Public spending: a brief introduction

Types of spending

Public spending is planned under several intersecting sets of categories. The main ones are:

• Whether the spending can be planned long-term (this appears as Departmental Expenditure Limits or DEL) or is more demand-driven (Annual Managed Expenditure, AME);
• Whether the money is spent on assets (capital spending) or on things that are used up (current/resource spending);
• Whether the money is spent on a department’s governmental functions (programme spending) or on running the department itself (administration spending).

Each of these categories appears in departmental spending plans and accounts. The amounts going to each vary according to departmental responsibilities and central government priorities.

What does the Government spend its money on?

Money is spent on a very wide range of areas, but in most years social protection, health and education are the areas receiving the largest amounts (economic affairs and general public services replaced education as the third-largest area of spending in 2020/21 and 2021/22 respectively, due to spending incurred during the Covid-19 pandemic). In 2021/22, social protection accounted for £299 billion of total spending, health £217 billion, general public services £109 billion, and education £100 billion. Spending related to old age is expected to make up an increasingly large proportion of overall spending as the UK’s population gets older.

Who spends the money?

Government departments each have their own budgets, which vary in size in line with the spending needs associated with their responsibilities. The departments with the largest budgets are usually the Department for Work and Pensions, the Department of Health and Social Care and the Department for Education, which taken together account for over half of 2022/23’s planned spending.

Departments spend both centrally and by funding public bodies, which are used when spending needs a degree of operational or constitutional separation from government. The largest such bodies in terms of the amount of funding they receive are NHS England and the Education and Skills Funding Agency.

Current plans include three separate funding pots – for the Levelling Up Fund, the UK Shared Prosperity Fund, and returning overseas aid funding to 0.7% of gross national income – which have not yet been allocated to departments.

Where is the money spent?

73% of all public spending in 2020/21 was in England, with Scotland, Wales and Northern Ireland receiving 8%, 4% and 3% respectively. 10% could not be identified with any particular region, and 3% was spent outside the UK.

Some money has typically gone to the EU – the UK’s net contribution in 2021/22 was £6.3 billion, and the total is set to decrease over the next few years now that the UK has left the EU – and some is spent abroad as part of the international development budget.

How does the UK’s spending compare with other countries?

In per-person terms, the UK’s public spending is similar to that of Italy and Australia. The UK is far from unusual in its spending among developed economies, either in the amount that it spends per person or relative to the size of its economy – its spending as a percentage of GDP is fairly typical amongst OECD members.