We have used UKMOD, the free tax-benefit calculator for the UK and its constituent regions, to monitor the distributional and budgetary effects of the Covid-19 crisis, month by month from March 2020 to December 2021. The results, published in our interactive Covid-19 Policy Response Dashboard, show a large negative impact of the Covid-19 crisis on equivalised household disposable incomes in the second quarter of 2020 (with a 4.5 percent reduction in mean income in April 2020), followed by a period of stagnation and a steady trend towards recovery starting from April 2021. Overall, the bottom decile has gained significantly due to the anti-crisis public support (with a 30% percentage increase in income, although starting from a very low baseline), while the top decile ended 2021 with an income loss compared to pre-pandemic.

 

Some particularly vulnerable household types, such as couples with 3+ children and lone parents, jobless and one-earner households, households with the disabled and social renters have seen an increase in their disposable incomes throughout 2020-2021. At the same time, couples with 1-2 children and households of working age adults have experienced an income decline throughout 2020 and even long after that. For instance, incomes of couples with 1 child have not returned to their pre-pandemic level until October 2021. (Note that these numbers are not adjusted for inflation and do not account for housing costs, therefore could underestimate the full negative impact of the pandemic on household incomes.)

 

Overall the pandemic had strong inequality reducing effects: the average decline in the Gini coefficient for disposable income (0.307 in March 2020) amounted to 0.021 Gini points for all months of the pandemic and remained at 0.012 points in December 2021. The redistributive impact of the UK tax-benefit system (measured as the difference between the Gini coefficients for disposable and market incomes) has increased from 0.144 Gini points (32 percent) in March 2020 to 0.157 Gini points (35 percent) in December 2021. In the first months of the pandemic in 2020 the redistributive impact exceeded 0.200 Gini points (over 40 percent of the market income Gini).

More statistics, as well as monthly zooms, are available from here.