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Welfare now costs £200 Billion while NHS spending has almost doubled in the past three decades while defence, housing and public safety are some of the areas that saw significant drops in spending, the respected think tank Institute For FIscal Studies (IFS) has said in a report.

According to the report, "The changing composition of public spending" health and social care and pensions made up only a third of public spending while it is two thirds of the government budget.  The defence allocation has dropped from 10% of the budget to 6% now and other areas such as industrial support saw similar drops.

Healthcare spending is expected to rise at a rapid pace and would constitute one third of all government spending by the end of this Parliament, the report says. However, the opportunity costs for rising spend in healthcare would see public order and safety expenditures brought down drastically despite the rioting that took place across cities in England.

“The way the state spends our money has shifted to a remarkable extent towards spending on health and social security over the past 30 years,” said Paul Johnson, Director of the IFS and one of the authors of the report. “This change has been possible because the state has withdrawn from other areas of activity — defence, housing and industrial support."

But the think tank warns that both this and future governments would have to make tough choices as healthcare and social welfare costs rise in the coming years due to an ageing population. In addition there would be less people working to pay for people's pensions which would further put pressure on the public purse.

The government might have to either cap these expenses to some extent or cut much more in other areas to meet the growing demand.

"Going forward, pressures on health and pension spending are severe. Governments have three choices – increase total spending to accommodate these changes, reform health and pension spending dramatically to cap future costs, or cut back elsewhere," IFS director Paul Johnson said.