Tuesday 16 July 2013





What does the government spend its money on?

by  on June 30, 2013 in economics
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

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)
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

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Posted by Britannia Radio at 09:57