford to do without his income.

"Any statutory extension of paid paternity leave would be brilliant," says Chris. "When Adassa was born, it was fantastic to be able to spend such a long period with her."

Once maternity and paternity leave come to an end, the finances of having children get even more tricky, particularly as there have been no improvements to families' rights to take parental leave.

In addition to maternity and paternity leave, parents are entitled to take three months off work before their child's fifth birthday. But although Labour's National Policy Forum last year promised to look at improving this right - by making at least some of the leave paid, for example - the latest consultation makes no mention of the benefit.

"Parental leave has just disappeared from the Government's agenda," complains Anderson. "Many parents can't afford to take unpaid leave and it's awkward because you have to take off blocks of at least a week at a time, rather than the odd day here and there, which would suit most parents better."

The Daycare Trust, a charity that campaigns for better childcare, says parental leave could play an important role in helping families cope with the costs of looking after children. It says the average British nursery now charges £138 a week for looking after a child under the age of two.

Steven Burke, the director of the Daycare Trust, says a second problem is that there is an acute shortage of childcare places in many areas of the country. "Availability is still a huge issue," Burke warns.

The trust welcomes new tax breaks on offer from next month. From April, employers will be able to pay staff up to £50 a month in childcare vouchers, free of tax and National Insurance. Both parents will be entitled to claim, if their employers offer a scheme.

In addition, parents who qualify for the Working Tax Credit will be better off. The maximum childcare costs with which parents will be able to claim assistance through the childcare element of the credit will rise from £135 to £175 a week for one child, and from £200 to £300 a week for two children. But larger families don't get any extra help.

The initiatives are good news for working parents, who now represent the majority of families. The Daycare Trust says 58 per cent of mothers with children aged five or younger go back to work, though often on a part-time basis. The figure rises to 78 per cent for families with older children.

The new benefits could save families on the basic rate of income tax up to £800 a year, rising to £1,000 for those on the higher rate.

Back at work for love, not money

Melanie Merriden took maternity leave when her son Freddie, now three, was born. With her second son, Ollie, two next month, she gave up her job and stayed off work until his first birthday. She now works three days a week.

Even with her salary and various state benefits, she and her husband, Trevor, are not much better off than when they were relying purely on his income as a magazine editor.

"Once I have paid our childcare costs and the cost of travel to the office, I reckon we're about £20 up each month from me going back to work," she says.

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