Which benefits does the government spend most money on?
As the government pledges to clamp down on the 'bulging' benefits bill, we take a look at where most money is spent.
Sir Keir Starmer has pledged to tackle the “bulging benefits bill blighting our society”, as the government continues looking for ways to slash its spending.
In 2024 to 2025, the UK is forecast to spend £319.1bn on the social security system — a figure the Labour government says it is determined to cut.
Here's what we know about what payments make up the benefits bill, what is the largest expense, and how the UK's welfare spend compares to other countries.
What do we spend most money on?
According to official statistics, the department for work and pensions spent £285.7bn on welfare in 2023-24. In comparison, NHS England's budget was around £100bn lower at £171bn.
Of that, the single benefit that ate up the largest amount of cash was the state pension, which cost the UK around £125bn – 44% of the total welfare spend.
Other benefits claimed by the elderly included pensioner housing benefit (£6bn), pension credit (£5bn) and winter fuel payments (£2bn), meaning the total benefits bill in 2023/24 for pensioners was £138bn – around 48% of all welfare spending.
And the UK’s state pension bill is going to keep increasing. That’s partly due to the triple lock guarantee, which means that pensions increase by inflation, average earnings, or 2.5%, whichever is higher.
In terms of other benefits, universal credit (UC) is the next most substantial government outgoing.
Originally introduced in 2013, UC is gradually replacing six benefits and tax credits with a single monthly payment if you're out of work or on a low income. These payments came to a sizeable £80.8bn in 2023/24.
It appears the government is focused on cutting these payments because the bill is anticipated to grow – in 2022/23, the cost of universal credit was 10% lower at £73.4bn.
Disability benefits have also been under intense scrutiny under the current government and made up 12.2% of total welfare spending in 2023-24 at £39.1bn. This consisted of attendance allowance (£6.7bn) disability living allowance (£6.7bn), personal independence payments (£21.8bn) and devolved benefits (£4bn).
Child benefit makes up the smallest total, accounting for 4.2% of total welfare spending.
What country spends the most on benefits?
According to a report published last year by the OBR, the current decade is proving to be a very expensive one for governments around the world. This is, in large part, due to the COVID pandemic in early 2020, the cost-of-living crisis from mid-2021, and the sudden interest rate rises in 2022.
And it's in this context that governments are also dealing with the growing costs from an ageing society.
In 2019, just before the pandemic hit, the UK’s spending on total non-pensioner cash welfare benefits was similar to the average across the 38 OECD countries, at 3.7% and 3.6%of GDP respectively. The total spend on incapacity benefit was slightly lower than average (1.3% versus 1.6%)
Spending on non-pensioner cash benefits across OECD countries, 2019. (OBR)
It's hard to make exact comparisons between countries due to the different each one sets up its welfare systems.
Another significant outgoing is social protection — a wide-ranging area of spending, covering areas like housing benefit, pensions, and supporting people who are at risk of exclusion from society. It's the highest category of UK government spending, accounted for £361bn in the last year.
For context, the government spent £221bn of total spending on health, and £112bn of total spending on education.
The UK is not an outlier with these figures. In fact, pretty much every country in the EU and the OECD spends more on its social protection bill than anything else.
What about spending on fraud?
One of the government's areas of focus is cracking down on any bogus benefit payments made to fraudsters.
Starmer used an article in the Mail On Sunday to promise a crackdown on “criminals” who “game the system”. He wrote: “In the coming months, Mail On Sunday readers will see even more sweeping changes. Because make no mistake, we will get to grips with the bulging benefits bill blighting our society.
“Don’t get me wrong, we will crack down hard on anyone who tries to game the system, to tackle fraud, so we can take cash straight from the banks of fraudsters.
“There will be a zero-tolerance approach to these criminals."
Overall, the government says benefit overpayments due to fraud cost the DWP £7.4bn in the last financial year. By comparison, HMRC estimates that tax evasion costs around £5bn a year in lost revenue.
But the DWP's figures show that fraud is more prevalent in some benefits than others.
The rate of fraud relating to personal independence payments (PIP) for disabled people stood at just 0.4% (£90m) of the total PIP bill in the government's annual report released earlier this year.
For state pension, overpayments due to fraud were 0.1% (£80m) last year.
Universal credit was found to have the highest level of fraud, standing at 10.9% (£5.7bn).
