Business groups have warned that increasing paternity and maternity pay would lead to "crippling" extra costs.

Downing Street tried to play down industry secretary Patricia Hewitt's personal backing for suggested improvements in parental leave payments and more flexible hours for working carers.

Tony Blair's official spokesman said the plans were a "party matter", adding: "I do not think we should get ahead of ourselves."

The British Chambers of Commerce said that the plans "could have a crippling effect on many small businesses who have just a small number of staff".

But the TUC general secretary, Brendan Barber, said: "Patricia Hewitt has put the policies agreed at Labour's Policy Forum at Warwick into a compelling case for a new and radical focus on the workplace in a third Labour term. Employers may complain, but this is a compendium of vote winners."