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Net Expenditure by Central and Local Government is government spending on providing services and goods directly for the country. This includes the cost of running schools, hospitals, prisons, the Gardaí, the Army, social housing and the rest of public services.

The value of the services Government provides is hard to estimate using market prices, since few of these services are provided on an open market. For this reason, the Final Consumption Expenditure of Government is valued as the sum of the costs to produce these services. A large part of the cost is the pay of workers (Compensation of Employees), but it also includes Intermediate Consumption of goods and services bought in to produce these services. This expenditure also includes Consumption of Fixed Capital, which is the wear and tear on Capital Assets used in producing public services.

The Net Expenditure excludes any income government gets from selling services. So, for instance, passport fees are deducted from the total Net Expenditure on providing the passport, because that part of the cost is borne by the passport holder instead.

The Net Expenditure by Local Government on local authority housing is calculated as the rent that would be paid for the home on the open market minus the rent actually paid by the government’s tenant.

This Net Expenditure excludes cash payments to households, such as the state pension and Child Benefit. It also excludes interest on the national debt, investment grants, subsidies to companies and the self-employed, and our contributions to the European Union.

In National Accounts, Net Expenditure by Central and Local Government also excludes goods and services which are paid for by government and which commercial enterprises provide directly to the public. For example, the cost of the Drug Payment Scheme. This category is officially called “Social Transfers in Kind – Market Production Purchased by General Government.” Otherwise it is the same as Final Consumption Expenditure of Government in Government Accounts and Institutional Sector Accounts. This relationship is illustrated in the diagram.

Figure: Final Consumption

Net Expenditure by Central and Local Government in Constant Prices

Read next: Personal Consumption Expenditure

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