Exploring regional differences in public spending across England

Total public spending in the UK stood at £1.1 trillion, or 40.6% of GDP, in 2023–24. Within this total, there are large regional differences in how much money the government spends, and in what it spends that money on. Today, we have launched a new interactive tool which allows you to explore where, and how, the public sector spends its money. In this comment, we use graphs from the tool, which is based on data published by HM Treasury, to highlight the striking differences in public spending across English regions in 2023–24.

Most public spending can be ‘identified’ as having been for the benefit of a particular area of the UK. For example, a hospital in Birmingham can be thought of as benefiting the West Midlands, and state pensions paid to pensioners in Brighton and Hove can be thought of as benefiting the South East. But some spending, on things such as defence and debt interest, is ‘unidentifiable’ because it benefits all of the UK rather than a specific area.1 And some other spending, on things such as overseas aid, benefits areas outside of the UK. In this comment, we focus on domestic identifiable spending, which makes up the vast majority – but not all – of UK public sector spending (79.4% of all spending in 2023–24, or 32.2% of UK GDP). While the tool covers all of the UK, we focus solely on England in this comment, as differences between England and the rest of the UK also reflect different choices over tax and spend made by the devolved governments.

Figure 1 shows how total identifiable spending was distributed across England in 2023–24, measured in two different ways. Panel a shows identifiable spending per person by region and Panel b shows identifiable spending as a share of regional GDP by region.2 The measures are useful for different questions. For thinking about how public spending benefits people in a specific region, considering per-person spending makes sense. But for thinking about the scale of public spending within a region, and the relative importance of government spending to the local economy, comparing spending with the total amount of economic activity in the region – spending relative to regional GDP – makes more sense.

Panel a of Figure 1 shows that London has the highest per-person identifiable spending (£14,858) of all English regions, around 17% higher than the England-wide average (£12,653). This partly reflects the higher cost of providing services in London – NHS workers based in London typically receive higher pay (‘London weighting’) to reflect higher local living costs, for example – as well as higher capital spending, particularly on transport. Next are the North East and North West of England, where identifiable spending per person is £13,631 and £13,337 respectively. At the other end is the South East, with £11,639 of identifiable spending per person, 22% less than London and 8% below the England-wide average.

However, when we consider spending as a share of regional GDP (Panel b), the patterns are very different. This is because GDP per person – i.e. the size of the local economy per person – differs substantially across England. Under this measure, London has the lowest spending: we estimate that identifiable public spending was equivalent to 22.1% of GDP in London in 2023–24. The North East has the highest spending among English regions on this measure, with spending equivalent to 47.7% of regional GDP, more than double its level in London. In other words, public spending in the North East is equivalent to almost half of all economic activity, while in London it is less than a quarter of all economic activity.3

We can broadly split regions into four types. London has the highest spending per person and the lowest spending as a share of regional GDP, because its GDP per person is so much higher than anywhere else that this offsets its higher public spending per person. For some other regions, the pattern is the opposite: the East of England and the West Midlands have relatively low per-person spending, but their GDP per person is also low, which pushes up their spending as a percentage of regional GDP. Most other regions are high or low on both measures as their regional GDP per person is not high or low enough to offset their high or low spending. For example, the North East and the North West of England have high spending per person and high spending as a share of regional GDP, while the South East has low spending per person and low spending as a share of regional GDP.

Figure 1 shows that there are large differences in the level of total identifiable spending. But within this total, there are also differences in the types of things that money is spent on, which we illustrate in Figure 2. We focus on London and the North East, where the differences in total spending as a share of regional GDP are largest.

Panel a of Figure 2 shows spending differences in per-person terms. Per-person spending is relatively similar in London and the North East, but this overall similarity masks larger differences within particular types of spending. Per-person spending on benefits, the state pension and social services (a category of spending often referred to as ‘social protection’ spending) is higher in the North East (at £5,865 per person, compared with £4,902 per person in London). In contrast, some areas of spending are higher in London than in the North East in per-person terms. This includes spending on transport (£1,315 per person in London compared with £543 in the North East), housing and community amenities (£575 versus £262 per person) and business and economic development (£511 versus £263 per person).

Panel b shows differences in spending compared with regional GDP. Since total public spending in the North East is more than double the share of regional GDP that it is in London, it is unsurprising that most types of spending relative to regional GDP are much higher in the North East. The largest difference is for social protection spending. In the North East, we estimate that social protection spending is equivalent to 20.5% of GDP – almost equal to the level of all public spending in London. In London, we estimate that social protection spending is just over a third of that level, at 7.3% of GDP.

There are large differences in the composition of social protection spending as a share of regional GDP between the regions, too, with the gap between London and the North East particularly large for spending on pensions, old-age benefits and health-related benefits, and smaller for spending on social exclusion and housing benefits. This reflects, among other things, the fact that the share of the population aged over 65 is almost twice as high in the North East (20%) as it is in London (11%).

In contrast, spending on transport, housing and community amenities, and business and economic development is very similar between the two regions as a fraction of regional GDP (and so is much higher per person in London). This also means that spending on transport, housing and community amenities, and business and economic development makes up a much larger share of public spending in London than in the North East. In London, these categories represent 16% of public spending, more than double the 8% of public spending they make up in the North East.

Taken together, these figures show the striking differences in public spending across the regions of England. They also demonstrate the importance of the way in which public spending is displayed: the differences in the ranking of regions when thinking about per-person spending or spending as a share of GDP are large. At the extreme, those living in London receive the highest public spending per person of any region. But this spending is equivalent to a much smaller fraction of regional GDP in London – the state’s footprint, relative to the size of the local economy, is much smaller.

While this comment has focused on public spending, there are also large differences in the revenue that the government collects across regions. Data on the revenue that can be allocated as coming from each region are not as up-to-date as data on spending. But for 2022–23, we estimate that revenues were highest as a share of regional GDP in the East of England (44.5% of GDP) and the South East (43.6% of GDP).4 They were lowest in the North West (38.2% of GDP) and London (38.4% of GDP). The low level of revenue as a share of GDP in London mirrors what we see on the spending side, though this is not the case for the South East and East of England, where spending is also relatively low as a share of regional GDP.

As with per-person spending, per-person revenues were highest in London, at around £24,300 per person (compared with an England-wide average of £15,400 per person). While the North East has the second-highest level of per-person spending, it has the lowest level of per-person revenues of all English regions, at around £11,000 per person.

To explore further, all spending figures in this comment were created using our new interactive spending tool, which you can use to create a wide range of further breakdowns of public spending across all regions and nations of the UK. For a more granular look at spending on specific public services, our tool published in 2023 shows local-authority-level estimates of spending on health, police, schools and local government, alongside estimates of funding needs, in 2022–23.