Indicator 11 described the concept of general government final consumption,
reflecting the contribution government makes as a consumer of final goods and services for
individual and collective consumption. Whilst useful in illustrating the scope for
government to stimulate demand directly, it does not tell the full story. For a start the
measure does not include GFCF of government which is an area where the scope to stimulate
demand is considerable. But it also excludes other components of spending by government
not recorded as final consumption, for example, debt interest payments, and cash
transfers, such as social benefits, which, collectively, better reflect the size of
government and its ability to stimulate demand, without changing taxes say, both directly
and indirectly. The concept that best reflects this overall expenditure is referred to as
general government expenditure. It reflects the total
amount of expenditure by government that needs to be financed via revenues, such as
taxation, and borrowing.
Total general government
expenditure (GGE) is equivalent to expenditures by general g-overnment on the
following items: intermediate consumption, compensation of employees, subsidies,
social benefits and social transfers in kind (via market producers), other current
transfers, property income, capital transfers (payable), the adjustment for the net
equity of households in pension funds reserves, gross capital formation and net
acquisition of non-financial non--produced assets. It also includes taxes on income
and wealth any other taxes on production that government may be required to pay.
Many of the transactions are
better recorded on a consolidated basis (i.e. transactions between general government sub-sectors are netted out)
to avoid exaggerating the role of general government. Items that are usually
consolidated include: debt interest (part of property income), and capital transfers
(except capital taxes payable) and other current transfers.
The government sector covers all
units producing (all or mostly) non-market goods and services that are publicly owned.
Publicly owned units producing (all or mostly) market goods and services are not in
the government sector but are instead recorded as public corporations.
The biggest issue affecting
comparability across countries concerns the scope of the government sector. In many
countries, hospitals, for example, are classified outside of the government sector and
are instead recorded as public corporations; on the grounds that they charge market
prices for their services. How significant this is for international comparisons of GGE
ultimately depends on the share of goods and services provided to the market, as general
government expenditure will still record payments to the hospitals for these services.
This is an important point as the guidance provided in the SNA on the delineation of
units between market and non-market providers (which refers to most output being
non-market) provides scope for differences in country practices. EU countries have
adopted a 50% rule for "most" in this context.
Another potential area where
comparability may be affected relates to the determination of public ownership. The SNA
requires that "control" be the determining factor and
describes a number of criteria that can be used to assess this requirement. Recognising
that this is non-trivial it includes a practical recommendation that a 50% rule relating
to share ownership should be adopted. However, in practice, countries may still choose
to measure ownership on the basis of the determining criteria.
For most general government
expenditures there is little scope for ambiguity in treatment and the quality of
underlying data is very good, so the level of comparability is generally good.
Data for all countries are on a
consolidated basis, except Canada (which consolidates only current transfers) and New