“Health and social care will devour 40pc of all public spending by next year.”
“As a result of the latest changes, health is likely to account for 44 per cent of all public spending by 2025, up from 27 per cent at the start of this century.”
“Experts said the Department of Health and Social Care is set to splash out 40 per cent of all government day-to-day spending from 2022.”
Following the government’s decision to increase National Insurance to fund health and social care, several newspapers reported that health and social care spending would account for around 40% of “all public spending”, which is misleading.
Health spending will amount to around 40% of day-to-day public spending from government departmental budgets. But that total doesn’t include the large amount of money spent on welfare payments, like pensions and benefits.
If these were included, then health is forecast to account for around 20% of all day-to-day spending over the next few years.
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How the government spends money
Government spending can be broken into two main types:
- Departmental budgets, which the government can, essentially, plan for and control
- Annually managed expenditure (AME), which the government can’t control that easily
For example, the government can set a budget for the cost of running, say, a school, and so this falls under a departmental budget limit.
But it can’t really control how much it is going to spend on state pension payments. It can, of course, estimate how much it expects to spend, but it can’t set a hard limit on its “budget” for pension payments, and so these fall under AME.
Then, both types of spending can be further subdivided into capital spending, and day-to-day “resource”, or “current” spending.
Capital spending includes spending on one-off investment projects like building a hospital or a new road. Day-to-day resource spending is on things like maintaining that hospital or road year after year.
So that gives you essentially four types of spending. In 2020/21 the total spent on each and as a proportion of all public spending were as follows:
- Departmental budgeted day-to-day spend (£500 billion, 46%)
- Departmental budgeted capital spend (£94 billion, 9%)
- AME day-to-day spend (£487 billion, 45%)
- AME capital spend (£14 billion, 1%)
The Telegraph claimed that 40% of “all public spending” would go to health next year, as did the New Statesman in a tweet.
Meanwhile the i claimed “health is likely to account for 44 per cent of all public spending by 2025”.
These figures come from think tanks the Resolution Foundation and the Institute for Fiscal Studies (IFS), which respectively estimated that health would account for 40% and 44% of the day-to-day budget for government departments.
But these calculations excluded capital spending, and the annually managed expenditure, which itself accounts for almost half of all public spending.
However, the media reports do not make this clear, in wrongly claiming the figures represent the amount of health spending as a share of “all” public spending.
Unlike the other outlets mentioned, the Sun did include the detail that this was talking about the share of “day-to-day” spending, but did claim health would account for “40 per cent of all day-to-day Government spending” (our emphasis).
There are justifiable reasons for the IFS and Resolution Foundation to exclude AME when doing this sort of calculation as opposed to looking at total day-to-day spending.
The Resolution Foundation told Full Fact: “The report we published is very clearly referring to the Spending Review, which is just about [departmental budget spending], not AME.” Announcing the launch of the Spending Review on Tuesday, the Treasury also talked about the day-to-day spending in this way, focusing on departmental budgets and excluding AME.
Meanwhile, the IFS told Full Fact it used the phrase “day-to-day public service spending” to talk about departmental budget spending, to distinguish it from AME.
However, whatever the reasons for focusing on departmental budget spend, It’s clear these nuances were somewhat lost when the figures were reported by the media.
How much will be spent on health if you include all day-to-day government spending?
Earlier this year, the Office for Budget Responsibility estimated that total day-to-day (“current”) spending would be £933 billion in 2024/25, including both day-to-day spending from AME and departmental budgets, but not including capital spending.
The recent announcement means the Treasury estimates that this will increase by about £14 billion in 2024/25 and in total, £176 billion will go to day-to-day spending on health.
So, as a proportion of all day-to-day spending, we estimate that health will account for around 19%, not 40%.