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Archive:Government finance statistics - revenue and expenditure by subsector of general government

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Data extracted on 03 November 2017.

Planned article update: January 2020.

Highlights

In 2016 in the EU, total revenue at general government level was equal to 44.7 % of GDP.
In 2016, central government total revenue accounted for 51.9 % of general government total revenue, state government for 7.1 %, local government for 13.3 % and social security funds for 27.7 %.
Total revenue from other sectors of the economy, as share of general government, 2016, cumulative percentage of total
Source: Eurostat (gov_10a_main)

In the European Union (EU-28) as well as Iceland, Norway and Switzerland, the compilation of government revenue and expenditure data is well established by reference to the European system of national and regional accounts (ESA2010).

This article focuses exclusively on the relative importance of the subsectors of general government in their total revenue and total expenditure.

Full article

Overview

The sector general government (S.13) is divided into four subsectors:

Usually, when presenting government finance statistics, as published in other contexts, some transactions forming part of general government total revenue and total expenditure are consolidated (meaning eliminated from total revenue and total expenditure) within the subsectors of government and between subsectors of government when looking at general government data. At general government level, this implies that general government total revenue is less then the total revenue of the sum of the subsectors and similarly, that general government total expenditure is less that the total expenditure of the sum of the subsectors.

This article uses an alternative presentation to the one above by considering only revenue / expenditure coming from / to other sectors of the economy (i.e. non-financial corporations, financial corporations, households, non-profit institutions serving households and the rest of the world) as revenue and expenditure for one particular subsector of general government, and not taking into consideration revenue and expenditure coming from other subsectors of general government.

The intention of this alternative presentation is to show the differing importance of the subsectors of general government in total revenue and total expenditure and to show the importance of intra-governmental transfers as well as their evolution.

For more information, please see Data sources and availability.

Total revenue (TR) and total expenditure (TE) is examined at subsector level as an aggregate as well as by category of revenue and expenditure in each subsector. The development of the weight of the subsectors over time is also analysed.

In 2016 in the EU-28, total revenue at general government level was equal to 44.7 % of GDP.

Central government total revenue accounted for 51.9 % of general government total revenue (TR) or 23.2 % of GDP. State government accounted for 7.1 % of TR or 3.2 % of GDP, local government for 13.3 % of TR and 6.0 % of GDP, with social security funds making up the remainder, i.e. 27.7 % of TR or 12.3 % of GDP (taking into account only revenue from other sectors of the economy).

In 2016 in the EU-28, total expenditure at general government level was equal to 46.3 % of GDP.

Central government total expenditure accounted for 37.6 % of general government total expenditure (TE) or 17.4 % of GDP. State government accounted for 8.2 % of TE or 3.8 % of GDP, local government for 22.5 % of TE and 10.4 % of GDP, with social security funds making up the remainder, i.e. 31.6 % of TE or 14.6 % of GDP (taking into account only expenditure to other sectors of the economy).

Share of subsectors in general government total revenue and total expenditure

Figures 1 and 2 as well as Table 1 show that the importance of the subsectors varies widely between countries.

Figure 1: Total revenue from other sectors of the economy, as share of general government, 2016, cumulative percentage of total
Source: Eurostat (gov_10a_main)


Figure 2: Total expenditure to other sectors of the economy, as share of general government, 2016, cumulative percentage of total
Source: Eurostat (gov_10a_main)


Table 1: Sectoral breakdown of total revenue and total expenditure consolidated between subsectors, i.e. from/ to other sectors of the economy, as shares of general government revenue/expenditure, 2016
Source: Eurostat (gov_10a_main)

Weight of central government in general government revenue and expenditure

Central government has the most important weight in general government revenue and expenditure from other sectors.

Government revenue

In the EU-28 as a whole (Table 2), central government is the largest subsector in terms of both revenue and expenditure. In the euro area, central government accounts for the biggest part of general government revenue (43.0 % of TR), but not of government expenditure (29.7 % of TE for central government and 39.4 % for social security funds).

Table 2: Sectoral breakdown of EU-28 total revenue and total expenditure of general government, 2005-2016, % of GDP
Source: Eurostat (gov_10a_main)

In the EU-28 in 2016, central government accounted for 51.9 % of total revenue and 37.6 % of total expenditure of general government.

As a percentage of GDP, EU-28 central governments' total revenue consolidated between subsectors (not taking into account transfers from other subsectors in general government) accounted for 23.2 % of GDP. Transfers from other subsectors of general government (i.e. state governments, local governments and social security funds) stood at 0.5 % of GDP, implying total revenue of central government (only consolidated within the subsector of central government) of 23.6 % of GDP. Total expenditure of EU-28 central governments (consolidated between subsectors) stood at 17.4 % of GDP, with transfers to other subsectors of general government at 8.0 % of GDP, implying total expenditure (only consolidated within central government) at 25.4 % of GDP in 2016. As total revenue minus total expenditure is equal to 'net lending (+)/ net borrowing (-)' or the surplus/ deficit, this implies that the deficit of EU-28 central government stood at -1.8 % of GDP in 2016.

The importance of central government revenue in comparison to the other subsectors is driven by the tax-raising powers of central governments in the EU-28. Under ESA2010 rules, tax revenue is recorded in the subsector which has the power to impose a particular tax as well as to set and vary its rate, see ESA2010 paragraph 1.78, so not necessarily in the subsector finally receiving the revenue. In 2016, in the EU-28, central government recorded 71.5 % of general government tax revenue or the equivalent of 19.0 % of GDP. This explains why central government transfers (mainly in the form of transfers of a general nature between different levels of government - D.73) are important in size.

In four countries – Ireland, Malta, the United Kingdom and Norway – the social security funds subsector is not separated from central government. In Ireland, Malta and the United Kingdom, central government total revenue (consolidated between subsectors) had, in addition to large shares in tax revenue, also large or exclusive shares in revenue in the form of social contributions. As a result the share of central government total revenue (consolidated between subsectors) exceeded 90 % of general government revenue in Malta (99.8 % of general government total revenue), Ireland (95.4 %) and the United Kingdom (91.4 %). In Norway, local government accounts for a comparatively large share of tax revenue (around 20 %), meaning that the central government revenue share at 83.3 % in 2016 did not reach the levels of the other three countries.

In all EU and EFTA countries except Germany (28.1 %), central governments accounted for the largest shares of general government total revenue in 2016. The lowest shares of central government (consolidated between subsectors) total revenue - aside from Germany - was observed in Switzerland (31.1 %). Shares of general government total revenue below 50 % were also observed in Spain (42.2 %) and Finland (44.0 %).

The detailed tables by Member State of the article on Government revenue and expenditure by subsector of general government Microsoft Excel 2010 Logo.png are available here.

Government expenditure

Due to the role of central government's transfers to state and local governments and social security funds (which are not taken into account in the consolidated measure of total expenditure used in this article), the importance of central government total expenditure to other sectors of the economy in general government total expenditure is not as pronounced as for total revenue.

In Malta (99.0 % of general government total expenditure) and Ireland (92.5 %), central government accounted for by far the largest part of total general government expenditure in 2016. For 2016, a high share in central government expenditure was also observed in the United Kingdom (76.1 %), Cyprus (73.7 %), Estonia (69.5 %), Norway (67.0 %) and Czech Republic (66.8 %).

Low shares of central government expenditure in respect of other sectors of the economy were observed in Switzerland (15.3 % of general government total expenditure in 2016), Germany (16.9 %), Belgium (18.7 %), Spain (23.0 %) and Finland (26.6 %). In all five countries, the size of transfers to other subsectors exceeded the expenditure vis a vis counterparts outside the general government sector (households, non-financial and financial corporations, non-profit institutions serving households and non-residents).

State governments

In federally-structured countries, state governments tend to have a high share of total expenditure.

For the countries that have a state government subsector, the importance of this subsector tends to be relatively high. In 2016, the share in total expenditure ranged between 16.4 % in Austria and 32.1 % in Spain.

As regards total revenue (consolidated between subsectors), the share of state government in total government in 2016 stood at 3.6 % in Austria, 16.0 % in Belgium, 16.8 % in Spain, 25.7 % in Germany and 29.7 % in Switzerland. Revenue received from other sectors of the economy (mainly taxes), was less important than transfers from other subsectors of general government in Belgium, Austria and Spain, while the opposite was the case for Germany and Switzerland.

Local governments

The importance of local governments in revenue and expenditure varies. A high share of local government expenditure is observed in Denmark (63.6 % of general government TE in 2016), Sweden (50.1 %), Finland (39.3 %), Norway (33.0 %), the Netherlands (31.4 %), Poland (30.9 %), and Iceland (27.1 %).

As regards revenue, the highest share of local government revenue from other institutional sectors in the economy was observed in Sweden in 2016 at 33.3 % of general government total revenue.

Low shares of local government in general government total expenditure were observed in Malta (1.0 %) and Cyprus (3.8 %), Greece (7.0 %) and Ireland (7.5 %).

Low shares of local government total revenue were observed in Malta (0.2 % of general government total revenue), Cyprus (2.2 %), Greece (3.0 %), Lithuania (3.1 %) and Estonia (4.1 %).

Social security funds

In France (45.6 % consolidated share of general government expenditure), Germany (43.0 %) and Luxembourg (40.8 %), the social security funds subsector had a share of more than 40 % of total general government expenditure in 2016. Conversely, in Denmark, the social security funds had a (consolidated) share of 3.3 % of general government total expenditure and a share of 1.4 % of general government total revenue in 2016. This is due to social security system largely being financed by taxes.

Share of subsectors by transaction

Social transfers form the largest category of government expenditure

Table 2 shows the importance of social transfers (social benefits in cash or in kind) in general government expenditure and the predominant role of social security funds in ensuring this distributive role of government. Indeed, the majority of social security funds expenditure is classified into this transaction, with the only other notable expenditure in this subsector being 'intermediate consumption' (P.2) and 'compensation of employees' (D.1p) – both of which could be characterised as 'operating costs'. Nevertheless, another large share of social transfers is distributed by central government. It needs to be taken into account that since Malta, the United Kingdom, Norway and Ireland do not separately show the subsector social security funds, social transfers are mainly paid by central government in these countries. In the case of the United Kingdom, this influences the EU aggregate.

The largest share of 'intermediate consumption' and 'compensation of employees' is incurred by central and local government, although these are also two important transactions for state government. A large part of 'compensation of employees', when classified by function (COFOG), is attributed to the divisions 'education', 'defence' and 'public order and safety'.

For general government as a whole in the EU-28, capital transfers (D.9p) to sectors other than general government remained stable between 2014 and 2015 and decreased in 2016.

From Table 3 it can also be seen that transfers within general government mainly come from central government and add a sizeable amount to central governments' total expenditure, if measured on a non-consolidated basis.

Table 3: Intra-governmental transfers and impact of consolidation, 2015
Source: Eurostat (gov_10a_main)

Government total revenue is mainly in the form of taxes and social contributions

As regards revenue, the largest component of total revenue at general government level is taxes (59.6 % of general government total revenue), followed by social contributions (29.7 %) of general government total revenue at EU-28 level in 2016.

Table 4: Evolution of EU-28 total revenue and total expenditure by subsector, 2005-2016
Source: Eurostat (gov_10a_main)

Evolution of the share of subsectors over time

The evolution of revenue and expenditure is not directly linked to the GDP

Figure 3 shows that over time the total revenue of the general government is steadily increasing (apart from 2009). As a share of GDP, total revenue by subsectors has decreased from 2013 to 2016, leaving EU-28 general government total revenue at 44.7 % of GDP (2013: 45.3 % of GDP, 2014: 45.0 % of GDP, 2015: 44.6 % of GDP) . Figure 4 shows that as a share of GDP, total expenditure by subsectors decreased from 2012 to 2016, leaving EU-28 general government total expenditure at 46.3 % of GDP (2012: 48.9 % of GDP, 2013: 48.6 % of GDP, 2014: 48.0 % of GDP, 2015: 47.0 % of GDP).

Figure 3:Evolution of EU-28 total revenue and total expenditure by subsector, 2005-2016, billion EUR
Source: Eurostat (gov_10a_main)


Figure 4:Evolution of EU-28 net lending (+)/ net borrowing (-) by subsector, 2005-2016, billion EUR
Source: Eurostat (gov_10a_main)

The shift in total expenditure is strongest in central government (from 27.8 % of GDP in 2012 to 25.4 % in 2016 taking into account transfers to other subsectors). The decrease (as a ratio to GDP) almost equally due to a decrease of transfers to other subsectors and of expenditure vis a vis other sectors of the economy.

The striking increase in social security funds expenditure and the more moderate increase in spending in the other government subsectors from 2008 to 2009 were largely due to an absolute increase in social transfers in the context of the crisis – these are known to act as automatic stabilisers in a recession. Between 2013 and 2016, total expenditure of social security funds decreased as a ratio of GDP. Total revenue of social security funds also decreased, partly caused by a decrease of transfers from other subsectors of general government.

Data sources

This section gives some background information on the data sources used in the preparation of this publication as well as on the methodological concepts and technical terms and codes used.

This article uses an alternative presentation to the one used in other contexts by considering only as revenue and expenditure for one particular subsector of general government only revenue / expenditure from / to other sectors of the economy (i.e. non-financial corporations, financial corporations, households, non-profit institutions serving households and the rest of the world) but not from other subsectors of general government. The intention of this alternative presentation is to show the differing importance of the subsectors of general government in total revenue and total expenditure and to show the importance of intra-governmental transfers as well as their evolution.

State government data exist only in federally structured countries, i.e. Belgium, Germany, Spain, Austria and Switzerland. Hence, in these five countries, expenditure and revenue for a state or regional level is distinguished – this concerns the three regions in Belgium, the Bundesländer in Germany and Austria, the Comunidades Autónomas in Spain as well as the Kantone in Switzerland.

For social security funds data, Ireland, Malta, the United Kingdom and Norway do not have institutional units meeting the definition of social security funds according to Regulation (EU) No 549/2013 (ESA 2010).

Reporting of data to Eurostat

Annual government finance statistics (GFS) data are collected by Eurostat on the basis of the European System of Accounts (ESA2010) transmission programme spilt in three tables:

  • Table 2 'Main aggregates of general government'
  • Table 9 'Detailed taxes and social contributions'
  • Table 11 'General government expenditure by function'.

"'In this publication, data transmitted in ESA table 2 is used.

As all GFS data are compiled within the ESA2010 framework, they follow the methodological guidelines set out in ESA2010 and the common rules adopted for national accounts. The legal requirement for transmission of table 2 data is at t+3 and at t+9 months after the end of the reference period. In this publication data corresponds to the end-September/ October 2017 transmissions of table 2 have been used.

Time of recording

In the ESA2010 system, recording is on an accrual basis, meaning that the flow will be recorded at the moment when the economic value is created, transformed or extinguished, or when claims and obligations arise, are transformed or are cancelled.

Definition of general government and its subsectors

The data relate to the general government of the economy, as defined in ESA2010, paragraph 2.111: the general government sector (S.13) consists of institutional units which are non-market producers whose output is intended for individual and collective consumption, and are financed by compulsory payments made by units belonging to other sectors, and institutional units principally engaged in the redistribution of national income and wealth. General government comprises the subsectors central government (S.1311), state government (S.1312 - where applicable), local government (S.1313), and social security funds (S.1314). State government data is applicable for Belgium, Germany, Spain, Austria and Switzerland - please see country codes). Data for social security funds is not applicable for Ireland, Malta, the United Kingdom and Norway.

Definition of general government total revenue and total expenditure

Colloquially put, total revenue is all the income a government receives. More formally, total revenue is the aggregate of all transactions recorded under resources in the ESA framework, including subsidies receivable in the current accounts and capital transfers receivable recorded in the capital account.

A revenue transaction is one that increases net worth. Revenue is presented in the tables as the sum of taxes, net social contributions, sales (defined as market output, output for own final use and payments for non-market production), other current revenues and capital transfer revenues. Total taxes are composed of taxes on production and imports (so-called indirect taxes), current taxes on income and wealth (direct taxes), and capital taxes (some classifications of taxes include capital taxes as a component of direct taxes). Net social contributions consist of actual social contributions by employers and households collected as well as imputed social contributions, households' social contribution supplements and social insurance scheme service charges. 'Other current revenues' consist of the categories property income earned, other subsidies on production received and other current transfers.

Summarising, total revenue of general government is defined in ESA 2010 (8.100 and chapter 20) as comprising the following categories of the European System of Accounts 2010 (ESA 2010):

Total expenditure comprises all transactions recorded under positive uses in the ESA framework, and subsidies payable, in the current accounts as well as transactions (gross capital formation, acquisition less disposals of non-financial non-produced assets plus capital transfers payable) in the capital account of the government.

Total expenditure is defined in ESA 2010, §8.100 and chapter 20 as comprising the following categories of the European System of Accounts 2010 (ESA 2010):

Consolidation

General government data reported in ESA tables 2 and 11 is partially consolidated, meaning that specific transactions between institutional units within the general government sector precisely:

are eliminated.

Subsector data should be consolidated within each subsector but not between subsectors. Thus data at sector level should equal the sum of subsector data, except for items D.4, D.7 and D.9 as they are consolidated. For these latter items and consequently total revenue and total expenditure, the sum of subsectors should be equal or exceed the expenditure the value of the sectors.

For the purpose of calculating the share of each subsector in general government total expenditure in this publication but not for data published on Eurobase, flows in transactions D.4, D.7 and D.9 to other subsectors of general government (flows within the sector S.13) are not considered in the expenditure of each subsector. Thus any expenditure shown in these transactions refer to transfers not within the general government sector of the economy. The advantage of this approach - which should be used only for subsector analysis - is that total revenue and total expenditure of general government are equal to total revenue and total expenditure respectiviely of the sum of subsectors of general government. Similarly, for total revenue, only D.4, D.7 and D.9 revenue from other sectors of the economy (thus excluding other subsectors of general government) are considered.

Any other (non-financial) intra-government flows are not consolidated in accordance with ESA2010. They refer to the distributive transactions D.29 other taxes on production, D.5 taxes on income and wealth, and D.39 subsidies on production. In addition, in the GFS framework established under ESA2010, the production account is not consolidated because it cannot be consolidated, due to valuation differences between output and intermediate consumption. The level of intra-government sales/ intermediate consumption is known to vary substantially between countries.

Gross domestic product

Throughout this article nominal GDP, i.e. GDP at current prices, is used.

Abbreviations

  • : not applicable
  • pp: percentage points

More data and information

More data can be found in Eurostat's online database under the theme economy and finance. Users might also like to refer to the integrated GFS data publications, which present GFS data in a user-friendly fashion are published shortly after transmissions of annual and quarterly data. For country-specific notes, including on missing data, please refer to the metadata published on Eurobase. In case of questions the authors can be contacted at ESTAT-GFS@ec.europa.eu. The GFS tables are also compiled as an Excel publication by subsector of general government, please see Annual GFS tables - Excel publications.

Context

In the European Union (EU-28) as well as Iceland, Norway and Switzerland, the compilation of government revenue and expenditure data is established by reference to the European System of Accounts (ESA2010).

This article focuses on the relative importance of the subsectors of general government, i.e. central government, state government, local government and social security funds, in total revenue and in total expenditure of general government, by examining the transactions vis a vis other sectors of the economy.

Total revenue and total expenditure are examined at subsector level both at aggregate level as well as looking at the predominant nature of transactions in each subsector and the development of the weight of the subsectors over time.

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