Background Notes

Introduction

This release contains detailed annual government finance statistics for the period 2009-2012, consistent with the results from the end-September Excessive Deficit Procedure notification by Ireland in 2013.  These figures are compiled in accordance with the ESA95 system of accounts, as used in all member states of the European Union.  Their publication coincides with the official publication by Eurostat of deficit and debt levels for all EU member states on Monday 21 October.

This detailed release along with the headline figures published on 14 October 2013 together comprise the second official publication by CSO of annual Government Finance Statistics results for years 2009 to 2012, following the first release in April 2013.

Because audited accounts for many government bodies become available between April and October, this second release allows us to present more final data for 2012 than the provisional outturn published in April.

The data published in both the April and October releases are consistent with the General Government Deficit and Debt levels for 2009 to 2012 reported to Eurostat at end-March and end-September under the EU regulation governing the Excessive Deficit Procedure.   Consequently they may not always be fully aligned with the National Income and Expenditure and related publications such as the Institutional Sector Accounts.

Reclassification of Public Universities and Fee-Paying Schools

Since the publication of Government Deficit and Debt data in April 2013, the seven public universities and certain publicly funded fee-paying secondary schools have been reclassified from the Non-profit institutions serving households (NPISH) economic sector to the Non-financial corporations economic sector. This change has been made following an analysis by the CSO that these entities are ‘market producers’ – that is, they cover a majority of their costs through their own sales of education and research services.  While not affecting the overall deficit this has resulted in a number of reclassifications within the expenditure of General Government.

Specifically, the changes shift expenditure from D.7 (transfers to NPISH) to a combination of

• P.2 (government purchases of goods and services), for certain research grants deemed to represent sales of services
• D.31 (product subsidies), for subventions directly linked to student numbers
• D.39 (other subsidies on production) for general subventions to promote research etc.)
• D.6313 (social benefits in kind provided via market producers) for payments to universities that directly replace student fees that would otherwise be payable by the students themselves (the ‘free fees’ initiative).

Government Finance Statistics – Concepts and Definitions

Government Finance Statistics (GFS) form the basis for fiscal monitoring in Europe, in particular in relation to the Excessive Deficit Procedure (EDP).  

European GFS, including EDP statistics are produced according to the legally binding accounting rules of the European System of Accounts 1995 (ESA95).  The Manual on Government Debt and Deficit (MGDD) provides further guidance on the implementation of ESA95 in the context of GFS. 

The ESA 95 regulation sets out both a methodology for the compilation of National Accounts and a programme of transmission of key economic aggregates which are a subset of the full set of accounts set out in ESA 95.  In relation to GFS aggregates of interest include: general government revenue and expenditure, general government surplus/deficit, general government consolidated gross debt and their main components.

EU Member States are required to report government deficit/surplus and debt data biannually under the EDP (before 1 April and 1 October in year N) for years N-4 to N-1 calendar years as well as a forecast for the current year. The data are reported in harmonised tables, which provide a consistent framework for the presentation of this data by Member States. The tables provide a structure for linking national budgetary aggregates with government deficit and debt.

Detailed statistics on Government revenue and expenditure are also provided to Eurostat under the ESA95 transmission programme.  For annual data the main tables reported are:
Table 0200      Main aggregates of general government,
Table 0900      Detailed tax receipts by sector
Table 1100      General government expenditure by function.

These data are available on the Eurostat website.

Total general government expenditure and revenue are defined according to Commission Regulation (EC) No 1500/2000 of 10 July 2000 on general government expenditure and revenue. They comprise specific categories of ESA 95.

Definition of general government and its subsectors

The general government sector of the economy, is 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. General government comprises the sub-sectors central government (S.1311), state government (S.1312 - where applicable), local government (S.1313), and social security funds (S.1314).

As part of the GFS production process CSO is required to define the General Government and public sectors for Ireland. In this context, the public sector includes all bodies that are directly or indirectly controlled by a Government department or office, or by a local authority.  General Government, in turn, includes all public sector bodies that are also mainly financed by Government bodies.  The decision rules governing the classification of bodies to the public and General Government sectors are set out in detail in the Manual on Government Deficit and Debt.  A detailed explanation of the application of these rules and the most up-to-date list of public sector and (including general government bodies) for Ireland are shown at http://www.cso.ie/en/surveysandmethodology/nationalaccounts/.

General Government Deficit/Surplus (GG Deficit) is the standard European measure of the fiscal balance, which is used to monitor compliance with the Stability and Growth Pact.  It is the difference between the revenue and the expenditure of the general government sector. The government deficit data related to the EDP (EDP B.9) differs from the deficit according to ESA95 (B.9) in the treatment of interest relating to swaps and forward rate agreements.

Net Lending/Net Borrowing, that is, the GGDeficit excluding flows on interest swap instruments, is by definition equal to both Total Revenue less Total Expenditure, and Net Acquisition of Financial Assets less Net Incurrence of Liabilities. In order to respect this accounting identity, a technical adjustment is made to the level of transactions recorded in liability category F332 (long-term securities other than shares) to eliminate any statistical discrepancy between the two approaches to the calculation of Net Lending/Net Borrowing This adjustment has no impact on Net Worth, gross or net debt.

 General Government Debt (GG Debt) is defined in the EU regulations implementing the Maastricht Treaty as the gross debt liabilities of the consolidated General Government sector, at nominal value.
‘Gross’ means that the value of any financial assets held by General Government cannot be deducted from the GGDebt. In Ireland’s case, this means that the liquid assets which are deducted from the ‘gross’ National Debt in arriving at the audited National Debt cannot be deducted from the GGDebt.
‘Debt liabilities’ are defined as the ESA categories AF.2 (Currency and deposits), AF.33 (Securities other than shares, excluding financial derivatives), and AF.4 (loans).
This definition excludes liabilities in derivatives (AF.34), equity liabilities (AF.5), pension and insurance liabilities (AF.6) and accounts payable (AF.7).
‘Consolidated’ means that any money owed by one entity within General Government to another is excluded from the total GGDebt.
‘Nominal value’ is defined in the governing regulation as face value.  If debt is sold at a discount, it is the undiscounted value of the instrument, rather than the amount actually received, that is shown in the GGDebt. In other statistical contexts, ‘nominal value’ means face value plus any interest accrued but not paid; however, such interest is excluded from GGDebt by definition.

ESA 95 codes and an explanation of each are shown below for the main components of Government revenue and expenditure as well as for types of financial flows. More detailed codes and technical definitions can be seen in the ESA 95 manual available at http://circa.europa.eu/irc/dsis/nfaccount/info/data/esa95/en/esa95en.htm. 

Main Components of General Government Expenditure and Revenue

P.2   Intermediate consumption – value of goods and services used in the process of production, excluding fixed assets

P.5   Gross capital formation

P.51     Gross fixed capital formation - acquisitions, less disposals, of fixed assets during a given period plus certain additions to the value of non-produced assets realised by productive activity. 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
P.52     Changes in inventories
P.53     Acquisitions less disposals of valuables

D.1  Compensation of employees – the total remuneration of government employees

D.11    Wages and salaries, in cash and in kind
D.12    Employers social contributions – actual (D.121) and imputed (D.122)

D.29 Other taxes on production (payable) all taxes that enterprises incur as a result of engaging in production, independently of the quantity or value of the goods and services produced or sold. These include taxes on use or ownership of land or buildings, taxes on use of fixed assets, taxes on total wage bill and payroll, taxes on international transactions related to production.

D.3   Subsidies (payable) - current unrequited payments which general government or the Institutions of the European Union make to resident  producers, with the objective of influencing their levels of production, their prices or the remuneration of the factors of production

D.4   Property income (payable) - the income receivable by the owner of a financial asset or a tangible non-produced asset in return for providing funds to, or putting the tangible non-produced asset at the disposal of, another unit

D.41    Interest (payable) - 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)  - all compulsory, unrequited payments, in cash or in kind, levied periodically by general government and by the rest of the world on the income and wealth of units in the economy, and some periodic taxes which are assessed neither on income nor wealth

D.6  Social contributions - transfers to households, in cash or in kind, intended to relieve them from the financial burden of a number of risks or needs, made through collectively organised schemes, or outside such schemes by government and non-profit institutions. These include payments from general government to producers which individually benefit households and which are made in the context of social risks or needs

D.62    Social benefits in cash - social benefits and pensions paid in cash;
D.631  Social transfers in kind, via market producers - can be subdivided into those where beneficiary households actually purchase the goods and services themselves and are then reimbursed, and those where the relevant services are provided directly to the beneficiaries

D.7  Other current transfers

D.9  Capital transfers - involve the acquisition or disposal of an asset, or assets, by at least one of the parties to the transaction.

K.1  Consumption of fixed capital - the amount of fixed assets used up, during the period under consideration, as a result of normal wear and tear and foreseeable obsolescence, including a provision for losses of fixed assets as a result of accidental damage which can be insured against.

Categories of Financial Flows

F.1  Monetary gold and special drawing rights (SDRs)

F.11     Monetary gold
F.12     Special drawing rights (SDRs)

F.2   Currency and deposits

F.21     Currency
F.22     Transferable deposits
F.29     Other deposits

F.3   Securities other than shares

F.33   Securities other than shares, excluding financial derivatives  (F.331 - Short-term, F.332 - Long-term )
F.34   Financial derivatives

F.4   Loans

F.41 - Short-term loans
F.42 - Long-term loans

F.5   Shares and other equity

F.51 Shares and other equity, excluding mutual funds shares (F.511 - Quoted shares, F.512 - Unquoted shares, F.513 - Other equity )
F.52 Mutual funds shares

F.6   Insurance technical reserves

F.61 Net equity of households in life insurance reserves and in pension funds reserves
F.611 - Net equity of households in life insurance reserves
F.612 - Net equity of households in pension funds reserves,
F.62 - Prepayments of insurance premiums and reserves for outstanding claims

F.7   Other accounts receivable/payable

F.71     Trade credits and advances
F.79     Other

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