Draft Paternity Leave (Amendment) Regulations 2024
(2 months, 2 weeks ago)
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The Lord Commissioner of His Majesty's Treasury (Mike Wood)
I beg to move,
That the Committee has considered the draft Paternity Leave (Amendment) Regulations 2024.
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
It is a pleasure to serve with you in the Chair, Mr Hosie. The draft regulations were laid on 10 January 2024. I am pleased to be here today to debate these measures, which will benefit families by working alongside the paternity pay regulations to provide valuable additional flexibility to paternity leave, effectively making it easier and more useful for parents while putting minimal burdens on businesses.
Currently, eligible employed fathers and partners are entitled to one or two consecutive weeks of statutory paternity leave and pay to care for their baby or to support the mother. This must be taken within eight weeks of birth or placement for adoption. The regulations recognise the importance of fathers and partners spending valuable time with their children in the first year following birth or adoption and will make it easier for parents to take their full paternity entitlement.
Some 64% of respondents to the 2019 consultation, “Good Work Plan: Proposals to support families”, wanted greater flexibility in when and how paternity leave could be taken. Allowing fathers and partners to take their leave up to a year following birth or adoption was the most commonly suggested measure to accomplish that. Our changes will provide that much-needed flexibility and will fulfil our 2019 manifesto commitment to make paternity leave easier to take.
Our first change will allow fathers and partners to take their leave in non-consecutive blocks. Currently, only one block of leave can be taken, which can be either one or two weeks. Our change will remove that barrier by enabling parents to take two non-consecutive weeks of leave. We hope that providing fathers and partners with the flexibility to take their two weeks of leave non-consecutively means that they will find it easier to use their full entitlement.
For some parents, taking two weeks of leave in one go is challenging due to pressures of work or other reasons. Enabling parents to take their leave non-consecutively means that they can take it at a time that works best for them and could lead to an increase in parents taking their second week of paternity leave.
Our second change will allow fathers and partners to take their leave and pay at any point in the first year after the birth or placement for adoption of their child. This represents a big increase from the eight weeks in which parents currently have to take their leave following birth or adoption. This change gives parents more flexibility to take their paternity leave at a time that works best for their family.
For example, this change could enable a father or partner to take time off work to be the primary care giver when the mother returns to work. This is important, as evidence shows that fathers who spend time solo parenting are more likely to play a greater role in caring for their children in later years.
Our third change will shorten the notice period required for each period of leave. The new regulations will require an employee to give only four weeks’ notice prior to each period of leave, instead of 14 weeks before the expected week of childbirth. This means that a parent can decide when to take their leave at shorter notice to accommodate the changing needs of their families. This will apply to parents in birth and surrogacy scenarios, as the notification rules are different for adopters. It will also allow fathers and partners to change the number and dates of blocks of leave they plan to take. Responses to the “Good Work Plan” consultation show that both employer and employee groups considered that to be a fair and practical option.
The Government have in place a range of leave and pay entitlements to support parents to balance their work and family responsibilities in a way that works best for them. For families who would prefer a father or partner to take a longer period of leave, shared parental leave may be available. This entitlement allows eligible parents to share up to 50 weeks’ leave and up to 37 weeks of pay between them. Parents can choose whether to take time off together or to stagger their leave and pay.
The Government are also introducing new entitlements to enhance the current provision for working parents, including additional protections against redundancy, which will be available from 6 April for pregnant women and parents who are returning to work after a period of eligible parental leave. There are also improvements in flexible working. From 6 April, employees will be able to request flexible working from their first day of employment, and the new entitlement of carer’s leave will give unpaid carers one week of leave from work from their first day in a job. That can be used to provide care or to make arrangements for the provision of care for a dependant with a long-term care need.
We are also introducing new leave and pay entitlements for parents with children who spend time in neonatal care. That will give each eligible employed parent up to 12 weeks of additional paid leave on top of their existing entitlements if their baby is admitted to neonatal care in its first month of life. That will ensure that parents no longer find themselves in the incredibly difficult position of having to choose between risking their job and spending time with their baby during such a stressful time. I commend the regulations to the Committee.
Rushanara Ali (Bethnal Green and Bow) (Lab)
It is a pleasure to serve under your chairmanship, Mr Hosie. The birth of a child, and their early years, are crucial periods for the child and their development. They are special and very important for parents to be involved in. Parental leave is crucial to making this period a smoother, healthier and more beneficial time for parents and newborns alike. I welcome these reforms, which make parental leave more flexible and thereby open up the opportunity for increased parental involvement in the child’s first year. These changes are a step in the right direction, and we will not stand in the way of measures that facilitate greater take-up of important workers’ rights, particularly those that will help more women to return to work after having a child.
The current paternity leave system is too rigid: leave must be taken in one block of no more than two consecutive weeks within a period of eight weeks after the child’s birth and the employer must be notified 14 weeks beforehand. We will all be familiar with cases in our families and constituencies of how that can be a barrier to parents, particularly fathers and partners, who want to take that leave. It is limiting for them, and I am glad that these changes will go some way towards making improvements.
Although I welcome these changes, I still have concerns that this will not go far enough to meet the stated aims of the policy in the impact assessment, which is to allow
“more fathers/partners to play a greater role in caring for their children”.
It is a shame that this opportunity has not been used to reform the failed shared parental leave system. In October 2020, the Women’s Budget Group commission on a gender-equal economy noted:
“At the root of women’s disadvantage in the labour market is inequality in unpaid work…75% of mothers face pregnancy or maternity-related discrimination”
Along with many other campaign groups, it has reiterated the need for implementing equal parental and caring leave policies as a crucial step in addressing this.
If the Government are committed to encouraging fathers and partners to play a more active role in lessening the burden on mothers, doing this would no doubt have a greater impact. Take-up of shared parental leave is measured in two ways: as the proportion of eligible fathers who take a shared parental leave each year, or as the proportion of new mothers starting statutory paid maternity leave each year who used the shared parental leave scheme to transfer some of that paid leave to the child’s father. The second method is more meaningful because the size of the pool of eligible fathers is unknown. According to Maternity Action, in 2021 and 2022, only 2% of mothers used shared parental leave to transfer leave to a partner. That figure shows that shared parental leave is not reducing the domestic burden on women. It is not helping women to return to the workplace, and it continues to restrict the involvement of fathers and partners in this crucial time in their child’s life. The Government’s consultation on shared parental leave concluded that the system was found to be “too complicated” for many respondents to use and there was a lack of awareness about the available leave. Despite receiving that report, the Government stated:
“We are not proposing any changes to shared parental leave or unpaid parental leave at this time.”
Can the Minister explain why the Government refuse to take further action to reform shared parental leave?
Today’s changes in the policy area stem from the 2019 Conservative party manifesto, which committed to
“look at ways to make it easier for fathers to take paternity leave.”
It is only now, five years later and just before another general election, that that manifesto pledge is being looked at. The consultation took place in 2019 and the response was published in June 2023. I would be grateful if the Minister could explain why there was such a long delay, which has meant that we have not seen the benefits of the changes that could have happened sooner. The delays to this crucial legislation speak to a wider context in which the Government have not prioritised the importance of addressing workers’ rights.
The Minister has a great track record of being persistent on issues for which he has responsibility. I hope that he will speak to his colleagues to ensure that we continue to build on what has been announced and done today to address the wider issues affecting parental leave and the discrimination faced, particularly by women, and make the much-needed reforms to ensure that shared parental leave in practice derives the benefits that are desperately needed for parents.
Richard Thomson (Gordon) (SNP)
It is a pleasure to serve under your chairship this morning, Mr Hosie. On behalf of my party, I very much welcome the statutory instrument. It is important to recognise that we are broadly congratulatory on the greater flexibilities, but I will mark a waypoint on the public record about how far the UK still lags behind other jurisdictions.
I will give two examples across the North sea. On the length of parental leave, Norway allows 49 weeks of parental leave, with 15 weeks reserved for each parent. Sweden allows 480 days of parental leave, with each parent, if there are two, allowed 240 of those days. While we recognise the flexibility that this legislation will bring, let us not forget how far behind many other prosperous northern European societies we are. With that said, anything that makes it easier to take paternity leave and encourages its uptake must be a good thing. To that extent, we very much welcome the flexibility brought by the legislation on the timing of the leave, the notice required to be given in order to take up that leave and the flexibility in how it is taken.
To speak personally as a father of two, when I took some parental leave after the birth of my first child, the first week certainly was not terribly restful, and getting back to work was actually a blessed relief in many respects. The poor girl was tongue-tied. That was not noticed in the hospital, and feeding her became far more of a challenge that it ought to have been, which was to her great detriment. However, having flexibilities in the legislation might have helped us to navigate that. At the time, I was a local authority councillor; I had a great deal more flexibility than many other people—certainly many other fathers—in how I could manage my workload to balance home life and get as much of those precious early few weeks with both my children after they were born as I could. I certainly benefited from that, and I hope that as a family unit we all benefit from it going forward. As the Minister said, there is a considerable body of evidence showing that when fathers are involved in caring for their children and in their upbringing, a range of better outcomes result across the course of everyone’s lives.
I will veer off momentarily to say how important this legislation is in tackling gender inequalities. At Prime Minister’s questions on International Women’s Day, I highlighted a report by the pension firm Scottish Widows that showed that women were retiring with a pension pot worth £123,000 less on average than men. Further, a woman aged 25 today would be on track to retire with a pension pot £100,000 less than her male counterpart.
There is no doubt that a whole range of reasons that contribute to that, including discrimination and attitudes in the workplace, a large part of which come back to the differences that emerge after people go on to start a family. Anything that recalibrates attitudes and which not just allows but encourages men to play a more active role in the upbringing of their children, in particular to get involved at that early stage, hopefully breeding good habits that go on as their children grow up, has to be a good thing.
There is no single measure that will tackle that gender inequality, particularly that gap. Rather, a series of small measures such as this one will start to make the difference. I very much welcome the flexibilities in the regulations, but we need to remember that there are other places that are doing this much better than us in the overall amount of leave for parents of whatever gender, and I firmly believe that we should aspire to improve that as well.
Kevin Hollinrake
Before I respond to hon. Members, may I apologise for the late change in Committee attendance? The hon. Member for Bethnal Green and Bow made an interesting point and I welcome her challenge. She mentioned pregnancy and maternity discrimination. As I said in my speech, we have recently legislated for that, to provide more protections in pregnancy and on return to work. On the take-up of shared parental leave, those are very much a floor and not a ceiling, and many employers go much further in both the private and the public sector. Take-up of shared parental leave is in line with expectations and, indeed, has doubled in recent years.
There are obvious reasons for not going further. We tread carefully when placing extra burdens on business and we are clear about that. A strong labour market is in workers’ as well as employers’ interests, so it is about striking a balance. In addition to these regulations and others, we have brought in measures that create extra burdens for businesses, such as flexible working, day-one rights, carer’s leave and neonatal care. Those are on top of other burdens that businesses face, such as cost of living pressures and the rise in the national living wage, which has increased by historic amounts. We believe that we have struck the right balance.
The Opposition may differ and set out, as they have, to go much further if they are ever in government. I am interested in their intention to have a day-one right to unfair dismissal. Employers should look carefully at that as it might upset the delicate balance between workers and employers, to the detriment of workers. We have to guard against that.
On delays, we would have liked to introduce the regulations more quickly, but it is fair to say that we have been dealing with covid and its aftermath. That is not just about the administration of some of the measures but the impacts on business, and we have to tread carefully in that regard.
The SNP spokesman, the hon. Member for Gordon, made some interesting points, and asked why we cannot go much further on parental leave, citing Norway and Sweden. Looking at work by the Institute for Fiscal Studies, the average tax take in Norway and Sweden is 43% of GDP. In comparison, it was 32% of GDP in the UK in 2021. The hon. Member may want to go 13% higher with our taxing of businesses and people; we do not and that is very clear. It is clearly the direction of travel in Scotland under the SNP. Under our Government, however, we want to keep taxes low. Where there are those kinds of measures, they have to be paid for by somebody, and inevitably that is the taxpayer. We therefore think we should tread carefully.
We support the regulations, which deliver on our manifesto commitment. We want the UK to be one of the best places to work and to start and grow a business. We want to build skills, increase productivity and move to a high-wage economy that delivers this ambition. We will continue to prioritise labour-market policies, such as these changes to paternity leave, which have the potential to benefit the most people, the most firms and the most jobs while at the same time ensuring we balance burdens on business and taxpayers. The changes to paternity leave brought forth today will advance our progress towards those objectives. I thank hon. Members for their contributions and I commend the regulations to the Committee.
Question put and agreed to.
Draft Occupational Pension Schemes (Collective Money Purchase Schemes) (Amendment) Regulations 2023
(2 months, 2 weeks ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Paul Maynard)
I beg to move,
That the Committee has considered the draft Occupational Pension Schemes (Collective Money Purchase Schemes) (Amendment) Regulations 2023.
It is a pleasure to serve under your chairmanship, Mrs Harris. The instrument clarifies requirements on trustees of authorised collective money purchase schemes, which are more commonly known as collective defined contribution or CDC schemes. The Government believe CDC schemes have an important role in the future of pensions in this country. CDC schemes offer members a seamless transition to the regular retirement income that we know many want, without the need for complex financial decisions that many are ill equipped to make.
The Government want to ensure that as many savers as possible can take advantage of the numerous benefits of CDC. By pooling longevity and investment risk across their membership, CDC schemes can shield savers from much of the uncertainty faced by members of DC schemes, which allows the CDC schemes to target higher investment returns. As part of our Mansion House reforms, that will help to unlock capital for our most promising industries and increase returns for savers, supporting growth across the wider economy.
The Pension Schemes Act 2021 provided the legislative framework for single or connected employer CDC schemes to be set up in the UK. Those regulations came into force on 1 August 2022, enabling such schemes to apply for authorisation from the Pensions Regulator. Throughout the development of our policy, the Government have engaged with stakeholders on how best to deliver CDC in the UK and invited challenge and scrutiny. In that vein, we have been helpfully advised that two areas of the current framework do not meet our published policy intent. CDC schemes can only succeed if there is confidence in this new type of provision. The technical changes made by this instrument ensure that prospective schemes are set up to work as we intend from the start.
Turning to the first amendment made by this instrument, the existing regulations make provision in relation to the annual actuarial valuation and benefit adjustment process for CDC schemes. That means that, each year, benefits are reviewed and adjusted where required, so that the value of assets held is in balance with the projected costs of benefits. It is important that a balance is maintained between the value of the available assets of the scheme and the amount needed to provide the target benefits to members on an ongoing basis.
The policy intention is to provide that, where a cut to benefits must be made due to an economic downturn, the trustees of the CDC scheme can smooth the impact of the benefits cuts on members over three years. That is called a multi-annual reduction. The mechanism helps to reduce volatility and to ensure that current and future benefits remain relatively stable, in contrast with individual DC schemes, which have no pension smoothing mechanism. Members of those schemes experience the full impact of falls in investments as they happen, which can lead to a significant reduction in the value of their retirement savings immediately. For savers closer to retirement, that may be unrecoverable.
The intention is that, where a market recovers during a multi-annual reduction, increases in benefits resulting from a subsequent annual valuation would first be offset, in whole or in part, against the remaining planned cuts under the multi-year adjustment before any remaining increase can be applied as an increase to future benefits in the normal way. If we did not do that, the benefits of the recovery would likely go to future pensioners. That would run against our principle that, as far as possible, all members—that is, current pensioners, those who are currently accruing benefits and those who are not contributing, but have rights to a future pension from the scheme—should all share in the upsides and downsides at the same time. The instrument also ensures that information about any multi-annual reduction and subsequent offsetting must be reported to the Pensions Regulator in the actuarial valuation to ensure proper oversight.
The second amendment ensures that, when a scheme winds up, a beneficiary’s accrued rights are transferred to suitable pension schemes or alternative payment arrangements. A key element of the wind-up process is calculating the share of the fund for each person who is a beneficiary at that time. The scheme rules may provide that that person be a member, but could include a spouse, a child or a person financially dependent on the deceased beneficiary. Our intention has always been that if that beneficiary dies during the winding-up period, the pot allocated to them will not be extinguished but be reallocated among their successors, where a scheme’s rules provide for that.
In conclusion, CDC schemes are an important addition to the UK pensions landscape. When well designed and well run, they have the potential to provide a good retirement outcome for members. The draft instrument will provide clarity for schemes moving forward by more accurately reflecting our intent.
Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)
As usual, it is a pleasure to serve under your chairpersonship, Mrs Harris. The Minister has covered all the technical details, so I will not repeat them, even though they are important to why we will not be opposing the draft instrument.
As we have heard, the instrument makes technical amendments to clarify two areas of regulations relating to collective defined contribution pension schemes. The first is to mitigate the impact on members when reductions to benefits need to be made. The second is to provide clarity on the categories of flexi-access drawdown fund to which accrued rights in a CDC scheme that is being wound down can be transferred.
We will not be opposing the measure, and we hope that it represents a step forward in getting CDC schemes up and running. To date, only one pension scheme has been granted CDC authorisation—the Royal Mail collective pension plan, which my former colleague Jack Dromey worked very hard to secure. The journey up to this point has been challenging, and I commend those in Royal Mail and the union representatives who were able to reach that milestone agreement. It is important that the remaining regulatory hurdles are cleared as soon as possible so that they can actually launch the CDC scheme. I welcome recent progress in that area, particularly from the Department for Work and Pensions side. However, I understand that new tax legislation and guidance is still outstanding. I hope that will be resolved in the upcoming Budget. From his conversations with colleagues in the Treasury, could the Minister confirm whether that is the case?
To conclude, we support efforts to get CDC schemes off the ground as soon as possible, so, as I have said, we will not oppose the draft instrument. I know that many in the pension sector are eagerly awaiting the launch of the Royal Mail scheme; I hope that that is now in the very near future, and I look forward to seeing its progress.
Paul Maynard
I echo the hon. Lady’s comments on Royal Mail, the late Jack Dromey and the Communication Workers Union ushering the CDC initial vehicle almost to its delivery. I think it is coming very soon—in just a few weeks, if not months.
I can confirm that we have worked closely with the Treasury to ensure that we get in place all the wider regulations needed, particularly for multi-employer trusts, which are slightly more complex than Royal Mail, and indeed even those that might cover a whole profession with a range of similar characteristics. That work is ongoing with the Treasury, and I stress that the draft regulations are part of it. On that note, having answered that point, I commend the regulations to the Committee.
Question put and agreed to.