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Understand economics at your own pace: step-by-step guided courses, and exercises to practice.
Where does the state's money go?
The real amounts item by item — and why public spending is endured more than it is decided.
spending = beneficiaries × average amountProblem / motivation
In 2025, French general government spent about €1,711 billion — 57.2% of everything the country produces in a year. Where does that money go, and who really decides?
First precaution, the same as for revenue (course “Where does the state's money come from?”): “the state” covers three tills. The state in the strict sense — the ministries, whose budget is voted in Parliament — spends €458.9 billion in 2026. Social security and local authorities spend the rest. The €1,711 billion is the total of all three. A consequence that is always forgotten: **the ranking of spending items is not the same depending on which till you look at**. Pensions do not come out of the same pot as teachers' salaries, and the poll below makes the point.
Second idea, the one that structures the whole course: public spending is almost never an envelope you choose. It is a PRODUCT — a number of beneficiaries multiplied by an amount set by a rule. Pensions are the number of pensioners multiplied by the average pension; public salaries, the number of staff multiplied by their pay; debt interest, the stock of debt multiplied by a rate. That is why “making savings” is so hard: to change the result, you have to change one of the two factors, and neither can be decreed overnight.
Assumptions
In your view, which assumptions are needed for this model to hold? Jot down your ideas — no lead is wrong, this is your worksheet.
Your worksheet is still empty. Go for it: propose at least one idea.
0 idea(s) proposedFormalization
Let's take the rule from the revenue course again: the state in the strict sense (ministries, budget act), social security (pensions, health, family — a separate funding act) and local authorities. Add the three and you get GENERAL GOVERNMENT, whose spending reaches €1,711 billion in 2025 — an addition made with care, because the state itself pays money to social security and to local authorities: those internal transfers are removed from the total, otherwise the same euro would be counted twice. Look at the state alone and you drop to €458.9 billion in 2026 — almost four times less. This is no disagreement between sources: they are two perimeters. Remember the reading rule: before quoting a spending item, ALWAYS ask which budget it comes out of.
To file €1,711 billion, you do not invent your own boxes: you use COFOG, an international classification with 10 functions — social protection, health, general public services (the administration itself, and debt interest), economic affairs (transport, business support, energy), education, defence, public order and safety, recreation-culture-religion, housing, environment. Two properties make it usable: the boxes do not overlap and they cover everything (assumption 2). That is what licenses writing a genuine equality — total spending is the SUM of the ten — instead of a list that would end in “and the rest”.
Let's go down into one box. Pensions: France had 17.2 million people receiving a pension in their own right, for an average pension of €1,666 gross a month. Multiply — 17.2 million × €1,666 × 12 months — and you get about €344 billion a year. Name the pieces: the BENEFICIARIES (how many people) and the AVERAGE AMOUNT (how much each receives); their product is the spending. The same mechanics holds everywhere, only the names change: for public salaries, number of staff × average pay; for debt interest, stock of debt × average rate. And as with revenue, learn to read it backwards: if you know the spending and the number of beneficiaries, you recover the average amount by dividing.
This notation is not just a computational convenience, it explains the public debate. To reduce spending, you have to lower one of the two factors — and both resist. The number of beneficiaries depends on demography: you do not decide that there will be fewer pensioners next year. The amount depends on legal rules: cutting a pension or a salary takes a law, often a conflict. That is why a large part of public spending is said to be COMMITTED: it is already determined before the budget is even debated. Click each term of the two formulas:
Solving / calculation
Three computations, all on real French figures: one item built by hand, one item recovered backwards, then the overall picture — and the same country seen from the other till. A word about dates, because they are about to change along the way: the TOTAL of public spending is known quickly (€1,711bn for 2025), but its breakdown by function takes a further year of work — so the most recent one covers 2024, when the total was €1,672bn. The two vintages resemble each other (2.3% apart); the proportions below are therefore good keys for reading 2025, not measurements of 2025.
- Pensions, through beneficiaries × amount
17.2m pensioners × €1,666 × 12 months≈ €344bn a year - What this single scheme weighs
344 / 693 (all social protection, 2024)≈ 50% — pensions on their own - Debt: the product read backwards
€60bn of interest (2024) ÷ ≈ €3,300bn of debt at end-2024average rate paid ≈ 1.8% - The overall picture (2024, the 10 functions)
social 693 · health 261 · general services 181 · economic 166 · education 149 · defence 54 · safety 52 · culture 43 · housing 42 · environment 30= €1,671bn — the published total is 1,672, each item being rounded - The same country, seen from the state's budget alone (2026)
education 64.5 · interest 58.0 · defence 57.1out of €458.9bn — a different ranking
Three lessons. (1) Social protection dwarfs the rest — €693bn out of 1,672, that is 41% of public spending — and pensions alone make up half of it: it is a demographic product, not an annual budget choice. (2) Debt interest (€60bn) is real but far from the fantasies: 3.6% of public spending. It is its SENSITIVITY that worries — the average rate paid is still only 1.8% because old cheap loans have not finished running (course “The dynamics of public debt”). (3) The ranking depends on the till: in the state's budget, education comes first, and social protection all but disappears. Finally, these €1,711 billion of spending face about €1,558 billion of revenue: the gap — measured at €152.5 billion, that is 5.1% of GDP — is the 2025 public deficit (course “Deficit and the public balance”).
spending = beneficiaries × average amountYou do NOT set the spending: you set the two FACTORS of each product — how many people, and how much each receives. The amounts follow. Age the population, then push up the rate on the debt: you will see which of the two really moves the budget.
- Retirement pensions 344
- Debt interest 62,3
- Everything else (frozen at its 2025 level) 1305
- Total public spending 1711,3 %
Economic interpretation
Three readings so as not to draw the wrong conclusion: which budget is being discussed, why you cannot “just spend less”, and what becomes of the money spent.
This is the commonest error in public debate. “The state's largest item is social spending” is false in the strict sense: social protection is paid by social security, whose budget is voted in a separate act. In the state's budget, the largest item is school education (€64.5bn in 2026), followed by debt interest (58.0) and defence (57.1). At the scale of all of government, the order changes completely: social protection 693, health 261, general services 181. Both statements are true — within their perimeter. Always say which.
Since every item is a product beneficiaries × amount, reducing spending means acting on one of the two factors, and both are slow. The number of pensioners was fixed thirty years in advance by births; the amount of pensions, by a scale written into law. The same goes for interest: the stock of debt comes from the past, the rate comes from the markets. Hence the vocabulary of budget debates — “committed”, “steerable”, “entitlement” spending — and hence the fact that a government really decides, each year, only a few per cent of the total. The simulator shows it: it is by moving DEMOGRAPHY or the RATE that you shift tens of billions, not by changing your mind.
A large part of these €1,711 billion does not vanish: they are TRANSFERS, money taken on one side and handed back on the other — pensions, benefits, reimbursement of care — which returns to households and goes back into the economy. The rest is shared between RUNNING costs (the salaries of teachers, health workers, police: services rendered, not gifts), INVESTMENT (roads, hospitals, schools, which will serve for decades) and a fourth, separate kind, debt INTEREST (€60bn), which is neither a transfer to households, nor a service rendered today, nor an asset for tomorrow: it is the price of past borrowing. That is why “57.2% of GDP” does not mean the state runs 57% of the economy: it mainly makes part of it PASS THROUGH. And depending on the kind of spending, the effect on activity differs sharply (course “The fiscal multiplier”).
Limits / critiques
Exercises
A scheme pays €800 a month to 2 million people. How much does it cost a year (in €bn)?
Social protection weighs €693bn out of €1,672bn of public spending. What share is that (in %)?
True or false: repaying the capital of a maturing loan is public spending of the year, just like interest.
Public spending reaches €1,711bn for a GDP of €2,991bn. What share of GDP is that (in %, one decimal)?
A benefit costs €12bn a year and goes to 5 million people. What is the average amount paid per person per year (in €)?
Public debt reaches €3,400bn and the state pays an average rate of 2%. How much does interest cost over a year (in €bn)?
True or false: social protection is the largest spending item in the state's budget voted in Parliament.
The number of pensioners rises by 5% with no change in pensions. By how much does pension spending rise?