The squeeze on household budgets “cannot go on”, says the head of the business lobbying group, the CBI, as he calls for an expansion of free childcare and a rise in the national insurance threshold.
CBI Director General John Cridland called on the government to implement for a range of measures to help low paid workers – a plea that usually comes from trade unions, rather than businesses – as part of the CBI’s “radical” blueprint for improving living standards.
As well as calling for an expansion of current free childcare arrangements to include one and two-year-olds, and extended maternity leave, the CBI said the government could offer immediate help to workers by raising the threshold of when people pay employee national insurance to £10,500.
This would be worth £363 a year to a dual-income household, the organisation said in its new report, A Better Off Britain.
The CBI said an average couple with two children saw their income fall by £2,132 a year in real terms between 2009/10 and 2012/13, while working families, those on low incomes and younger workers have found recent years the most difficult.
Katja Hall, the CBI’s deputy director general, said childcare costs have increased by 27 per cent since the last general election, stopping parents from working or increasing their hours.
The CBI is calling for the current 15 hours of free childcare to be extended from three and four-year-olds to all children aged one and two, and extending maternity pay from 39 to 52 weeks.
Businesses should also adopt a presumption in favour of flexibility to help staff save on childcare costs, Ms Hall added.
£363: Tax reduction for dual earner household, if NIC threshold rises to £10,500
33.8 per cent: Average share of income average couple spends on childcare
£3,430: Average yearly saving by family with one-year-old, with 15 hours of free childcare
£1,300: Average "rainy day" sum of British saver
Speaking ahead of the CBI’s annual conference in London, Mr Cridland 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 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.”
A government spokesman said: “The government’s long-term economic plan is working, putting more people into work than ever before.
“As the CBI make clear, it’s not possible to create a sustainable rise in living standards with short-term sticking plaster fixes.”