1. Item 25b: Government finance statistics
ESTP course on National Accounts ESA 2010
Luxembourg, 30 May - 3 June Eurostat (D.1, D.4)

2. What is so special about government?
Major 'actor' in the economy
Policy maker
Redistribution of income
Non-market output
Major employer
Potentially major borrower/lender
Economic impact on..
Demand in the economy
Balance of saving and investment

3. The Excessive Deficit Procedure
Need for fiscal discipline in a single currency
Article 126 of the Treaty on the Functioning of the European Union and Treaty on European Union, Protocol 12 on the Excessive Deficit Procedure (Maastricht Treaty) define the reference values for public deficit and public debt: 'EDP' and the reporting arrangements.
Council Regulation 479/2009, as amended (and Commission Regulation 220/2014 amending 479/2009 as regards references to ESA 2010) defines deficit and debt and operational arrangements.
Deficit/ surplus = net lending(+)/ net borrowing (-) (B.9) of general government (S.13).
Gross debt = liabilities of S.13 in currency and deposits (AF.2), debt securities (AF.3) and loans (AF.4).
at nominal (face) value; consolidated.

4. Maastricht Treaty: EDP
Deficit - 3% of GDP Debt - 60% of GDP

5. Maastricht Treaty: recent statisticsEU
Deficit -
-2.4 % of GDP
Debt -
85.2 % of GDP

6. Fiscal monitoring DG-ECFIN in charge of fiscal monitoring
Commission and Economic and Financial Committee (EFC) gives an opinion to the Council if there is an excessive deficit
Council decides if there is an excessive deficit within 3 months; recommends to Member States corrective actions:
Stability Programme for euro area members (possible financial penalties)
Convergence Programme for EU Member States (no euro area entry)

7. So government is important – how do statisticians react?
General Government is a part of integrated system under ESA 2010 and European system of GFS presentation ensures duality of approaches
Sequence of accounts
Total revenue and total expenditure
… but:
Need for more data (ESA transmission programme, dialogue for underlying government sector accounts in 479/2009)
Need for more precise methodological rules … to prevent accounting to minimise deficit/ debt by governments (MGDD)
Need for EDP-specific data collection system

8. GFS - Transmissions Gradual extension of general government data:
ANNUAL GFS DATA
Table 2 – Main aggregates
Table 9 – Taxes and social contributions + NTL
Table 11 – Expenditure by function - COFOG
QUARTERLY GFS DATA
Table 25 – Non-financial accounts (STPFS)
Table 27 – Financial accounts (QFAGG)
Table 28 – Maastricht debt
Table 2899 – Intergovernmental lending
RELATED DATA (SECTOR ACCOUNTS)
Tables 6/7 – Annual Financial accounts/BS
Table 8 – Sector accounts, annual
Table 801 – Sector accounts, quarterly
Table 26 – Non-financial balance sheets
Table 29 - Pensions

9. Timing of data transmission
Annual data
Quarterly data
T+3 – ESA table 2
T+9 – ESA table 2
– ESA tables 6/7
– ESA table 8
– ESA table 9 + NTL
T+12 – ESA table 11
T+24 – ESA table 26
T+24 – ESA table 29
T+3 – ESA table 25
– ESA table 27
– ESA table 28
– ESA table 801
provisional data:
T+85 – EA – ESA table 801

10. Total expenditure and total revenue
ESA95 did not include initially a definition of government expenditure and revenue: Commission regulation 1500/2000. In ESA2010 included in chapter 8 and 20.
Simple rearrangements of ESA transactions (sequence of accounts)
Duality of approaches is retained in ESA table 2, but some items are not shown explicitly.
P.132 (output provided free of charge) and corresponding parts of P.3 (final consumption expenditure do not form part of total revenue and total expenditure respectively.
Helpful: P.32=P.4, D.63=D.631+D.632=P.31, P.3=P.132+D.632.
Imputed flows in GFS presentation: imputed social contributions, capital transfers in kind, imputations related to social insurance.
Rearrangement described in chapter 20.
Difference between total expenditure and total revenue is deficit/surplus (B.9 – net borrowing (-)/ net lending (+)).

11. Expenditure EU - 2014 Largest share of expenditure:
social transfers (D.62, D.632) ~44%
Average government expenditure per inhabitant: €

12. Revenue EU
Taxes (59%) and social contributions (30%) together make up 89 % of government revenue.
Average government revenue per inhabitant
€12 365

13. More deficit

14. Debt:
Currency and
deposits,
Debt securities, Loans

15. Integrated GFS system
Need to integrate diverse ESA transmission tables and test consistency
Clearer presentation for users
Structure:
Expenditure and Revenue
Balances (Deficit/surplus, EDP Deficit)
Financial transactions and balance sheets
Maastricht debt – levels and changes
See GFS summary tables

16. EDP data Treaty 'Commission provides fiscal data to the Council'
Member States notify the data to the Commission / Eurostat – twice per year (before 1 April, before 1 October)
Eurostat:
Validates
Or:
expresses reservations; or
changes the data (amendment)
Eurostat News Release t+3 weeks
Eurostat must notify + justify 3 days in advance the intention to express reservations or amendments of data

17. Format of EDP data
Special 'EDP Notification Tables' (Excel spreadsheets)
4 historic years and one forecast (current year)
Data should be consistent with GFS data transmitted at same time (underlying government account Reg 479/2009)
EDP questionnaire tables (confidential)
EDP supplementary tables on government interventions to support financial institutions

18. EDP Notification Tables part I
General Government and its subsectors
Table 1 – summary data (deficit, debt, interest, GFCF, GDP)
Table 2 – Reconciliation of working balance with B.9

19. EDP Notification tables part II
Reconciles deficit with change in debt (“stock-flow adjustments”)
Financial assets
Financial liabilities
Other adjustments
Statistical discrepancies
Table 4

20. Questionnaire relating to EDP tables
Accompany twice-yearly EDP tables:
Revision of general government net lending (+)/ net borrowing (-) and revision of general government consolidated gross debt
Breakdown of financial transactions included in the working balance
Adjustments for sector delimitation in EDP tables
Breakdown of other accounts receivable/payable (F.8) reported in EDP tables
Taxes and social contributions: other accounts receivable/payable (F.8) of general government
Recording of EU flows in EDP tables
Military equipment expenditure (weapons and supporting equipment)
Central government claims, debt cancellation
Guarantees recording
Capital injections, superdividends and privatisations
Public-Private Partnerships (PPPs)
Sale and leaseback operations

21. Methodological issues
Pyramid of methodological basis:
ESA 2010 (+ SNA 2008 if doubts)  specific chapter on government accounts
Eurostat Decisions, guidance and Manual on Government Deficit and Debt (MGDD)
Discussions at EDPS WG
Bilateral discussions between Eurostat and the Member States (usually based on above)

22. Dealing with specific cases
Council Regulation 2103/2005 (before: Code of Best Practice – ECOFIN, 18 February 2003)
Resolution of methodological issues: MS advised to organise consultations at national level
If doubts prevail, NSIs ask informally or formally to Eurostat to rule on the matter
Formal opinion via bilateral letter to be provided (informal advice may be provided)
Opinion published on the Eurostat website (since 2006)
A formal European consultation may be needed; a Eurostat decision may be asked with possible consultation of the CMFB

23. General Government vs Public Sector
Focus at European level on General Government (excludes Public Corporations)
IMF (and some countries) focus on Public Sector
Two major implications:
Classification of units
Transactions between government and public corporations

24. Δ Classification of units
Concept of control (is it public?)
Non-market / 50% rule
Quasi-corporations, holding companies
Specific cases:
Hospitals
Railways

25. Δ Relations between government and public corporations
Capital injections
Government provides funds to a PC
Is government investing for a return, or
Is government providing funds to cover losses?
Dividends
'Super-dividends'
Privatisation
Holding companies and 'indirect' privatisation

26. Time of recording ESA 2010 on an accruals basis… Taxes Interest
when the interest accrues
EU flows
eliminate timing effects for EU funds to 3rd parties
Military equipment expenditure
when the equipment is delivered
Court Decisions

27. Public-private partnerships
Government signs contract to:
Obtain services for itself (e.g. building)
Obtain services for third parties (shadow tolls)
Involves a (significant) asset
Special purposes vehicles!
Concept of risk and rewards
Construction risk
Demand risk
Availability risk

28. Securitisation
Government can “sell” claims it holds, usually to SPE, in return for large lump sum payment
Securitisation of fiscal claims = government borrowing
Securitisation with “Deferred Purchase Price” = government borrowing
Securitisation with significant substitution clause = government borrowing

29. GFS Website Transparency initiative by Eurostat:
EDP material (incl. notifications)
News Releases on Eurostat methodological decisions and on government debt and deficit (and related GFS releases)
ESA2010 MGDD, decisions and guidance notes
Minutes of visits, letters exchanged, etc.
GFS data