Government spending, explored: how much does the UK spend, and what on?
Hello! Is this thing on?
Welcome to the site’s first proper blog! I’m looking forward to exploring (sorry-not-sorry) some fascinating policy questions over the coming months — and I hope you’ll enjoy reading and learning with me.
But before jumping into specific policy detail, I wanted to start with a couple of blogs that set the scene a little. It feels important to try and establish the scale and breadth of government policy before diving into specifics.
So let’s start with two fundamental questions:
- What does government spend its money on?
- How does government raise the money it spends?
In short, a brief primer on “tax and spend”. We’ll discuss the spending bit in this first blog, with the taxing bit coming next time. Why not cover the fun stuff first?
So, how much does government spend then? The chart below shows how much we’ve spent in the past, as well as our current spending and our forecast future spending (both from the most recent Budget).
The orange line shows this in £billions, but with prices adjusted so that you can meaningfully compare one year’s spending to another. The blue line shows this same spending figure, but as a % of UK GDP.
A few highlights:
- Since the late 2000s the UK has spent over £800bn per year, and more recently this has now been pushed to over £1 trillion, mostly because of coronavirus (the big spike you can see in the chart). That’s a lot of money.
- This is about 40% of UK GDP (about 50% since coronavirus). This puts it roughly in the middle of the pack for the G7 countries — a collection of comparable ‘advanced economies’ — but is STILL a lot of money.
- Generally, public spending has been rising in absolute terms over time (orange line); but spending as a % of GDP has stayed much more stable over time (blue line). The reason this can be the case is that the UK’s GDP has grown over time. GDP growth is important, then — if GDP grows then we can spend more on public services without de-prioritising other things. And the opposite is true when GDP shrinks, we will spend less without de-prioritising other things!
So we’ve seen that the UK spends a lot of money, and that’s really important context — but arguably the more interesting question is “what does it spend it on?” The chart below shows the government’s spending plans for 2021–22, from last week’s Budget.
There’s a lot of interesting stuff in this chart, but some key points:
- 32% of UK spending is on the social safety net (“social protection” and “personal social services”). About half of this is on the State Pension alone (!) but other stuff here includes Universal Credit and disability benefits.
- Health is next, comprising 22% of UK spending. Most of this is on the NHS. This means that the social safety net and health combined account for over half of total UK spending…
- Other notable outlays include education (12%); defence (6%) and public order (4%); transport (5%); and interest payments on the UK’s debts (4%). But worth noting how all these important public services are dwarfed by the items from the first two bullets!
So we’ve taken a quick look at government spending. What have we learned?
Firstly, that the UK does a lot of public spending — at least £800 billion for the last decade or so, and coronavirus has pushed this higher (for now, at least). This spending is comparable to other advanced economies, as a % of GDP.
And secondly, that this spending covers a range of stuff — the social safety net; schools; police; debt repayments; the NHS; and more. It isn’t distributed uniformly across all these things by any means, but even with over half of spending going on the social safety net and health there is hundreds of billions being spent on the rest!
I hope that was interesting — I’m looking forward to now turning my attention to revenue raising, as without that side of the coin this is fundamentally a partial picture. Hopefully see you then!
