2 - The Composition of Expenditure

Summary

The history of the composition of government spending is both complex and fascinating. Although government priorities have changed over the past 150 years, social spending has been the biggest ‘winner’. In the late nineteenth century, public spending focussed on public administration, investment, debt service and the military. In the following decades until about 1960, such growth focussed on developing public services and social safety nets, taking advantage of falling military spending after the two world wars. The following sixty years saw mostly further increases in social expenditure, especially on pensions, health and long-term care. Public spending on ‘goods and services’ has always averaged nearly half of total expenditure. By contrast, social expenditure has grown from less than 10% a century ago to 55% in 2017. Education spending has been stable at about 10% of total spending in recent decades, after rising strongly in earlier years. The share of public investment has been falling steadily, from 20% in the late nineteenth century to only 7% in 2017.