Background Notes

Introduction

This release comprises the latest official dissemination by CSO of annual Government Income and Expenditure (GIE) results for 2015 to 2020. The data in this release are consistent with the Government Finance Statistics (GFS) 2021 Q1 release (to be published on 21 July 2021) and the National Income and Expenditure 2020 publication of 15 July 2021.

The tables provide detailed revenue and expenditure data for general government and its two subsectors, central and local government.  A full time series of general government data back to 2000 are available on CSO PxStat. The full suite of GFS publications are available on the CSO website.

Data back to 1995 for all EU Member States are available on Eurostat’s database.  

Updates to general government deficit/surplus since EDP

Compensation of employees (D.1): Continuing with the previous developments of processes and data sources, further amendments have been made to the compilation of the components of D.1 for General Government (2011-2020). 

These include:

• Fully incorporating the register of public sector bodies into the CSO’s Business Register. This includes a correction of the classification of VEC’s from central to local government (2011–2014) and the inclusion of NAMA and other entities – see Register of public sector bodies (2020).

• The methodology for calculating employer imputed pension contributions (D.1221) (2011–2020) has been updated following the publication of the Estimates of Irish Pension Liabilities earlier this year. This aligns the methodologies and data sources and has resulted in an increase in the estimate of D.1221 (and therefore D.1).

Social contributions (D.61): The presentation of the components has been updated, with  ‘Government employees' social contributions’ (D.613)(pt) re-labelled as ‘Government employee pension contributions’. This had previously included an element of  PRSI contributions and has now been amended.

Depreciation (P.51c): Revisions have been made to the P.51c data due to the availability of additional data. These revisions are in line with the latest National Income and Expenditure Accounts published on 15 July 2021. 

Reclassification of local authority housing rent as non market output

To date the provision of local authority housing was treated as a market output. This meant that the difference between the differential rent paid by the tenant and a market rent was calculated and included as P.11 (market output), with a corresponding imputed expenditure D.632 (social benefit in kind). However, Approved Housing Bodies (AHB) reclassified into the local government sector are considered as non-market producers, with no imputed rent calculation made.

On review, this approach was deemed not appropriate and thus a decision has been made to treat the local authority housing output as non-market. This ensures consistency with AHBs. This determination means that there is no longer an imputed D.632 expenditure related to local authority rent. Local authority rent payments are now recorded as P.131 (incidental sales and fees of non-market establishments). This methodology has been applied from 1995.

Transactions of note 2020

COVID-19 

In addition to the direct expenditure measures included above earlier, other measures had an implicit impact on the GFS aggregates:

• Commercial rates for businesses impacted as a result of the public health restrictions were waived for an initial 3-month period, later extended to the end of the year. D.29 tax revenue is therefore lower than otherwise. The cost to local authorities is met by the Exchequer, resulting in an intra-government transfer between central government and local government.
• The Ireland Strategic Investment Fund will invest up to €2 billion of its existing portfolio, through a new sub-portfolio - pandemic stabilisation and recovery fund – in medium and large enterprises.
• The ECB has made a recommendation to all euro-area banks that dividends are not paid to shareholders. The State has a shareholding in both AIB and Bank of Ireland and, as a result of the recommendation, D.42 (dividend revenue) is lower than last year. Other dividend receipts were also lower.
• Ireland, and other EU Member States, have provided guarantees to the temporary Support to mitigate Unemployment Risks in an Emergency (SURE) and Pan European Guarantee Fund. These are included as contingent liabilities.
• Employers affected by trading restrictions can avail of an arrangement to ‘warehouse’ VAT and employer PAYE liabilities incurred during the period. The accrual concept in ESA 2010 would require that such receipts, once paid, are recorded in 2020. Using preliminary information provided by the Revenue Commissioner €874 million has been accrued to 2020. The accrual adjustment will be kept under review as new information becomes available.

Other Transactions of note during 2020

Super dividend: In Q2 2020 the exchequer received a super dividend of €1,228 million from the Central Bank of Ireland.

Changes to the Register of Public Bodies.

The Register of public sector bodies (2020) was published in April and forms the basis for the general government sector. This update saw the inclusion of NAMA, the Insurance Compensation Fund and further approved housing bodies. Details were included in the background notes accompanying the April 2021 GFS Publication.

GDP and GNI* figures used in publication

The GDP and GNI* figures used in the current publication are consistent with those published in the latest National Income and Expenditure Accounts 2020 on 15 July 2021.

Government Finance Statistics – concepts and definitions

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 (ESA2010). The Manual on Government Debt and Deficit (MGDD) provides further guidance on the implementation of ESA 2010 in the context of GFS.

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.

In addition to the EDP transmission programme, detailed statistics on government revenue and expenditure are also provided to Eurostat under the ESA transmission programme.

These data are available on the Eurostat website.

Definition of general government and its subsectors

The general government sector of the economy, is defined in ESA2010 paragraph 2.111: as “institutional units which are non-market producers whose output is intended for individual and collective consumption, and are financed by compulsory payments made by units belonging to other sectors, and 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 – which does not apply in Ireland), local government (S.1313), and social security funds (S.1314 – which does not apply in Ireland). See the latest Register of public sector bodies (2020).

General government deficit/surplus (GG deficit/surplus) is the standard European measure of the fiscal balance, which is used to monitor compliance with the Stability and Growth Pact.

This measure is by definition equal to both Total revenue (TR) less Total expenditure (TE) (Table 1), 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 F32 (long-term debt securities) to eliminate any statistical discrepancy between the two approaches to the calculation of GG deficit/surplus. This adjustment has no impact on Gross debt, Net debt or Net worth.

Detailed codes and technical definitions can be seen in the ESA 2010 manual.

A listing of some of the main items included in this release is shown below.

Main components of general government expenditure and revenue

P.1 Total output of government is equal to market output, own account capital formation, and non-market output (i.e. the sum of D.1+P.2+P51c). The market output referred to in this publication is the imputed market value of social housing rented dwellings.

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

P.3 Final consumption expenditure of government is equal to the total of its output (P.1) plus the expenditure on products/services supplied to households via market producers minus the sales of goods and services (at both market and non-market prices). This is made up of individual non-market services plus collective non-market services (P.31 and P.32).

P.5 Gross capital formation.

P.51g 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.51c 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.

P.52 Changes in inventories.

P.53 Acquisitions less disposals of valuables.

D.1 Compensation of employees (Pay) - the total remuneration of government employees.

D.21    Taxes on products are taxes that are payable per unit of a given good or service produced or transacted. Included in this is customs and excise taxes and VAT. To accrue this data the cash receipts are time adjusted. Customs and excise taxes are time adjusted by 1 month and VAT is time adjusted by 2 months. For example Q1 VAT is March, April, May cash receipts.

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 accrues when the owners of financial assets and natural resources put them at the disposal of other units of the economy. The income payable for the use of financial assets is called investment income, while that payable for the use of a natural resource is called rent. Property income is the sum of investment income and rent.

D.41 Interest receivable by the owners of a financial asset for putting it at the disposal of another institutional unit. Applies to deposits (AF.2), debt securities (AF.3), loans (AF.4) and other accounts payable (AF.8).

D.42 Dividends receivable by the owners of share equities. Dividends exclude "super dividends" which arise where the dividend paid is large relative to the recent level of dividends and earnings. Super dividends are recorded as withdrawal of equity (F.5). This arises, for example, in the case of dividends paid by the Central Bank.

D.45 Rent of a natural resource – income receivable by the owner of a natural resource for putting the resource at the disposal of another party.

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.

D.7 Other current transfers – includes VAT and GNI based EU budget contributions, current transfers between subsectors of government, current international co-operation and current transfers to households and non-profit institutions.

D.9 Capital transfers - involve the acquisition or disposal of an asset, or assets, by at least one of the parties to the transaction. Includes capital taxes and investment grants.

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