Spending by the UK Government currently accounts for around 41% of GDP. The way public funds are allocated impacts the provision and delivery of services (like health, pensions and benefits), and therefore affects people’s day to day lives.
This article in the UK Perspectives series presents key statistics showing changes in government spending over the last two decades, and takes a closer look at some aspects of the largest spending categories.
1. Changes in public spending over time
Total UK government managed spending (in 2014/15 real terms) and government managed spending as % of GDP, financial year ending 1995 to financial year ending 20151
- After more than a decade of continuous growth, total government spending (in 2014/15 real terms) reached a high of £765.2 billion in 2010/11.
- In 2014/15 government spending was £746.7 billion; this was £1.1 billion higher than 2013/14 in real terms.
- Since 2009/10, government spending as a percentage of GDP has fallen from 46.1% to 40.8% in 2014/15.
2. Share of spending on health has increased over last 20 years
Proportions of total UK government spending by function (in 2014/15 real terms), £billions (and as a percentage of total) financial year ending 1995 and financial year ending 20152
Since 1994/95 the top three spending categories have been social protection, health and education
Health spending increased steadily and had the largest increase proportionally, increasing from 13.9% of all government spending in 1994/95 to 19.8% in 2014/15.
Social protection (pensions, benefits and personal social services) spending was the largest public spending category, totalling £258.4 billion in 2014/15 compared with £162.6 billion in 1994/95 (2014-15 real terms). This represented 38.1% of total government spending in 2014/15, compared with 35.9% in 1994/95.
Education was the 3rd largest area of government spending; proportionately this has fallen slightly compared with 20 years ago. Education spending was 12.5% of total government spending in 2014/15 and 12.7% in 1994/95.
Over the same period spending on defence fell from 8.2% to 5.4% of the total. Spending on public order and safety, which includes policing and crime prevention, fell from 5.5% to 4.4%.
3. Pensions spending increased over last 5 years
Proportions of UK social protection spending by category (in real terms), financial year ending 2010 and financial year ending 20143
Pensions were the largest component of social protection spending in 2014/15 and their share has increased over the last 5 years. It was 37.9% in 2010/11 and 41.9% in 2014/15, when total spending on pensions was £108 billion. Increased spending on pensions in particular reflects the UK’s growing and ageing population and the fact pensions have been rising faster than inflation. Forecasts have projected that spending on state pensions will increase from 5.5% of GDP in 2014/15 to 7.0% of GDP by 2054/55.
Government policies on the state pension age affect the number of people who qualify for a state pension and, therefore, will also affect the overall level of spending on pensions that is required.
The share of spending on family benefits, income support and tax credits has fallen the most over the same period. It was 20.3% in 2010/11 and was 17.2% in 2014/15.
4. Secondary education made up largest share of education spending
UK spending on four education categories, financial year ending 2011 to financial year ending 20154
Spending on education at all levels includes: operation and support of schools, administration and inspections.
Secondary education accounted for £36.8 billion of spending on education in 2014/15, or 44% of the total. Primary education accounted for £26.0 billion, 31% of the total, and education for the under fives accounted for £5.2 billion, 6% of the total. Spending on these three categories has remained similar since 2010/11.
Spending on higher (tertiary) education in 2014/15 was £10.3 billion, 12% of the total. This has fluctuated from year to year. However, this is mainly because each year’s figure takes account of changes in the estimated value of future student loan repayments, rather than simply how much cash is actually spent.
5. Majority of defence expenditure is on equipment and property
Proportion of UK defence spending by category, financial year ending 2015
In 2014/15 the majority of defence spending was on equipment and property (59%). This spending includes new military machinery, maintenance of existing equipment, property, dual use equipment and research & development. The proportion of spending on equipment and property has increased from 56% in 2011/12.
Government spending on defence services also includes the costs of employing armed forces and civilian personnel. In 2014/15 around 32% of expenditure was on armed forces and civilian personnel costs, including pay and allowances, and this has fallen from almost 35% in 2011/12. The average strength of the armed forces and civilian personnel during 2014/15 was 251,670, a fall of 13% from 1 April 2012.
The remaining 9% of expenditure was on running cost items such as stores, fuel, clothing and other materials such as stationery.
Conclusion: Public spending reflects changing demands
There have been some large changes to the amount of government spending on different types of public service in the last 20 years. In particular, spending on health and pensions has played an increasingly important role over time as the UK’s population increases and gets older.
Changes in government spending can be driven by requirements for public services like healthcare and pensions, as well as by policies initiated by government. In the future, the changing needs of the country’s population will help determine how public money is spent.
Please note that wherever slashes "/" are used between years it relates to financial years, for example wherever 2014/15 is used it refers to the financial year ending 2015.