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

UK public sector spending 2014-15

UK-government-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 (State pensions, public sector pensions, housing benefits, income support, disability / incapacity benefits, unemployment benefits).

Main Areas of Government Spending 2015

  • Public Pensions       £150 billion
    • Sickness and disability £40bn
    • Old age pensions £107bn
  • National Health Care       + £133 billion
  • State Education       + £90 billion
    • Secondary education – £25bn
    • University education – £11bn
    • local education spending – £48bn
  • Defence       + £46 billion
  • Social Security       + £110 billion
  • State Protection       + £30 billion
  • Transport       + £20 billion
    • Railway – £5.2bn
    • Roads – £3bn
    • Local transport – £9bn
  • General Government       + £14 billion
    • Executive and legislative – £5.9bn
  • Other Public Services       + £86 billion
    • Social housing – £1.2bn
    • Waste management – £9bn
  • Public Sector Interest       + £52 billion

Cost of EU

  • Gross payment to EU – £17.2bn
  • Net payment to EU – £8.6bn
  • FT – EU cost

Total Spending       = £731 billion

Other Notes

  • Foreign Aid £7.8 billion or 0.7% of GDP 2011/12 (Cost of Foreign aid)
  • Job Seekers allowance £4.9bn (or 0.7% of total spending) 2013/14

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

uk-welfare-payments

Welfare benefits (billion, bn)

  • Housing benefit    £16.94 bn
  • Disability allowance    £12.57 bn
  • pensions credit +MIG    £8.11 bn
  • Income support    £6.92 bn
  • Rent rebates    £5.45 bn
  • Attendance allowance    £5.30bn
  • Incapacity    £5.30 bn
  • Jobseekers allowance    £4.90 bn(0.7% of total spending)
  • Council tax benefit    £4.80 bn
  • employment + Support    £3.58bn
  • Sick + maternity pay    £2.55 bn
  • Social fund    £2.37 bn
  • carers allowance    £1.73 bn
  • financial assistance    £1.24 bn
  • See more on UK social security 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

39 thoughts on “What does the government spend its money on?

  1. Also Fire, Policing and Waste services are funded through Council tax revenue are they not. Why do they appear here then.

    How much tax revenue is received annually by the Government?

  2. If our economy is doing as well as we are told or at least better than other member states then should we not be saving money instead of spending it, or am I being to simplistic. Running through contries finance should not be so difficult and what the government spends my hard earned tax dollars on shouldn’t be so gray but much more transparent and clear. The bottom line for me is I don’t want some Germany or in the future some Turkish polotitian design on what my money, my money is spent on.

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