Free 'used' storage

the iPad is running out of storage. Apps listed under storage need roughly 5 gb of space. The iPad is the 16 gb version. After updating to the new iOS space being used shows 9 gb while listing 2.5 gb as free.

Is the used space occupied by the OS? how can this be shrinked to a reasonable amount? The OS image has only 2 gb. Regardless of compression I would find it bold if it used nearly 10 gb of space. Considering there are 16 gb devices