Employers dismayed by improvements in maternity benefits: Labour attacks Government's 'daft' stance on Social Chapter

IMPROVEMENTS to maternity pay announced yesterday by Peter Lilley, the Secretary of State for Social Services, provoked a lukewarm response from Labour and dismay from employers who will pick up the additional pounds 55m-a-year bill.

Labour said that Mr Lilley, a right-winger, had been dragged 'kicking and screaming' into implementing the improvements under the EU Directive on the Protection of Pregnant Women at Work, making a mockery of the Government's 'daft' position on the Social Chapter.

Donald Dewar, shadow Secretary of State for Social Security, said that while the extra help would be welcome, one in five pregnant women earning less than pounds 57 a week would gain nothing from the changes.

Kamlesh Bahl, chairwoman of the Equal Opportunites Commission, said she was 'pleased in part' with the decision, but said it did not go far enough. Women in the UK would still receive the lowest level of maternity pay in Europe.

The qualifying conditions for leave and pay would remain separate so that women had an entitlement to 18 weeks' pay, but only 14 weeks' leave, Ms Bahl said. The commission would now seek action to increase the length of leave to 18 weeks, she added.

The Institute of Directors, meanwhile, reacted strongly against the plan to cut, from 4 September, the current 100 per cent employers' reimbursement to 92 per cent to meet the additional costs of around pounds 55m a year.

Ann Robinson, head of the institute's policy unit, said: 'Making business foot part of the bill is bad for both business and women. Business is being saddled with what is essentially a social cost and this is bound to damage employment opportunities for women of child- bearing age.'

About 285,000 women will benefit from the changes, announced without fanfare by Mr Lilley in a Commons written reply. They will allow women to claim Statutory Maternity Pay after 6 months' service instead of the current two years. The new arrangements will apply to those expecting babies on or after 16 October, with the first payments beginning in July.

Maternity pay will now be 90 per cent of earnings for all recipients for the first six weeks and pounds 52.50 for the remaining 12 weeks, a rise of pounds 3.70 a week.

Maternity Allowance for employees will rise by pounds 7.95 to pounds 52.50 a week. Women not covered by the directive will continue to receive pounds 44.55 a week.

The scheme will also be more flexible, allowing maternity leave and pay to begin at any time after the start of the 11th week before the baby is due.

Defending the switch of some of the burden to employers, Mr Lilley said they stood to make a net gain of pounds 125m a year. The reduction in employers' National Insurance contributions announced in the Budget would more than compensate them for the abolition of Statutory Sick Pay reimbursement as well as the reduction in maternity pay reimbursement.

But Dr Robinson said it was ironic that the changes came on the day the Government launched its 'Agenda for Jobs' for next week's G7 Jobs Summit, espousing the benefits of a low-cost and deregulated labour market.

The changes would impose additional costs which employers could ill afford at a time when they were trying to keep costs down.

Mr Dewar said: 'This may not just be penny-pinching by the Treasury, but a staging post to privatisation which would dump extra costs on employers.'

The charity Maternity Alliance said the Government had left it to the last minute to introduce the changes, but they were 'more generous than we anticipated'.

However, the Maternity Alliance could see no justification for continuing to exclude women on low earnings.

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