GENERAL GOVERNMENT Marga Hüttner

Outline Introduction Different concepts of general government Delimitation of the sector general government Sources general government statistics Tools compiling general government statistics Transactions of general government General government in the National Accounts

Different concepts of general government Administrative government (legal approach) Industry general government (supply and use –tables) Public sector (range of control) Sector general government (sector accounts)

Administrative government (legal approach State)

Administrative government (legal approach municipalities)

Industry general government (supply and use –Tables) The industry general government includes the branches public administration and defence services; compulsory social security services public education services Sector general government includes the industry general government and other branches such as health and social work services cultural services

Public sector The public sector consists of all market and non-market producers controlled by government. The public sector equals the sector general government corporations which are part of the sector non-financial corporations and of the sector financial corporations and are controlled by government. Examples are: Central bank, banks, airports, electricity companies owned by government

Public sector

Sector general government (sector accounts) Definition The sector general government consists of all institutional units which are controlled by government (qualitative criterion) and are non-market producers (qualitative criterion)

Delimitation of the sector general government Institutional unit An economic entity that has decision making autonomy in respect of its principal function. This unit is capable of: owning goods and assets of its own right incurring liabilities on its own behalf engaging in economic activities / transactions Sectors Institutional units are grouped into sectors, based on principal function, behaviour and objectives

Government control Government control is defined as the ability to determine the general policy of the unit. Indicators of control e.g: rights to appoint, veto or remove a majority of officers, board of directors, key personnel rights to control via contractual agreements rights to control from agreements /permission to borrow the degree of financing the degree of risk exposure

Market – non-market producers Criteria economically significant prices 50 % rule If more than 50 % of the production costs are covered by sales then the producer is a market producer. If less than 50 % of the production costs are covered by sales then the producer is a non -market producer. Substance over form.

Non-market producers by sector Sector general government (S.13) Units mainly financed by compulsory payments (taxes, actual social contributions) Non-profit institutions mainly financed and controlled by government Sector non-profit institutions serving households (NPISH, S.15) Non-profit institutions mainly financed but not controlled by government

Sector general government includes Ministries Provinces, Municipalities Embassies and military bases abroad Polder Boards and Inter Communal Arrangements Regional Police Organizations Universities and subsidized Private Schools Social Security Funds and Organizations

Sector general government also includes NPI’s mainly controlled and financed by government (museums, organizations for social work and employment service offices) Units/schemes/funds of government that do not qualify as institutional units, (e.g. earmarked funds for civil servants’ pensions, infrastructure or old age pensions) Corporations which are controlled by government and are non-market producers. Substance over form.

Sector general government excludes Corporations owned by government Quasi-corporations of government Financial institutions, e.g. the pension fund for civil servants or private social insurance schemes NPI’s mainly financed but not controlled by government International organizations and foreign embassies on domestic territory

Decision tree Institutional unit ? no part of the controlling unit   Institutional unit ? no part of the controlling unit - annual report of unit - Own balance-sheet - entitled to own goods and services - able to incur liabilities - able to make economic decisions yes Controlled by government ? unit is classified to the - legal government private sector - entitled to levy taxes - owned by government - Influence on general policy and decisions Non-market producer ? unit is classified as a - sales against economic significant prices public corporation - less than 50% of production costs are covered by sales Unit is part of the sector general government

Sources general government statistics Annual reports Electronic data from administrations Accounting reports Questionnaires Surveys of budget executions

Tools compiling general government statistics Classifications for Institutional sectors (ESA 1995/ESA 2010) Transactions and other flows (ESA 1995/ ESA2010) Industries (NACE) Functions of government (COFOG)

Transactions of general government Revenue less Expenditure Taxes Intermediate consumption Social contributions Compensation of employees Sales of goods and services Interest Other current revenue Subsidies Capital transfer revenue Social benefits Other current expenditure Capital transfer expenditure Investment expenditure equals net lending/net borrowing equals net financial transactions

Excessive Deficit Procedure (EDP) EDP net lending/net borrowing = Government finance statistics net lending/net borrowing + the interest advantage less the interest disadvantage from government interest swaps

General government in the national accounts Time of recording (accrual principle) Measuring government output Final consumption expenditure

Time of recording (accrual principle) Taxes Cash registration at source, time adjusted cash Interest Recording as accruing continuously, independent of cash payments Payments in advance Payments in arrear

Measuring government output Output of non-market producers equals the sum of production costs Production costs are Intermediate consumption Other taxes on production payable Other subsidies on production receivable Capital consumption Compensation of employees

Output of non-market producers Output consists of Sales of goods and services Own-account capital formation Other non-market output

Final consumption expenditure government Final consumption expenditure of government equals Output by government minus market output by government minus own-account capital formation plus social benefits in kind via market producers (purchases by government that are supplied without transformation to households)

General government