Employment, income and council tax during the COVID-19 crisis
A geographical analysis and implications for councils
Institute for Fiscal Studies
February 2021
The COVID-19 crisis has hit employment and incomes across the UK, which in turn has affected some households' ability to pay major bills such as council tax. As a result, councils expect to collect £1.3 billion less council tax in 2020–21 than they forecast before the COVID-19 crisis. The government has agreed to cover just 75% of this shortfall.
Drawing on data from tax and benefit records, household and business surveys and the Money Dashboard app, this IFS report shows that these impacts have been uneven geographically:
- The number of Londoners on employers' payrolls fell by almost double (5.5%) the UK average (2.9%) between February and December 2020.
- Londoners on unemployment-related benefits has increased by 4.7 percentage points, almost 1.5 times the UK average increase (3.2 percentage points). The West Midlands and North West regions have also seen above-average increases - 3.4 percentage points in both instances - while Northern Ireland has seen the smallest increase (2.5 percentage points).
- Pre-crisis differences mean employment rates are still lower than the capital (75%) in Yorkshire and the Humber, Scotland, the West Midlands, the North West (all 74%), Wales (72%), the North East and Northern Ireland (both 71%).
- During the second lockdown (November 2021), 14.9% of Londoners were furloughed, while it ranged from 11.2% in the North East of England to 12.7% in the South West of England.
- In the first half of the 2020–21 financial year, the amount of council tax collected fell by 1.4% in London, 1.3% in the North East of England and 0.2% in the North West of England. In contrast, the amount collected increased in other regions, with the largest increases in the South East (up 1.2%) and South West (up 1.7%).
- Council tax revenues fell by 1.2% in the most deprived fifth of English councils in the first half of 2020–21, but grew by 2.4% in the least deprived fifth.
