Government Spending (Edexcel GCSE Citizenship Studies): Revision Note

The role of the Chancellor of the Exchequer

• The Chancellor of the Exchequer is the government minister responsible for managing the UK’s economy and public finances

The Chancellor's role

• The Chancellor leads the Treasury

  • The Treasury advises the government on economic policy, growth and financial stability

• The Chancellor plays a key role in managing economic risks

  • This includes responding to inflation, recession and changes in global economic conditions

• The Chancellor oversees taxation and public spending

  • This includes deciding how much money is raised through taxes and how it is allocated to public services

• The Chancellor presents the Budget to Parliament

  • In the 2025 Budget, the government announced that its spending priorities for 2026–27 would focus on the NHS, education, defence, welfare support and improvements to infrastructure

Expected expenditure 2026-2027

• The largest areas of spending are

  • Social protection

    • Social protection spending pays for welfare benefits and support, such as pensions, disability benefits and unemployment support

  • Health

    • Health spending mainly funds the National Health Service (NHS), including hospitals, doctors, nurses and public health services

  • Education

    • Education spending covers schools, colleges and universities, as well as funding for teachers, buildings and support services for children and young people

  • Debt interest

    • Debt interest is the money the government must pay on loans it has borrowed in the past, reducing the amount available to spend on public services

Welfare spending

• Welfare spending has increased significantly since the COVID-19 pandemic

  • More people rely on benefits due to job insecurity, low wages and rising living costs

  • A large number of people claiming Universal Credit are in work

    • Having a job does not always guarantee a sufficient income.

• The government wants to reduce welfare spending, but this is difficult

  • Spending cuts often affect the poorest in society, which is politically and morally controversial

• Raising the National Minimum Wage could reduce reliance on benefits

  • However, some employers may be unable to afford higher wages and could reduce staff

• Governments generally agree the best long-term solution is more people in secure, well-paid work

  • The challenge is creating jobs that generate income tax and National Insurance without increasing unemployment

Health spending

• The NHS is one of the most popular public institutions in the UK

  • Any major reform risks public opposition due to strong support for the NHS

• Health spending continues to rise, but productivity has not increased at the same rate

  • New treatments and medicines are often very expensive

• Changes in primary care have led more patients to seek help via A&E, increasing pressure

• The UK has an ageing population

  • People live longer but often need more medical treatment later in life

• Governments face difficult reform choices, including:

  • Whether to introduce charges for GP visits or missed appointments

  • Whether to encourage private medical insurance

  • Whether to devolve health responsibilities to directly elected mayors

Spending on care of the elderly

• An ageing population means higher spending on pensions and social care

• The state pension is paid to almost all elderly people

  • The pension age has increased over time to reduce costs

• The triple lock guarantee ensures pensions rise by the highest of inflation, wages or 2.5%, whichever is the highest

  • This has helped reduce pensioner poverty

  • Politicians are reluctant to change it because older people vote in high numbers

• Social care costs are mainly paid by individuals until their savings fall below a low threshold

  • Many elderly people worry about having to sell their homes to pay care costs

• Governments face pressure to reform social care but struggle to find a fair and affordable system

Spending on education

• School funding is decided using a national funding formula

  • Many schools, especially in rural areas, argue they receive less funding per pupil

• Spending on SEND (Special Educational Needs and Disabilities) has increased sharply

  • This has forced the government to lend money to some councils to cover costs

• University tuition fees have risen in recent years

  • Despite this, many universities report financial difficulties

• The government has recently placed VAT on private school fees

  • This was intended to raise money to improve education for the 90% of students who receive a state education

• Ongoing debates include:

  • Whether schools need more central control or greater freedom

  • Whether university fees should be reviewed regularly or spending monitored more closely

  • Why SEND spending is rising and how the system can be made sustainable