1. Purpose
Support the data used for the break down of spending in Macro Economic Overview in the Program Overview.
This appendix establishes the baseline decomposition of UK Total Managed Expenditure (TME) for 2023-24, the most recent year for which full outturn data are available. The analysis categorises public spending into three functional types — cash transfers, public services, and other — to provide a reference framework against which the spending effects of the Prosperity 2030 programme can be assessed.
All figures are expressed in £ billions to two decimal places unless otherwise stated. The primary year of analysis is 2023-24 (outturn). Autumn Budget 2024 plans for 2024-25 are noted where available but a full COFOG breakdown is not yet published for that year.
2. Sources and Methodology
2.1 Data Sources
| Source | Coverage | Used For |
|---|---|---|
| PESA 2024, Table 1.1 | TME by budget classification, 2019-20 to 2024-25 | High-level TME structure; AME component detail |
| PESA 2024, Table 5.2 | Expenditure on services by COFOG sub-function, 2019-20 to 2023-24 | Functional decomposition; cash vs. services split within social protection |
| PESA 2024, Table 5.4 | Current and capital expenditure by COFOG function | Current/capital split by function |
| PESA 2024, Annex E | Reconciliation of departmental budgets to TES | Accounting adjustments detail |
| OBR Fiscal Supplementary Tables, Table 3.7 (November 2023) | Welfare spending breakdown by benefit type | Cross-reference for cash transfer estimates |
| Autumn Budget 2024, Tables C.1/1.7 and Annex D | TME overview and functional spending chart; revised 2024-25 plans | Revised TME totals; forward spending context |
2.2 Classification Method
TME is decomposed into three categories:
Cash transfers: Direct monetary payments to individuals, comprising all COFOG 10 (Social Protection) spending excluding personal social services, plus public sector pension payments classified under COFOG 1.7 (Public Debt Transactions).
Public services: COFOG functions that deliver domestic civilian services directly to the public: health, education, transport, public order and safety, personal social services, general public services (ex debt transactions), housing and community amenities, environment protection, and recreation/culture/religion.
Other: Debt interest payments (COFOG 1.7 excluding public sector pensions); accounting adjustments reconciling TES to TME; defence; economic affairs excluding transport (industrial subsidies, energy support, agricultural support, R&D, employment programmes); and EU transactions. These items are excluded from "public services" either because they do not deliver services directly to the domestic public (defence, EU), because they are primarily subsidies or transfers to firms rather than service provision (economic affairs ex transport), or because they are financial/accounting items (debt interest, adjustments).
This classification follows the approach used in comparative public finance literature (cf. Bharti, Gethin, Piketty et al., 2025) for distinguishing between cash redistribution and service provision within aggregate public expenditure.
2.3 Key Definitional Notes
TME vs TES: PESA reports both Total Expenditure on Services (TES = £1,095.43bn) and Total Managed Expenditure (TME = £1,216.77bn). The difference (£121.34bn in accounting adjustments) arises from the reconciliation between departmental budget classifications and national accounts definitions. TME is used throughout this appendix as the comprehensive measure of public spending.
PESA vs Autumn Budget TME: PESA 2024 reports 2023-24 TME outturn as £1,216.77bn. The Autumn Budget 2024 (October) reports £1,222.70bn for the same year, a £5.93bn upward revision reflecting later data. Both are noted; the PESA figure is used for the detailed COFOG decomposition as it is the source of the functional breakdown.
Public sector pensions: PESA classifies gross public sector pension payments (£17.44bn) under COFOG 1.7 (Public Debt Transactions) rather than COFOG 10 (Social Protection). These are reclassified here as cash transfers, since they represent regular income payments to retired individuals and are functionally equivalent to state pension payments.
OBR welfare total vs COFOG social protection: The OBR's welfare spending aggregate (£295.37bn forecast for 2023-24, Table 3.7) uses a narrower definition than the COFOG-based figure derived here (£332.02bn). The gap (~£37bn) reflects: (a) the inclusion of locally-financed social protection spending in COFOG but not in the OBR budget classification; (b) the reclassification of public sector pensions from COFOG 1.7; and (c) definitional differences between the DWP/HMRC-administered benefits captured by the OBR and the broader COFOG statistical classification.
3. TME Baseline: Three-Way Decomposition, 2023-24
3.1 Summary
| Category | £bn | % of TME |
|---|---|---|
| Cash transfers | 332.02 | 27.3% |
| Public services | 557.67 | 45.8% |
| Other | 327.08 | 26.9% |
| TME | 1,216.77 | 100.0% |
3.2 Cash Transfers: £332.02bn
Cash transfers comprise direct monetary payments from the state to individuals, primarily through the social security and pension systems.
| Component | £bn | Notes |
|---|---|---|
| Social protection cash transfers | 314.58 | COFOG 10 minus personal social services |
| State and public pensions (COFOG 10.2, ex PSS) | 140.64 | Includes basic state pension, additional state pension, new state pension |
| Incapacity, disability and injury benefits (COFOG 10.1, ex PSS) | 60.23 | ESA, PIP, DLA, industrial injuries |
| UC, income support and tax credits (COFOG 10.7, ex PSS) | 64.08 | Universal Credit (excluding jobseeker element), Working/Child Tax Credits, income support |
| Housing benefit (COFOG 10.6) | 17.18 | Housing benefit and housing element of UC |
| Family benefits and tax credits (COFOG 10.4, ex PSS) | 16.09 | Child Benefit, Sure Start maternity grants, statutory maternity/paternity pay |
| Social protection n.e.c. (COFOG 10.9) | 13.79 | Cost-of-living payments, Household Support Fund, other |
| Survivors benefits (COFOG 10.3) | 1.36 | Bereavement benefits |
| Unemployment benefits (COFOG 10.5, ex PSS) | 1.21 | JSA, UC jobseeker element |
| Public sector pensions | 17.44 | Reclassified from COFOG 1.7 |
Derivation: COFOG 10 total (£360.91bn) minus personal social services (£46.33bn) = £314.58bn, plus public sector pensions from COFOG 1.7 (£17.44bn) = £332.02bn.
Cross-reference: PESA Table 1.1 reports social security benefits (£280.27bn) plus tax credits (£7.46bn) = £287.73bn in the budget classification. The £44bn gap to the COFOG-derived figure reflects locally-financed social protection, public sector pensions, and classification differences.
3.3 Public Services: £557.67bn
Public services comprise spending that delivers domestic civilian services directly to the public: healthcare, education, transport, policing, social care, housing, environmental protection, and general administration.
| COFOG Function | £bn | % of TME | Current (£bn) | Capital (£bn) |
|---|---|---|---|---|
| 7. Health | 220.97 | 18.2% | 208.84 | 12.14 |
| 9. Education | 111.48 | 9.2% | 99.30 | 12.18 |
| 3. Public order and safety | 47.75 | 3.9% | 44.06 | 3.69 |
| 10. Personal social services | 46.33 | 3.8% | 46.33 | — |
| 4.5 Transport | 46.16 | 3.8% | 17.31 | 28.85 |
| 1. General public services (ex 1.7) | 36.80 | 3.0% | 30.16 | 6.64 |
| 6. Housing and community amenities | 19.89 | 1.6% | 4.27 | 15.62 |
| 5. Environment protection | 15.33 | 1.3% | 9.50 | 5.83 |
| 8. Recreation, culture and religion | 12.96 | 1.1% | 9.66 | 3.30 |
| Total | 557.67 | 45.8% | 469.43 | 88.25 |
Transport (£46.16bn): Extracted from COFOG 4 (Economic affairs) and retained in services as direct public infrastructure and service provision. Comprises national roads (£6.12bn), local roads (£6.05bn), railway (£26.81bn), local public transport (£4.90bn), and other transport (£2.28bn). The remainder of economic affairs is reclassified to "other" (see §3.4).
Current vs capital split: Of the £557.67bn in services, approximately £469.43bn (84.2%) is current expenditure and £88.25bn (15.8%) is capital. Transport is notably capital-heavy (63% capital), driven by rail and road infrastructure investment.
3.4 Other: £327.08bn
| Component | £bn | Notes |
|---|---|---|
| Accounting adjustments | 121.34 | Reconciliation from TES to TME |
| Debt interest (COFOG 1.7 ex pensions) | 103.64 | |
| — Central government debt interest | 78.24 | Gilt interest, NS&I, Treasury bills |
| — Bank of England (APF) | 23.93 | Asset Purchase Facility losses, 2023-24 |
| — Local government debt interest | 0.94 | |
| — Public corporation debt interest | 0.54 | |
| Defence (COFOG 2) | 56.75 | Military defence, foreign military aid, defence R&D |
| Economic affairs ex transport (COFOG 4 ex 4.5) | 45.64 | |
| — General economic, commercial and labour affairs | 19.51 | Business support, employment programmes, regulation |
| — R&D economic affairs | 9.61 | Government-funded research |
| — Fuel and energy | 7.07 | Energy bill support, net zero subsidies |
| — Agriculture, forestry, fishing and hunting | 6.72 | Agricultural support, market intervention |
| — Other (mining, manufacturing, communication, nec) | 2.73 | |
| EU transactions | -0.28 | Net residual EU settlement payments |
Rationale for reclassification: Defence (£56.75bn) is excluded from domestic public services on the grounds that it does not deliver services to the civilian public in the same sense as health, education, or transport. Economic affairs excluding transport (£45.64bn) is predominantly composed of subsidies, grants, and transfers to firms and institutions rather than direct service provision to individuals — energy bill support, agricultural market intervention, business support schemes, and publicly-funded R&D. These are better characterised as economic management and industrial policy than as public services in the Prosperity 2030 framework.
Accounting adjustments (£121.34bn): These reconcile departmental budgets (the "DEL plus AME" view) with the national accounts definition of TME. Principal components include: removal of intra-government grants to avoid double-counting; addition of locally-financed expenditure not captured in departmental budgets; depreciation reclassifications; financial transaction adjustments; and public corporations' own-financed capital expenditure. The adjustments are large but are an artefact of the dual reporting framework, not a substantive spending category. They net to zero in whole-of-government terms.
Debt interest (£103.64bn): This represents the cost of servicing public sector debt, including the exceptional BoE/APF losses incurred as quantitative tightening crystallised losses on the gilt portfolio acquired during QE. The BoE component (£23.93bn) is volatile and was negative (-£10.97bn) as recently as 2019-20.
4. Structural Observations
4.1 The Cash-Services-Other Ratio
The UK's spending ratio under this classification is approximately 27:46:27 (cash:services:other). The relatively large "other" category (£327bn) reflects the decision to exclude defence, non-transport economic affairs, and accounting adjustments from the services definition, focusing "services" on domestic civilian provision that directly benefits the public.
Examining only the cash-to-services ratio within the two substantive categories (£332bn + £558bn = £890bn), the UK split is approximately 37:63 — broadly consistent with the European pattern identified by Bharti et al. (2025), where mature welfare states allocate around 41% to cash redistribution and 59% to services. The UK is slightly more service-heavy than this average, driven substantially by the NHS (£221bn alone = 25% of substantive cash + services spending).
4.2 Current vs Capital Expenditure
From PESA Table 5.4 and Table 1.1:
| £bn | % of TME | |
|---|---|---|
| Public sector current expenditure (PSCE) | 1,080.76 | 88.8% |
| Public sector gross investment (PSGI) | 136.01 | 11.2% |
| TME | 1,216.77 | 100.0% |
The approximately 89:11 current-to-capital ratio reflects a structural bias toward consumption over productive investment. Net of depreciation (£65.14bn), public sector net investment is £70.87bn (5.8% of TME), though this figure is inflated by financial sector interventions and student loan disbursements classified as capital.
4.3 Revenue-Spending Gap
| £bn | |
|---|---|
| TME (spending) | 1,216.77 |
| Public sector current receipts (approx.) | ~1,100 |
| Public sector net borrowing (PSNB) | ~117 |
The deficit predominantly finances current services and debt interest rather than cash transfers. Cash transfers are demand-led (AME) and largely self-financing within the existing tax-benefit envelope. The DEL-heavy service functions — particularly health and education — are where fiscal pressure concentrates and borrowing fills the gap.
5. Data Reconciliation Notes
| Item | PESA 2024 (£bn) | Autumn Budget 2024 (£bn) | Difference | Explanation |
|---|---|---|---|---|
| TME 2023-24 | 1,216.77 | 1,222.70 | +5.93 | Later revision of outturn data |
| TME 2024-25 | 1,226.35 (plans) | 1,276.20 (plans) | +49.85 | Autumn Budget policy measures and in-year pressures |
| Social protection 2023-24 | 360.91 (COFOG) | — | — | COFOG classification; no direct Autumn Budget equivalent |
| Total welfare 2023-24 | — | ~295.37 (OBR Nov '23 forecast) | — | Narrower OBR definition; forecast not outturn |
Small discrepancies between PESA outturn and Autumn Budget figures for the same year are normal and arise from revision timing. PESA is the preferred source for functional breakdowns; the Autumn Budget is preferred for the most current TME totals and forward plans.
Sources
- HM Treasury, Public Expenditure Statistical Analyses (PESA) 2024, July 2024. Tables 1.1, 5.1, 5.2, 5.4, Annex E.
- HM Treasury, Autumn Budget 2024, October 2024. Tables C.1, 1.6, Annex B, Annex D.
- Office for Budget Responsibility, Fiscal Supplementary Tables: Expenditure, November 2023. Table 3.7.
- Bharti, N., Gethin, A., Piketty, T. et al. (2025), ‘Human Capital, Unequal Opportunities and Productivity Convergence: A Global Historical Perspective, 1800-2100', Journal of Public Economics vol. 255, 2026.