Benjamin Franklin famously said that only two things in life were certain – death and taxes.
Unfortunately, while that might ring true with many, discussions over taxation levels (and tax avoidance) have often left some feeling like that quote might be truer for some than for others.
‘Non-dom’ tax status has been a big part of the recent conversation on taxes – from Rishi Sunak’s wife to former senior cabinet ministers.
The other side of the coin from tax receipts is, of course, spending.
How the government spends the money it raises from taxation has always been a big subject of political discussion.
Chancellor Jeremy Hunt’s Autumn statement recently revealed large changes for the UK economy, including on benefits, energy support, the NHS, council tax, and many more.
On a smaller level, it was recently revealed that MPs can put Christmas parties on expenses in a move that has been condemned by many prominent members of parliament.
MPs’ expenses have been very politically sensitive since the 2010 expenses scandal that saw several members claiming outrageous amounts of money for inappropriate items and allowances.
So, how does the government spend your tax money?
Here’s what you need to know.
How much money does the government raise from taxes?
The latest information on UK government tax receipts is based on the 2021/2022 year, where, according to the House of Commons library, the government raised approximately £915 billion in taxes.
Of this figure, income tax receipts made up £228 billion – the highest area of tax receipts.
This was closely followed by National Insurance contributions (£161 billion) and VAT (£143 billion).
The OBR (Office for Budgetary Responsibility) also has predictions based on what the government will raise and spend over the 2022 – 2023 period.
With that in mind, here is what the government spends the tax receipts on (according to the Gov.uk website).
Health
In 2021-2022, the government spent £219.4 billion on health, which makes up 21.9% of public sector spending.
This is, perhaps unsurprisingly, the biggest area of government spending and covers several of its most expensive programmes, including the NHS budget (which is the largest employer in the UK).
Welfare
The second biggest area of public spending is Welfare, with a total bill of £196 billion at 19.6% of total spending.
Interestingly, this covers all aspects of welfare state protections (like unemployment benefits, tax credits, and public sector pensions) except for state pensions, which are listed separately.
In 2021-2022, health and welfare spending (the two largest government expenses) combined made up a staggering 41.5% of the total public sector budget.
Business and Industry
£143.8 billion was spent in the areas of business and industry in 2021-2022, making up 14.4% of public sector spending.
This bill covers economic affairs but does not include Transport, which is listed elsewhere.
This spending was a big increase on previous years due to the covid-related support schemes, including furlough and business support grants.
State Pensions
State pensions have been in the headlines a lot recently, with the debate around whether Jeremy Hunt would protect the pensions ‘Triple Lock’ which he ultimately chose to do.
State pensions cost £101.2 billion – 10.1% of the overall budget.
This means that state pensions were the 4th biggest government expenditure in the 2021-2022 time period.
Education
The education budget covers everything you might expect it to within the fields of children’s services and education.
This includes early years, schools and academies, as well as further and higher education policy, and apprenticeships and wider skills.
£96.1 billion was spent on education in 2021-2022, making up 9.6% of total spending.
Transport
The Transport budget (which includes spending on local roads, railways, and more) was £45.1 billion in 2021-2022 and made up 4.5% of overall spending.
Defence
While the British Army is one of the largest employers in the UK, the defence budget is 7th on the list of government expenses for 2021-2022.
The defence budget was £44.6 billion and made up 4.5% of overall spending – the same allocation as transport.
The conversation around defence spending can occasionally prove confusing, with many organisations (including NATO) using figures as a percentage of GDP (Gross Domestic Product) instead of public spending.
The defence budget recently hit the headlines after then-PM Liz Truss promised to commit 3% of GDP to defence – above the 2% NATO stipulation.
However, in the government’s Autumn statement, Jeremy Hunt said defence spending would not be increased until a wholesale review of expenditure on defence had been undertaken.
National Debt Interest
Interest payments on the country’s national debt (money borrowed by the government) also makes up a significant expense, at £41.5 billion.
This figure made it 4.1% of all public sector spending for 2021-2022, and meaning it cost the government more than areas like the Environment, Overseas Aid, Culture and more.
Public Order and Safety
Public Order & Safety spending made up 3.9% of expenditure at £38.6 billion.
This covers everything you might expect, including Police Services, Fire protection, prisons, and law courts.
Government Administration
In 2021-2022, £20.2 billion was spent on government administration, making it 2% of the public sector budget.
Housing and Utilities
£13.9 billion was spent on Housing and Utilities in 2021-2022, which covers all manner of Housing & Community Amenities, such as streetlights.
This made up 1.4% of the public centre spending.
Environment
Environmental protection often makes its way into the headlines, whether it’s through protests by groups like Just Stop Oil or Extinction Rebellion or other conversations around energy use.
At £12.6 billion, spending on the environment makes up 1.3% of government spending in 2021-2022.
Culture
Culture spending stands at 13th on the list of total government spending, despite covering spending on recreation, culture, and religion, like sports, libraries, museums, and more.
In 2021-2022, £12.3 billion was spent on Culture, making up 1.2% of government spending.
Overseas Aid
An often-controversial political topic, Overseas Aid makes up 0.9% of government spending at £8.6 billion.
Overseas aid is often brought under the banner of ‘soft power’, that is, how the government can seek to wield influence abroad without military solutions (or ‘hard power’).
UK Contributions to EU budget
While this might prove surprising to some, the last item on the list of public spending is £5.8 billion in EU transactions, at 0.6% of the budget.
It was agreed in the Brexit withdrawal agreement that the UK would continue to make contributions to the EU Budget during 2020-21.
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