Archive:General government expenditure on social protection and health
General government expenditure in 2011 – Focus on the functions ‘social protection’ and ‘health’
Statistics in focus 9/2013; Author: Laurent FREYSSON, Laura WAHRIG
ISSN:2314-9647 Catalogue number:KS-SF-13-009-EN-N
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This article analyses trends in the structure of general government expenditure by socio-economic function (according to the Classification of the Functions of Government - COFOG) and puts a special focus on health and social protection expenditure.
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Main statistical findings
In 2011, EU-27 general government expenditure amounted to 49.1 % of GDP. Based on the latest available expenditure data by economic function for 2011, more than half was devoted to the functions ‘social protection’ and ‘health’, which accounted for 19.6 % and 7.3 % respectively of GDP (slightly down compared with 19.9 % and 7.5 % respectively in 2010). The other functions also comprising a large share of government expenditure are ‘general public services’ (6.6 % of GDP), ‘education’ (5.3 % of GDP)and ‘economic affairs’ (4.0 % of GDP).
General government expenditure at 49.1 % of EU GDP in 2011
General government expenditure amounted to around EUR 6 200 billion in 2011 in the EU-27, or 49.1 % of GDP.
As a ratio to GDP, the highest levels of government expenditure were found in Denmark, France, Finland and Belgium, all with proportions above 53 % of GDP.
In ten out of the twelve Member States that joined the EU in 2004 and 2007, total general government expenditure remained below or around 46 % of GDP. Among the 'old' EU Member States, Luxembourg had the lowest proportion at 42.0 % of its GDP. Of all the reporting countries, Switzerland had the lowest government expenditure relative to GDP (33.8 %).
General government expenditure by function
In the framework of the European System of National Accounts (ESA95), Eurostat collects data on general government expenditure by economic function according to the international Classification of the Functions of Government (COFOG) – see further details in the chapter Data sources and availability.
In the EU as a whole, as well as in all individual Member States, ‘social protection’ is the most important function of government expenditure. In 2011, governmental social protection expenditure in the EU-27 was equivalent to 19.6 % of GDP (see Figure 1), slightly less than in the preceding two years (19.9 % in 2010 and 20.1 % in 2009).
The next most important functions in terms of government expenditure were ‘health’ and ‘general public services’, amounting to 7.3 % and 6.6 % respectively of GDP in the EU-27 in 2011. ‘Education’ (5.3 % of GDP) and ‘economic affairs’ (4.0 % of GDP) followed. The remaining functions – composed of ‘defence’, ‘public order and safety’, ‘environmental protection’, ‘housing and community amenities’ and ‘recreation, culture and religion’- represented altogether 6.0 % of EU-27 GDP in 2011.
From 2010 to 2011, in terms of GDP, general government total expenditure decreased for all functions except general public services, which increased largely due to increases in interest payable, which are recorded in COFOG group 01.7 ‘public debt transactions’. For instance, general public services represent nearly a quarter of total expenditure in Greece (versus 13.5 % for EU-27) – interest payments to service debt account alone for 13.9 % of total public spending in Greece. Larger relative year-on-year decreases than for ‘health’ and ‘social protection’ were observed for all other functions. The largest decrease was recorded for ‘economic affairs’, which is explained by an absolute decrease in capital transfers to banks and a decrease in gross capital formation (mainly investments).
The structure of public expenditure is relatively homogeneous across countries and particularly in the ‘old’ EU Member States. In the twelve Member States that joined the EU in 2004 and in 2007, more differences are noticeable (see Table 1).
In addition to differences observed in ‘health’ and ‘social protection’, described in more detail below, the highest inter-country differences are observed in the ‘general public services’ and in the ‘economic affairs’ functions and are often related to diversified social and economic public interventions in response to the crisis. Ireland is also a specific case as expenditure related to ‘economic affairs’ is double the EU average due to substantial capital injections into banks in 2011, which were partially treated as capital transfers. Romania also devotes relatively high levels of public expenditure to ‘economic affairs’, but this was also observed prior to the crisis. The importance of the 'economic affairs' division is also influenced by the amount of subsidies given to public or private transportation companies and even more by the amount of expenditure on transport companies classified within the general government sector. As the structure of public transportation differs widely across countries, this underlies the differing importance of the economic affairs function.
In Estonia, the negative expenditure recorded in the ‘environmental protection’ division is due to the disposal of Assigned Amount Units (AAU) under the Kyoto protocol, which are treated as negative expenditure.
Health and social protection
Taken together, government expenditure on ‘social protection’ and ‘health’ accounted for 54.8 % of total government spending of the EU-27 in 2011 (see Table 1).
This means that government expenditure is not predominantly on the main state prerogatives which are traditionally represented by three COFOG functions: ‘general public services’, ‘defence’, and ‘public order and safety’.
Expressed as a percentage of total general government expenditure, spending related to coverage of the main social risks (social protection and health) was highest in Germany (58.8 %), Denmark (58.3 %), France and Finland (both 57.3 %).
The lowest percentages were found in Cyprus (33.5 %), Latvia (42.2 %), Romania (44.5 %) and Hungary (44.8 %).
In fact, the weight of health and social protection combined in total public expenditure is lowest in the twelve Member States, which most recently joined the EU as well as in Portugal, where it represents less than half of total government expenditure.
Visible effects of the economic crisis
Social protection and health expenditure – visible effects of the economic crisis. Compared with 2002 (the first year for which data for all EU Member States are complete), spending by government on social protection and health has an increased weight relative to GDP.
After having remained relatively stable (less than 25 % of EU-27 GDP) until 2008, the share of these two combined functions increased substantially to reach 27.6 % in 2009. This increase in terms of GDP between 2008 and 2009 is not due to a stronger growth in absolute figures, but to a drop in GDP at current prices. ‘Social protection’ and ‘health’ expenditure together amounted to 27.4 % in 2010 and 26.9 % in 2011. A slight slowdown in the growth of absolute figures in both divisions can be observed between 2010 and 2011. Overall, in comparison with 2002, spending in the ‘health’ and ‘social protection’ functions as a percentage of GDP increased by 4 percentage points (pp) or more in Estonia, Greece, Spain, Italy, the Netherlands, Portugal, Finland and the United Kingdom and by nearly 9 pp in Ireland. On the other hand, government expenditure on health and social protection decreased in terms of GDP in Bulgaria, Germany, Poland, Slovakia and Sweden as well as in Norway and Switzerland.
As regards the distribution of expenditure by transaction in 2011 (see Data sources and availability), more than 90 % of public expenditure in the ‘social protection’ division concerns social benefits and transfers, which are redistributed to households. This is a relatively common pattern across countries. In the ‘health’ division, while social benefits (48.5 % of the total) are important, compensation of employees (26.1 %) and intermediate consumption (18.8 %) also take a large share in the divisions’ expenditure. However, in a group of countries composed of Belgium, the Czech Republic, Germany, Luxembourg, the Netherlands, Portugal, Slovakia and Switzerland, the share of redistributed transfers (essentially social transfers) exceeds 70 % of total public spending on health.
Capital investments, capital transfers and subsidies decreased from 2010 to 2011 in absolute terms, while compensation of employees increased only very slightly. In contrast with this, the growth of social benefits in absolute terms remained stable. This explains the relatively stable evolution of expenditure in the health and social protection divisions from 2010 to 2011.
Social protection: the most important function of government expenditure
The ‘social protection’ division includes spending on ‘sickness and disability’, ‘old age’, ‘family and children’, ‘unemployment’, ‘housing’ in the form of benefits in kind, and ‘social exclusion’.
This function is by far the most important in public expenditure and accounted alone for 39.9 % of total expenditure or 19.6 % of EU-27 GDP in 2011.
The highest expenditure on ‘social protection’ as a percentage of GDP was found in Denmark (25.2 %), France (23.9 %) and Finland (23.7 %). At the other end of the scale were Iceland (11.7 %), Slovakia (11.9 %), Cyprus (12.0 %) and Latvia (12.1 %). With the exception of Iceland, the Nordic countries all exhibit a relatively high level.
Looking at expenditure per inhabitant, the ranking of countries is slightly different with Luxembourg, Norway and Denmark showing the highest values, indicating a strong correlation between national wealth and the absolute per capita level of social expenditures.
In the countries for which detailed data is available, the breakdown of social protection expenditure by detailed COFOG group reveals different national structures.
In all countries (except Norway due to some receipts of the Government Pension Fund not through general government), the category ‘old age’ which includes most pension schemes, is predominant and represents at least 40 % of total public spending on social protection. The most noticeable exceptions are Ireland, Denmark and Norway, where this share does not exceed one third of social protection expenditure.
All benefits related to sickness and disability often come as the second group of social protection expenditure, representing 20 % or more in the Scandinavian countries, Ireland, Hungary, Lithuania and the Netherlands.
Other relatively important categories concern benefits to families for dependent children (21 % of total spending on social protection in Denmark and Luxembourg) and unemployment allowances (nearly 20 % of social protection expenditure in Ireland and Spain).
Health public expenditure – relatively wide differences between countries
‘Health’ is the second largest function of government spending, at 7.3 % of EU GDP in 2011 (14.9 % of total government expenditure). This includes expenditure on medical and pharmaceutical products or equipment intended for use outside a health institution, outpatient, hospital and other public health services and applied research and experimental development related to health.
Within the EU, government health expenditure ranges from less than 5 % of GDP in Cyprus and Romania (both at 3.4 %), Latvia (4.1 %), Bulgaria (4.6 %), Poland (4.7 %) and Luxembourg (4.8 %) to 8.0 % in the UK, 8.3 % in France, 8.4 % in Denmark and 8.5 % in the Netherlands.
Here again, this indicator is lower than the EU-27 average for almost all the most recent Member States with the exception of the Czech Republic (expressed in terms of percentage of total spending, the share of health is highest in this country – see Table 1). This share seems also particularly low in Switzerland where public outlays on health represented 2.1 % of GDP and is consistent with a generally low relative level of government spending and a strong tradition of private coverage of health risks.
As for public health expenditure per inhabitant, figures show a lower dispersion than for social protection. However, the smaller amounts are again found in the most recent EU Member States.
Looking at the most detailed categories of the health COFOG division (see Figure 5), the situation also reveals rather different organisations and structures across countries with an even more widespread breakdown than between the social protection sub-categories.
This said, the dominant group generally concerns public expenditure related to services of general and specialist hospitals. In 18 out of the 25 countries for which data is available, this group represents more than 40 % of total public spending on health.
It can also be assumed that this kind of expenditure is recorded under other groups by some other countries. For instance, 89 % of health related spending is concentrated in the ‘medical products’ group in Luxembourg whereas in Spain and Portugal, the ‘outpatient services’ category represents 77.0 % and 69.5 % of this expenditure respectively.
Data sources and availability
This chapter gives some background information on the data sources as well as on the methodological concepts and technical terms and codes used. More exhaustive information and additional data can be found on Eurostat's website in the section dedicated to government finance statistics as well as on the Statistics Explained page dedicated to government finance statistics.
Reporting of data to Eurostat: Annual government finance statistics (GFS) data are collected by Eurostat on the basis of the European System of Accounts (ESA95) transmission programme. Member States are requested to transmit, among other tables, table 1100, 'Expenditure of general government by function' twelve months after the end of the reference period. Table 1100 provides information about expenditure of the general government sector divided into main COFOG functions and ESA95 categories. The transmission of the COFOG I level breakdown (divisions) is compulsory for the years 1995 onwards, whereas information on the COFOG II level (COFOG groups) is provided on a voluntary basis. The main reference years used in this publication are 2011 as the latest year available and 2002 as the first year for which complete data on expenditure by function are available at EU-27 level.
Provisional data Data for BG, EL, HU, IS and SE (2011 only) is provisional.
Definition of general government and its subsectors: The data relate to the general government sector of the economy, as defined in ESA95, paragraph 2.68: 'All institutional units which are other non-market producers [institutional units whose sales do not cover more than the 50 % of the production costs, see ESA95 paragraph 3.26] whose output is intended for individual and collective consumption, and mainly financed by compulsory payments made by units belonging to other sectors, and/or all institutional units principally engaged in the redistribution of national income and wealth.
Classification of functional expenditure of government: The Classification of the Functions of Government (COFOG classifies government expenditure into ten main categories (divisions known as the 'COFOG I level' breakdown): general public services; defence; public order and safety; economic affairs; environmental protection; housing and community affairs; health; recreation, culture and religion; education; social protection. These divisions are further broken down into 'groups' (COFOG II level). Further information is available in the Eurostat 'Manual on sources and methods for the compilation of COFOG Statistics'
COFOG level II data: COFOG level II data is published only in agreement with the country concerned. The development of COFOG level II data is not completed in many Member States and data needs to be looked at with this in consideration. For BE and SK, COFOG group data is available but not published. For ES, COFOG group data is available for 2011, but not published pending the availability of more final data.
Satellite accounts: Administrative expenditure data is additionally collected in so-called satellite accounts. For health and social protection, the collections are SHA (system of health accounts) and ESSPROS (European System of Integrated Social protection Statistics) respectively. In general, the amount of expenditure recorded in satellite accounts is expected to exceed the expenditure recorded under the respective COFOG division, as the COFOG classification focusses on recording expenditure by primary function. The comparability of SHA and ESPPROS with COFOG data are explored in the COFOG manual.
Definition of general government expenditure:Government expenditure is defined in Commission Regulation 1500/2000 and use as reference a list of ESA95 categories:
Government expenditure comprises the following categories:
- P.2, 'intermediate consumption': the purchase of goods'and services by government;
- P.5, 'gross capital formation' consists of: (a) gross fixed capital formation (P.51); (b) changes in inventories (P.52); (c) acquisitions less disposals of valuables (P.53); where
- P.51, 'gross fixed capital formation': consists of acquisitions, less disposals, of fixed assets during a given period plus certain additions to the value of non-produced assets realised by the productive activity of producer or institutional units. Fixed assets are tangible or intangible assets produced as outputs from processes of production that are themselves used repeatedly, or continuously, in processes of production for more than one year;
- D.1, 'compensation of employees': the wages of'government employees plus non-wage costs such as social'contributions;
- D.29, 'other taxes on production, payable',
- D.3, 'subsidies, payable',
- D.4, 'property income, payable', consists of : (a) 'interest, payable (D.41) and (b) 'other property income, payable (D.42+D.43+D.44+D.45), where
- D.41, 'interest': excludes settlements under swaps and forward rate arrangements, as these are treated as financial transactions in the ESA 95;
- D.5, 'current taxes on income, wealth, etc, payable';
- D.62, social payments: cover social benefits and pensions paid in cash;
- D.6311, D.63121, D.63131, 'Social transfers in kind related to expenditure on products supplied to households via market producers';
- D.7, 'other current transfers, payable';
- D.8, 'adjustment for the change in net equity of households in pension fund reserves'
- D.9, 'capital transfers payable'
- K.2, 'acquisitions less disposals of non-financial non-produced assets': public investment spending. Non-financial non-produced assets consist of land and other tangible non-produced assets that may be used in the production of goods and services, and intangible non-produced assets.
Gross Domestic Product: Throughout this publication, nominal GDP, i.e. GDP at current prices is used.
Time of recording & symbol: In the ESA95 system, recording is in principle on an accrual basis, that is, when ‘economic value is created, transformed or extinguished, or when claims and obligations arise, are transformed or are cancelled.' ":" not available
More data and information: For country-specific notes, e.g. on missing data, please refer to the metadata published on Eurobase. The authors can be contacted at ESTAT-ESA95-GOV@ec.europa.eu.
Context
Annual government finance statistics (GFS) data are collected by Eurostat on the basis of the European System of Accounts (ESA95) transmission programme. Member States are requested to transmit, among other tables, table 1100, 'Expenditure of general government by function' twelve months after the end of the reference period. Table 1100 provides information about expenditure of the general government sector divided into main COFOG functions and ESA95 categories. The transmission of the COFOG I level breakdown (divisions) is compulsory for the years 1995 onwards, whereas information on the COFOG II level (COFOG groups) is provided on a voluntary basis.
See also
- Government expenditure by function – COFOG
- Government expenditure by sub-sector of general government
- Government finance statistics - quarterly data
- Integrated government finance statistics presentation
- Structure of government debt
- Tax revenue statistics
- Update of the SNA 1993 and revision of ESA95 (Background article)
Further Eurostat information
Publications
- COFOG Manual
- General government expenditure in 2011 – Focus on the functions ‘social protection’ and ‘health’ Statistics in focus 9/2013
Main tables
Database
- Annual government finance statistics (gov_a)
- General government expenditure by function (COFOG) (gov_a_exp)
Dedicated section
Methodology / Metadata
- Government revenue, expenditure and main aggregates (ESMS metadata file — gov_a_main_esms)
Source data for tables, figures and maps (MS Excel)
Other information
- Commission Regulation 1500/2000 of 10 July 2000 implementing Council Regulation No 2223/96 with respect to general government expenditure and revenue
External links