Coronavirus: Impact on the labour market
This is the final version of this paper which tracks the impact of the coronavirus on the labour market from January-March 2020 to January-March 2022.

An introductory overview of the social security system in the United Kingdom.
An introduction to social security in the UK (858 KB , PDF)
This briefing provides an introductory overview of the social security system in the United Kingdom. It includes information on the Department for Work and Pensions, as well as on government objectives for social security, different benefit types, and social security spending.
The Department for Work and Pensions (DWP) has overall responsibility for much of the benefits system in Great Britain, delivering the State Pension and a range of working-age, disability and ill-health benefits to around 20 million claimants and customers. The DWP is responsible for more spending than any other UK Government department – £220 billion in 2020/21.
However, the DWP is not the only government department to administer welfare provision. Her Majesty’s Revenue and Customs (HMRC) has responsibility for tax credits, as well as Child Benefit.
Local authorities administer Housing Benefit, and since April 2013 in England have been responsible for their own Council Tax Reduction schemes and local welfare assistance schemes (national schemes exist in Scotland and Wales).
Governments have attempted to pursue various aims simultaneously – sometimes overlapping, sometimes conflicting – through the payment of benefits, pensions and tax credits. Over time, government aims have included:
Governments have also pursued wider economic and social aims through the social security system, including encouraging participation in the labour market, providing income stability and economic stimulus in downturns, and changing behaviours.
Social security benefits in the UK were established gradually in the first half of the 20th century, based primarily on the contributory principle.
The National Insurance system, first introduced in 1912, was extended significantly as part of the post-Second World War welfare state, based on the model proposed by William Beveridge. Under the Beveridge scheme, eligibility for benefits was to be based largely on NI contributions, without (it was hoped) the need for means-testing to have a significant role.
However, the proportion of total working-age social security spending accounted for by means-tested benefits and tax credits – targeted at households with low incomes and savings – has risen dramatically since the 1970s. The same has not happened in pension-age provision, where contributory State Pensions account for over four fifths of social security support.
Nearly half of all DWP benefit spending is on people of pension age, with contributory State Pensions alone costing £100.8 billion in 2020/21. In the same year, £57.2 billion was spent on working-age benefits, £38.1 billion of which was Universal Credit. £28.6 billion was spent on disability benefits, mainly on extra-costs disability benefits such as Personal Independence Payment (PIP).
HMRC benefits include Child Benefit, which accounted for £11.5 billion in spending in 2020/21, and tax credits, on which £15.1 billion was spent. In the next few years, as Universal Credit caseload rollout is completed, tax credit claimants will be invited to claim Universal Credit, and this additional expenditure will move to the DWP.
Social security is mostly a reserved matter in Great Britain. In Northern Ireland it is almost entirely devolved (or “transferred”) and is the responsibility of the Department for Communities (aside from HMRC benefits and tax credits). By long-standing convention, however, Northern Ireland maintains “parity” with social security, child maintenance, and pension systems in Great Britain. Although since 2016, the Northern Ireland Executive has received funding to provide a “mitigation package” of measures to reduce the impact of the UK Government’s welfare reforms on the most vulnerable claimants.
Recent devolution of some social security powers to Scotland has altered the structure of welfare provision in the UK. The Scotland Act 2016 gives the Scottish Parliament and Government powers over benefits falling within certain categories, including extra-costs disability, industrial injuries, and carer benefits, as well as the power to top-up reserved benefits and create other new social security benefits.
The Scottish Government is introducing a suite of new devolved benefits. Most of the new Scottish benefits being introduced by the Scottish Government are direct replacements for DWP benefits, including extra-costs benefits such as Personal Independence Payment (being replaced by Adult Disability Payment from 2022). The Scottish Government is also introducing new benefits which do not have a direct equivalent elsewhere in the UK, such as the Scottish Child Payment – a weekly payment for low-income families with children.
The final section of this briefing provides information on key social security events and publications, including those related to:
An introduction to social security in the UK (858 KB , PDF)
This is the final version of this paper which tracks the impact of the coronavirus on the labour market from January-March 2020 to January-March 2022.
Commons Library publications on the rising cost of living in the UK, including cause of inflation, the effect on households, and Government support.
This paper looks at the development of Collective Defined Contribution (CDC) pension schemes in the UK