CIPD’s comment on the pre-Budget report

The Chartered Institute of Personnel and Development (CIPD) offer a cautious welcome to the Government’s proposal to extend paid maternity leave from 6 to 9 months by 2007.

Mike Emmott, CIPD Employee Relations Adviser, says, Research suggests that giving employees more choice about their working patterns pays off in terms of commitment and performance. Increasing the length of time that mothers can spend at home before returning to work makes sense as part of a wider strategy to improve childcare. However, it is sensible for the Government not to move too fast, but to evaluate what impact the change has on women’s careers and job commitments before considering going further in this direction. It may provide mothers with the opportunity to spend more time with their children early on but it could also cause them to drift away from the labour market.

CIPD has reservations about the proposal to consider extending paid maternity leave so it could be shared between mother and father. This could be confusing and the implications would need detailed working through to ensure that unnecessary extra work on employers is minimised. It is also unclear how many mothers will wish to surrender maternity leave to fathers, who can also claim two weeks paid paternity leave.

New proposals include plans to extend the right to ask for flexible working to benefit parents with older children. Mike Emmott says, This is a step in the right direction. Nevertheless it is a missed opportunity. The Government needs to look at the bigger picture and ensure there is help in place for other groups such as those responsible for elder care. We continue to urge the Government to extend the right to all employees, which most employers already do in practice on a voluntary basis. In practice there is a lot of give and take in the employment relationship, it is a mutual relationship between employers and employees and there will be circumstances where an organisation cannot meet an individual’s specific request for flexible working.

CIPD’s survey, A Parent’s Right To Ask, revealed that 91% employers say they are already prepared to consider requests for flexible working from some employees who are not entitled to the statutory right, and 72 per cent of employers are prepared to accept requests from all staff.

While welcoming measures on skills, employment and child care outlined in today’s pre-budget report, John Philpott, CIPD Chief Economist, questioned Treasury assumptions about the degree of spare capacity in the economy:

Gordon Brown’s bullish forecast for UK economic growth in 2005 and 2006 is likely to be questioned on the grounds that he is too optimistic about the prospects for domestic demand and exports. However, what is most remarkable is the pre-Budget report’s sanguine view of the amount of slack in the economy, especially in the labour market.

The Treasury assumes that there is ample scope to raise hours of work, boost hourly productivity and increase employment in 2005, thereby enabling the economy to grow by 3-3.5% without consumer price inflation rising above the target rate. This is highly debatable. The employment assumption looks particularly rosy given the tightness of the labour market and widespread evidence that employers are finding it extremely difficult to fill job vacancies at all skill levels. The Chancellor’s measures on training for workers and jobless people, plus extra help to get more lone parents and people on Incapacity Benefit back to work seem to recognise this. But most of these measures will be not be implemented until well into the next Parliament.

Squeezing additional output from the existing workforce could prove more of a challenge than the Chancellor expects. Even if Brown is proved right about the demand side of the economy his hopes for 3-3.5% growth next year could be scuppered by rising wage pressure which would trigger higher interest rates. Ironically, a pre-Budget report strong on measures to improve the underlying long-term strength of the UK economy seems to seriously understate the extent of short-run supply side constraints.