Plans to allow 4.5 million parents to work flexibly are to be delayed by the Government as it searches for ways to help businesses survive the economic downturn.
Lord Mandelson, the Secretary of State for Business, has ordered his officials to review all policies in the pipeline to ease the burden on firms so they are less likely to shed jobs, cut investment or go bust. The plan to extend the right to flexitime from parents of children under six to all those with children up to 16 was trumpeted by Gordon Brown and approved by Labour's annual conference last month. It looks likely, however, to be kicked into the long grass.
Other proposals which may be postponed include extending paid maternity leave from 39 to 52 weeks and creating an extra bank holiday. An internal document seen by The Independent reveals that Lord Mandelson is urgently drawing up an "action programme for business". He has ordered his department "to be completely focused on getting UK business through the present economic downturn and emerging stronger on the other side".
He plans a White Paper on Britain's industrial future, including the expansion of "low carbon" industries so the nation can broaden its base beyond the financial sector after the present crisis. He believes that although the City of London will still play an important role over the next 10 years, it will not drive the economy in the way it did in the past decade.
Lord Mandelson's efforts to cut red tape for firms are bound to provoke controversy. Extending the right to request flexible working for all parents of under-16s was a key plank of talks with the unions this summer.
It was due to take effect next April and an estimated 811,000 mothers and fathers were expected to request flexible working. With parents of children aged up to six, who can already request flexible hours, some 90 per cent of such requests are being granted. But the extension would cost employers an extra £69m a year.
Government sources say the decision is finely balanced. Ministers want to ease the pain of the downturn on ordinary people but must do everything possible to help business. Delaying a popular extension of workplace rights might contribute to a "feel-bad factor" and would be opposed by many Labour MPs and trade unions.
Mr Brown has also talked up the idea of an extra bank holiday as part of his "Britishness" agenda. But the Confederation of British Industry believes it could cost the economy up to £6bn.
Ministers say the drive to cut policies costly to business is only a small part of the action plan being drawn up by the Department for Business, which will be discussed by the National Economic Council or "war cabinet" chaired by Mr Brown. It will include measures to help small and medium-sized firms with their cashflow and finance for investment. Banks will be urged to restore lending to companies to their 2007 levels, local authorities will be asked to follow central government by paying suppliers within 10 days and HM Revenue & Customs will be asked to show flexibility in the way they treat firms. The action plan will identify key sectors for future growth, including manufacturing, and analyse the impact of the downturn on the corporate sector and other businesses. It says the Government will maintain its commitment to an "open economy" based on free trade rather than protectionism; try to open new markets abroad for UK business, and ensure workers can take full advantage of future economic opportunities by improving their skills.
Lord Mandelson said: "What we've got to do is get the Government, the public sector working hand in hand with the private sector and the business community to make sure everything we need to do at this stage is done both to get us through it and benefit in the future."
Amid concern that 60,000 more homeowners are falling into negative equity each month, ministers are urging lenders to adopt a "more responsible" approach to repossessions. The Chief Treasury Secretary Yvette Cooper said: "What we want to do is look at stronger rules across the board, that all the banks will follow, to make sure we are doing everything we can to support people through a difficult time."
The Government and opposition parties are rethinking their previously announced policies to give priority to limiting the impact of the recession. "Everything is up for review," said a Government source. "What was right two weeks ago might not be right now."
Alistair Darling, the Chancellor, announced yesterday that he plans to speed major building projects, including schools, hospitals and housing schemes, to safeguard jobs and keep the economy moving. He signalled that proposals for two new aircraft carriers and a replacement for the Trident nuclear weapons system would go ahead, and the £16bn Crossrail project in London and 2012 Olympic Games would help create jobs.
But the Tories fear government projects may be delayed because many are funded by the private finance initiative and are heavily dependent on lending by banks.
George Osborne, the shadow Chancellor, said: "While the Chancellor speculates about the timing of big capital projects that could take years to get off the ground, that's not going to help small businesses struggling this winter. Government should be doing what it can to help so jobs aren't lost."
Today David Cameron will publish a "plan for small business" which would allow them to defer their VAT bills for up to six months.