There are large differences in how much the government spends
across different parts of England, large differences in the
make-up of that spending, and large differences in the scale of
that spending relative to the size of the local economy,
according to the Institute for Fiscal Studies.
We (IFS) estimate that identifiable government spending (spending
that can be described as benefiting particular areas) amounted to
less than a quarter of all economic activity (22.1% of regional
GDP) in London in 2023–24, whereas it amounted to almost half of
all economic activity in the North East of England (47.7% of
regional GDP).
This is despite the fact that spending per person,
in pounds, is highest in London (at £14,858 per person in
2023–24, versus £13,631 per person in the North East). The
fact that government spending represents a much smaller fraction
of London's regional GDP reflects the fact that GDP per head is
so much larger in London than in other English regions, and
highlights the greater relative importance of government spending
to local economies outside of the capital.
Higher spending on transport, health, and housing and community
amenities is important in explaining why total per-person
spending is somewhat higher in London than in the North East,
though this is partly offset by lower per-person spending on
other areas, particularly benefits, the state pension and social
services. The large gap in spending as a share of economic
activity between London and the North East is particularly driven
by this difference in spending on benefits, the state pension and
social services. In the North East, we estimate that spending on
these areas was equivalent to 20.5% of regional GDP – only just
below the total level of public spending in London – while it was
equivalent to just 7.3% of GDP in London.
These are among the key trends identified in a new interactive
tool, created by IFS researchers and launched this week, which
allows you to explore how and where the government spends its
money, and how this has changed over time, across all regions and
nations of the UK.
ENDS
Notes to Editor
Exploring regional differences in public spending across
England is an IFS briefing by Bee Boileau, Max Warner
and Ben Zaranko.
