1. Use of national accounts: European unification Frits Bos CPB Netherlands Bureau for Economic Policy Analysis

2. Yesterday: Use of national accounts: – Historical overview – The Dutch case – See presentation and paper on website conference (in general: google “frits bos national accounts”)

3. Now: focus on European unification, a major case of administrative use of national accounts

4. EU-uses of national accounts Member States contribution: percentage of GNI Maximum total expenditure by EC: percentage of GNI (about 1%) Agricultural policy: agricultural accounts showing also the development of farmer income

5. Regional policy: Low regional domestic product is yardstick for granting regional funds Development aid: Low domestic product per capita is yardstick for granting aid Monetary policy and public finance: government deficit and debt as a percentage of GDP; various other statistics, e.g. Financial accounts, economic growth figures and harmonized CPI

6. Productivity and growth policy (Lisbon agenda): economic growth figures, expenditure on R&D and education as a percentage of GDP, EU-KLEMS Social policy: European social protection statistics closely linked to national accounts concepts (includes now also info on pensions) Defence policy: Expenditure on defence as a percentage of GDP

7. EU good user of national accounts: – Use for the right purposes (not better alternatives exist for such administrative uses) – Did not accept current state of European statistics but took a lot of measures to fit European national accounts statistics better to these data uses

8. Measures taken: – Extra money for many specific projects – Special committees on GNP and CMFB – Regulations for extra/better inputs, e.g. Business registers, surveys on industries, more surveys on services, harmonised labour force survey, also abolition of intra-EU customs borders, so deterioration of Foreign trade statistics – New guidelines: ESA95, handbook on price and volume measures, handbook on government deficit and debt

9. GNP Committee: – Jurisprudence on interpretation of ESA concepts, e.g. What are taxes on products and do the imputed services of owner-occupied dwelling include also holiday homes abroad and free standing garages? Input for ESA95, so in this respect more specific than SNA93 – Unique documentation of data sources and compilation methods for GNP by country, plus discussions on their merits and limitations

10. – Sometimes drastic revisions of Member States GNP figures, e.g. Greece, Portugal 10-20% up!

11. ESA95: more specific than SNA93: – Input from GNP committee – Important issues not resolved in SNA, should be resolved in EU, e.g. Market-non-market. SNA93 so vague and misleading (economically significant prices) that non-market output was actually not defined and that therefore also sector government was not defined

12. Contribution to EU linked to GNP: – Capital intensive countries pay more – Countries with small unpaid household services pay more – Countries with relatively a lot of indirect taxes pay more

13. European norms on government deficit and debt linked to national accounts (Treaty of Maastricht): – Deficit should not exceed 3% GDP – Debt should not exceed 60% GDP or decline in a satisfactory rate

14. So, national concepts on public finance replaced by European concepts fully linked to national accounts. Consequences: – Change in concepts used nationally, e.g. No financial transactions included, government includes now also local government – Concepts can not be changed any more by the national government over time – More limited role of ministries of finance, much more important and new role for statistical offices: they should translate European concepts into national operational concepts and provide the figures

15. Bad incentives for government behaviour, e.g. – Government deficit: Lease buildings, planes, cars Sell all kinds of property, e.g. Land, buildings Substitute income transfers and investment grants into loans at non-market interest rates Decrease interest payments only in nominal terms: Italian approach initiated by Modigliani

16. Government debt: – Sell equity of public corporations – Reduce outstanding loans – Sell natural resources (e.g. Gas) or other property

17. Solution: – Generational accounts – Complete balance sheets for the government

18. Figures for the Netherlands since 1994: – Gross debt decreased with 27% GDP – But no improvement in terms of net worth: it decreased wit 14% GDP (selling equity, less loans to housing corporations and less natural gas reserves)

19. So, gross debt does not suffice, also generation accounts do not suffice, also net worth is needed: – Gives a different picture of past performance (much better than gross debt) – Is important for the link to generational accounts: how can gross debt go down while CPB claims there still remain problems with the substainability of Dutch public finance? Data users and politicians do not understand that