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).

EU spending is £14.7bn (2014). Net spending £9.9bn. See more at the cost of EU

See also: Public Spending at UK Gov

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

The largest area of government spending?

By far the largest area of government spending is social protection. £222bn (2015) 34% of government spending. However, this budget can be split up into different compartments. The biggest single item of government spending is public pensions, with NHS spending in 2nd place.

What percentage of UK spending is on the EU?

If you take gross payments (ignoring EU payments to the UK), in 2014 – £14.7 billion was transferred from the UK to the EU in official payments. This is 2% of government spending.

If you take the £7.1bn net contribution, it works out at 0.9% of public sector spending or £110 per person per year. It is 0.4% of GDP.

government spending by dept.
Source for graph: Public expenditure, chapter 5 – though in that particular table, due to accounting reasons,  they give confusingly figure of EU spending at £3bn, which is less than agreed measure, so I adapted these treasury figures to use £14.7bn to show cost of EU – which is widely agreed as correct figure. (Cost of EU)

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 benefits bill for the UK was £200bn in 2012. See growing size of welfare state

 

Related

53 thoughts on “What does the government spend its money on?”

  1. 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!!

    Reply
  2. 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.

    Reply
    • 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.

      Reply
  3. 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

    Reply
    • 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

      Reply

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