From pensions to healthcare: UK state spending on old age surges

Government spending on the elderly has dramatically increased the size of the state, analysis by the official statistics body has shown. 

Fresh research by the Office for National Statistics has suggested a steady rise in spending on health and old age has contributed to a rise in government consumption as a share of GDP. 

In the period between 1995 and 2024, total government expenditure as a share of GDP has jumped from 36.9 per cent to 46 per cent. 

The size of the state briefly accounted for more than half of the overall UK economy in 2020 at the height of the Covid-19 pandemic as the furlough scheme and health spending boosted government consumption. 

Over the 20-year period, spending on areas such as education and general public services has been largely flat while some forms of welfare have also increased.

However, research shows that spending on old age has increased from 6.5 per cent as a share of GDP cent 30 years ago to 8.5 per cent. 

Health spending, which marks up around a fifth of total government expenditure, was just 4.9 per cent of GDP in 1995 but it came to 8.8 per cent in 2024. Social protection spending has risen by just over one percentage point while payments on economic affairs has doubled as a share of the economy. 

State spending to jump higher

The analysis illustrates the vast leaps in public expenditure as a share of the wider UK economy over a turbulent 21st century. 

Economists have warned that the triple lock pension, which is counted under spending on old age, has become unsustainable for public finances despite being backed by all main political parties. 

The Office for Budget Responsibility has warned that spending on pensions has been three times more expensive for taxpayers than first believed, with other independent analysts suggesting that the mechanism provides uncertainty for the future of public finances. 

State pension spending has been the largest component of welfare, with the OBR recently saying that it would increase pensioner expenditure by 0.6 per cent of GDP by 2031, 

Pensioner spending is forecast to total £169.2bn over the course of this year and hit £196.2bn by 2031. 

The increase in the size of state seen since 1995 is set to continue, depending on the differences of private sector growth over the coming years. Government consumption has recently driven GDP growth.

Looser fiscal rules under Labour and a heavier tax burden to fund increases in public services expenditure are set to make areas such as health and education larger, according to the official forecaster.