What does the government spend its money on?

Readers Question: What does the Government spend its money on?

The government spends money for a variety of reasons:

  • Reduce inequality (welfare payments like unemployment benefit).
  • Provide public goods (fire, police, national defence)
  • Provide important public services like education and health (merit goods)
  • Debt interest payments.
  • Transport
  • Military spending

In the UK, the biggest department for public money is social security. This takes  almost a quarter of all public spending. It goes on financing a variety of benefits (Unemployment, housing benefit, child support, pensions).

government-spending-actual-billion

Government spending as % of GDP

government-spending-percent
UK Government Spending 2013

Main Areas of Government Spending 2013

[+] Pensions (old age and sickness) £138.1bn
[+] Health Care £125.9bn
[+] Education £34.2bn + £59.1bn (local)  total education = £97.2bn
[+] Defence £46.4bn
[+] Social Welfare (income support, unemployment benefits) £117bn
[+] Protection (police, law, courts, fire) £33.4bn
[+] Transport £18.5bn
[+] General Government (e.g. civil service) £17.9bn
[+] Other Spending (mainly local, e.g. waste management, sports and leisure) – £48.6bn
[+] Interest payments on Government debt – £45.1bn
[+] Total Spending £683.bn
[+] Public Net Debt  £1,159)

Other Notes

Total Government Spending

 government-spending-real-1967-2012

Government Spending as % of GDP

g-spending-percent-gpd-68-14

 

In 2010, the government embarked on tough spending cuts to try and reduce the budget deficit. However, spending on debt interest payments rose to £48bn. Also, spending on welfare benefits rose because of the increase in unemployment. Overall the government plan to keep spending static in real terms (adjusted for inflation)

See also: Total UK government spending

Changes in UK government spending

changes UK spending

source: HM Treasury

In the past 20 years, in real terms, the biggest increase in government spending has been in the area of health care.

Welfare Payments

The welfare budget includes spending on unemployment, income support (universal credit), housing benefit and disability allowances. It increased to £105bn in 2011-12

welfare-spending-real

As a percentage of GDP, welfare spending  is just over 7% of GDP.

Total Benefit Spending

uk-benefit-spending-real-terms

Total benefit spending includes the welfare budget, plus also the total spending on pensions. The total benefit bill for the UK was £200bn in 2012. See growing size of welfare state

 

Related

26 Responses to What does the government spend its money on?

  1. Aidan December 28, 2008 at 7:28 pm #

    What checks the use of the UK’s public money. Starts with a ‘p’ , three leters altogether.

    • alyssa jones March 6, 2014 at 2:23 am #

      the goverment makes money from taxes,healthcare,education and welfare

  2. Aine Maire December 31, 2008 at 8:34 am #

    What checks the use of the UK’s public money. Starts with P and has 3 letters altogether?! Looks as if Aidan and I are doing the same crossword!!

  3. Jasmine Smith April 19, 2010 at 3:03 pm #

    your website could give more informatio about spending money :) x

  4. Danny Green October 21, 2010 at 11:45 am #

    hey guys was just wondering how much david cameron is going to cut from us working middle class guys

  5. Carla November 13, 2010 at 12:16 pm #

    I’ve got an assigment and got to write what the goverment spend on the Vat and Income tax money that they get please help ?

  6. lulama March 23, 2011 at 10:46 am #

    I’ve got an assigment and got to write what the goverment spend its money that they get please help ?

  7. Andrew November 2, 2011 at 10:10 pm #

    Thanks for this very useful website and for the information on the UK National Debt and Government spending.

    I would also find it helpful if there were information on Government Income – Corporation Tax, Income Tax, VAT, Excise Duties etc, just to complete the picture.

    Cheers.

    • Matty November 17, 2011 at 7:35 am #

      Yes,a pie chart laying out percentages of income from corporation tax, income tax, vat, excise duty’s etc.. would be very good.

      Also a pie chart showing percentages of income by sector, banking, retail, I.T., export… would also be good.

  8. qaisjan January 1, 2012 at 1:19 pm #

    i think goverment should spend money on sport facilities for young people as would keep them from commiting crime. in addtion it is beneficial for health

    • Ahren February 23, 2012 at 10:32 am #

      Stop beliveing the stereotypes. We don’t commit crimes every day. Our to do list does not consist of be a pain, terrise a shop by standinbg outside it and rob another shop! Plus, it’s businesses that spend money on that not the goverment

  9. Greg February 10, 2013 at 4:19 pm #

    fact is that currently the uk government is overspending with a £122 billion deficit and nearly £50 billion a year spent on interest payments alone.this is unsustainable and if our interest payments go up then we are in trouble. the solution as I see it is to index government revenue against goverment spending as a covenant with the uk people enshrined in law to avoid the populist flaw in the democratic system. For example income tax should equal social protection, governments should not be allowed to spend more than is contributed from this revenue section. national insurance should be realigned and indexed against Heath spend, again governments should not be allowed to spend more than is contributed from NI revenue, currently this would be an overspend of around 25% and this would be brought back in line through indexing. The government would not be held to account if this indexing was enshrined in a social people charter to avoid the inevitable social people unrest. Most people get the idea that you can’t spend more than you have.

    • Colin March 12, 2013 at 1:09 am #

      I agree with your point about there being a ‘flaw’ in democratic systems which encourages politicians to raise money from borrowing. I think the £43 billion interest bill to be a wasteful use of government revenue and would like to see it greatly reduced. .

      However, I am genuinely puzzled by the commonly aired view that current levels of debt are unsustainable. My question would be: what makes the current debt ‘unsustainable’ when historically we appear to have been able to sustain even higher debt levels over long periods of time?

      • Tejvan Pettinger March 12, 2013 at 9:17 am #

        The debt isn’t unsustainable, and debt interest payments as % of GDP are fairly low by historical standards

  10. John March 19, 2013 at 12:22 pm #

    how much does the government actually spend on “Helping the unemployed and those on benefits back to work?”

    Including all the costs for DWP, G4S, A4E,The work programme and the multitude of other government funded schemes.

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