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.
- 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 as % of GDP
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)
- Foreign Aid £7.8 billion or 0.7% of GDP 2011/12 (Cost of Foreign aid)
Total Government Spending
Government Spending as % of GDP
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
The welfare budget includes spending on unemployment, income support (universal credit), housing benefit and disability allowances. It increased to £105bn in 2011-12
As a percentage of GDP, welfare spending is just over 7% of GDP.
Total Benefit Spending
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