The lowdown on UK public spending in 2018-19

With the UK public sector spending £284 billion a year on procurement alone, we know that public spend is imperative to the future of procurement. This blog summarises the highlights of the key areas of total (procurement and non-procurement) public spending in 2018-19 and looks ahead to public sector spending in the coming years, with the recent Spending Round summary of 2019 announced by the Chancellor of the Exchequer earlier this month.

What’s been happening?

According to research, total UK public spending in 2019 by central government and local authorities was £821 billion. The prediction for 2020 is that this is set to increase to £847.6 billion.

Of total public spending, healthcare tops the list as the sector with the highest public spend at £162 billion. Pensions come a close second, at just over £161 billion, followed by the education and defence sectors.

A closer look at public sector healthcare spending

Since the UK recession in 2009-10, public sector healthcare spending has consistently increased, but at a lower rate than in the early 2000s, and much slower than the historic long-term trend.

In June 2018, it was announced that the NHS budget would increase by £20.5 billion a year by 2023-24. Plans for growth in the mental health service budget was also outlined, as well as an increase of funding in adult and children’s social care.

As the four countries that make up the UK have slightly different health systems, the NHS has separate operating bodies for each of them that all form together as the wider NHS. Because of this, and the immense spending across the NHS, total procurement spend can be difficult to trace. However, to give you an idea of how vast the NHS procurement market is, in July 2019 alone the total procurement spend was just over £1.6 bn. 663 contract notices were published and a further 535 contracts were awarded.

With NHS funding faring better than other public services, the opportunities for winning tenders in this huge market are real and more achievable than ever.

The defence procurement market is increasing

For the year ending March 2019, defence spending was £49.7 billion of which £21 billion was procurement spend. Considering that in 2000, total UK defence spending was less than £28 billion, the sector has seen a huge increase of nearly 50% in public spending in the last two decades.

In 2018, the Government announced a £1 billion investment in defence across 2018-19 and 2019-20, as well as £160 million for counter-terrorism policing in 2019-20. This was to ensure forces continue to be well equipped to keep citizens and communities safe from growing threats.

Looking ahead to public spending in 2020-21

Earlier this month the Chancellor of the Exchequer, Sajid Javid, announced his Spending Round to Parliament, detailing departmental spending plans for 2020 -2021. The plans set out how the Government intends to deliver on the public priorities, including health, education and security.

The Spending Round set out the fastest planned increase in day-to-day public spending for fifteen years, and has been described as ‘turning the page’ on austerity. Departments will get a £13.8 billion real terms increase in day-to-day spending compared to 2019-20.

Key highlights are in healthcare and education.  The Government has committed to more NHS funding with a cash increase of £33.9 billion a year by 2023-24 compared to the 2018-19 budgets. Nurses, midwives and other allied health professionals will receive £1,000 in personal development funding over a three-year period, in a bid to help to make the NHS more secure in future.

Schools will be provided with a cash boost to give every child a higher quality education. The increase in funding means every secondary school will be allocated a minimum of £5,000 per pupil by 2020-21, and every primary school £4,000 per pupil by 2021-22.

A public sector funding increase is good news for the future of public sector procurement, as public spending is essential to the procurement market. The increase in public spending will be felt across UK businesses, from SMEs to larger organisations, all of whom are looking to find and win contracts with the public sector.

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