Public sector spending refers to all money spent by Government in undertaking its functions. Therefore, it covers central and local government expenditure, as well as spending on public sector pensions and welfare payments.

Public sector spending is alternatively known as Total Managed Expenditure (TME). TME can also be presented as the sum of Department Expenditure Limits (DEL) and Annually Managed Expenditure (AME) – more on this later.

The government forecasts that in 2024-25, TME will total £1,226bn, an increase of £338bn when compared with 2019-20 levels. Of this, £957bn will be spent in central government, £222bn in local government, £31bn will be spent by public corporations and a further £16bn spent by the Bank of England via their asset purchase facility and Special Liquidity Scheme. The chart below sets out the split in expenditure between the different sectors of government for the previous three financial years.

DEL and AME

DEL and AME are essential elements of the budgeting framework within the public sector, with departmental budgets being split into either Departmental Expenditure Limits or Annually Managed Expenditure, generally depending on the type of expenditure being incurred. The two categories can be explained as follows:

Departmental Expenditure Limits (DEL): Spending which is subject to limits set out in the Spending Review (SR) and may include running costs of the services the department oversees, plus the everyday cost of resources such as staff costs. Departments cannot exceed these limits.

Annually Managed Expenditure (AME): Spending which is subject to budgets set by the Treasury, however is more difficult to control and may be demand-led, such as welfare payments or tax credits. Departments may exceed budgets subject to Treasury approval.

Generally, all expenditure is classified within DEL unless the Chief Secretary of the Treasury determines that it should be classified within AME. Typically, this is because the expenditure may be volatile such that it cannot be controlled by a department or may be sufficiently large that a department cannot be expected to absorb the expenditure within their DEL budgets.

Resource and Capital budgets

In addition to classifying expenditure as either DEL or AME, departmental budgets are also split into Resource or Capital categories, again depending on the type of expenditure being incurred.

Resource budgets: Captures current expenditure on pay, procurement, grants and subsidies, depreciation, and the creation, revaluation and release of provisions. The transactions will have either an immediate or near-immediate impact on the fiscal position of an entity.

Capital budgets: Captures new investment – for example the purchase of fixed assets, capital grants, and right of use assets, as well as financial transactions such as lending and equity instruments.

As part of the budgetary process, expenditure is split into Resource DEL (RDEL), Resource AME (RAME), Capital DEL (CDEL) or Capital AME (CAME). The sum of these equals Total Managed Expenditure (TME) for the year – total public sector spending by Government across all sectors.

As already mentioned, the Public Expenditure Statistical Analyses forecast TME to reach £1,226bn in 2024-25. Of this £489bn is RDEL expenditure, £602bn is RAME expenditure, £110bn is CDEL expenditure, and £25bn is CAME expenditure. The chart below shows the split between the different categories of expenditure for the previous three financial years.

Further resources

Want to learn more? Government’s Consolidated Budgeting Guidance sets out the principles of the UK’s budgeting framework and further explains the key concepts covered above.

HM Treasury also release annual Public Expenditure Statistical Analysis which provides information on total public sector spending.