1. Item 24a: Government finance statistics
ESTP course on National Accounts
ESA 2010
Luxembourg, 15 May May 2017 Eurostat (D.1, D.4)

2. What is so special about government?
Major 'actor' in the economy
Policy maker
Redistribution of income
Collects our taxes
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 concept and reference values for public deficit and public debt: 'EDP' and the reporting 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.
Council Regulation 479/2009, as amended (and Commission Regulation 220/2014 amending it as regards references to ESA 2010) defines deficit and debt reporting and operational arrangements.

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
Preventive arm
‘Medium term budgetary objectives (MTO)’ – target in structural terms
‘structural balances’ and ‘expenditure benchmark’
Corrective arm
Commission and Economic and Financial Committee (EFC) give 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
European system of GFS presentation builds total revenue and total expenditure from the sequence of accounts
… but:
ESA transmission programme: underlying government sector accounts in 479/2009
Need for more precise methodological rules … to prevent accounting to minimise deficit/ debt by governments (interpretation to ESA = MGDD)
Need for EDP-specific data collection system

8. GFS - Transmissions Gradual extension of general government data:
ANNUAL GFS DATA
Table 2 – Main aggregates (expenditure and revenue)
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)
Described in the (new) chapter 20.
Difference between total expenditure and total revenue is deficit/surplus (B.9 – net borrowing (-)/ net lending (+)).
Investment (GCF – P5) is an expenditure
CFC is an expense
Imputed flows in GFS presentation: imputed social contributions, capital transfers in kind, imputations related to social insurance.
'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.

11. 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

12. ESA transmission programme and GFS

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

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

15. More deficit

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

17. 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

18. 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

19. 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
Transition between budget to B9

20. EDP Notification tables part II
Table 3 Reconciles deficit with change in debt (“stock-flow adjustments”)
Financial assets
Financial liabilities not in debt
Other adjustments
Statistical discrepancies
Table 4

21. Questionnaire relating to EDP tables
Accompany twice-yearly EDP tables:
Revision of general government deficit and debt
Breakdown of financial transactions included in the 'working balance'
Adjustments for sector delimitation in EDP tables (list of B9 of main other central government bodies, etc.)
Breakdown of other accounts receivable/payable (F.8) reported in EDP tables
Taxes and social contributions other accounts receivable/payable (F.8)
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
Rerouting transactions

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

23. 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

24. EDP organisation of Eurostat – Member states contacts
EDP desk at Eurostat
During 2 weeks April and October: 'request for clarification'
Every 2 years EDP dialogue visit
Action points
Minutes published
Bilateral contacts
'Advice' : official letter
Tasks force or working group discussions
EDPS WG (Methodological TF, GFS TF)
CMFB consultation

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

26. Δ Classification of units
Is it an institutional unit?
Concept of government unit
Concept of control: is it public or private?
Non-market / 50% rule
Institutional unit level
Economically significant prices: product level
Quasi-corporations
Borderline with financial corporation
financial intermediation
Captives, SPE, holding companies
Specific cases of units "subsidized" (circularity)
Hospitals; Railways

27. Δ Relations between government and public corporations
Capital injections: D9 (capital transfer) or F5 (equity injection)?
Government provides funds to a PC
Is government investing for a return, or
Is government providing funds to cover losses (past or future)?
Privatisation: obvious…
'indirect' privatisation; holding companies
Dividends
'Super-dividends'

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

29. 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 risks and rewards
Construction risk
Demand risk
Availability risk
Other issues: financing, guarantees etc..
Tree approach or multi-criteria?

30. 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

31. GFS Website Transparency of 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