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Take more out of tax and extend maternity leave, says CBI

Monday: Britain’s bosses are today calling for millions of workers to pay less tax and for young mothers to be given paid leave for a year.

Bosses’ lobby group, the CBI, says the government needs to take urgent action to raise living standards which in turn would feed into growing the economy.

It wants the threshold for paying National Insurance contributions to be raised and free childcare extended.

The measures are included in a report A Better Off Britain unveiled at the CBI’s annual conference opening today and form the core of a plan to increase competitiveness while ensuring working families get a better deal.

The CBI also outlined a package of longer-term measures designed to raise pay sustainably. They include a business-focus on raising productivity to boost pay; better routes into higher-skilled better-paid work; and measures to ensure young people do not fall behind in school. The report also highlights ways that businesses can help their employees build stronger financial buffers.

John Cridland, CBI director-general, said: “The financial crisis and the slow recovery have hit people’s finances hard. Living standards will gradually improve as the economy does. But growth on its own will not be the miracle cure. Even before the recession, the income of a child’s parents determined too many of their own life chances.

“The UK needs to face up to some real long-term challenges. Changing skills needs, greater global competition and low social mobility mean for many the pathway to a better life is tough and far from clear.

“But the answers do not lie in short-term sticking plaster fixes, like intervening in pay or attacking the UK’s flexible labour market, which will ultimately cost jobs. Instead, we need to invest in productivity, skills and education to make the best of Britain’s talents.”

Higher productivity, he said, would lead to better wages.

“So we must have a laser-like focus on boosting firms’ competitiveness. We also need to create better ladders to higher-skilled, higher-paid work and improve our education system for all, to overcome disadvantage. Business leaders need to step up to the plate, as well as politicians.

“Business wants to help build a more prosperous Britain where everyone has the chance to get on in life. This is the right thing to do to build a stronger and fairer society, and it makes good business and economic sense too.”

The CBI says the average couple with two children saw their income fall by £2,132 a year in real terms between 2009/10 and 2012/13. Working families, those on low incomes, and younger workers have found recent years the most difficult.

Families have been hit by rising childcare costs and employees have seen less of the money employers spend on them, with more going into National Insurance contributions and pensions. To provide immediate relief, the CBI is calling for a reduction in employee NICs now – raising the threshold at which it is paid by staff to £10,500 in a series of steps until 2020/21. This will be worth £363 to a dual-income household and is more effective than raising income tax allowances.

Childcare costs have risen by 27% since 2010, hitting working families and stopping parents from working or increasing their hours. The current system of state support is complex, wasteful and needs changing. The CBI’s measures include:

-Extending free childcare provision of 15 hours to all children aged 1 and 2, with the longer-term aim of increasing the number of hours provided

-Extending maternity pay from 39 to 52 weeks to close the gap between maternity leave and when free childcare becomes available

-Businesses adopting a presumption in favour of flexibility from the job advert stage to help employees save on childcare costs.

Katja Hall, deputy director-general, said: “Cutting employee National Insurance and helping families with the cost of childcare will put more money directly into people’s pockets.

“Overhauling childcare in the UK would be a triple shot in the arm for our economy, raising family incomes, getting more adults into work and improving the life chances of many children.

“Many parents want to come back to work or put in more hours, but can’t because of soaring childcare costs. It’s ludicrous that the average working couple in the UK now spends over a third of their joint income on childcare.”

The CBI says the UK faces a long-term productivity challenge which has been made worse by the economic crisis.  If firms were more competitive, it says wages will rise. But the UK’s productivity is still 16% behind where it would have been had the financial crisis not happened.

The Government needs a greater understanding of productivity and how different sectors are faring. But ultimately raising productivity is a challenge for business, not for government. The CBI’s recommendations include:

-Putting the Office for Budget Responsibility (OBR) in charge of reporting on key productivity trends and challenges in a similar way to the Australian Productivity Commission

-Making raising employee value-added a business priority, focusing on areas like management skills, job design, innovation and investment

-Simplifying the support network for smaller and medium-sized firms, improving access to public sector contracts; and finance and exports support.

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