Government expenditure by function (COFOG)

Expenditure of General Government by Function (COFOG divisions and groups) 2007-2010, ESA 1995, General Government, consolidated (in million EUR)

In the year 2010 the expenditure of general government increased by €311 m in COFOG division 01. General public services. This was mainly due to the increase in the expenditure for the GNI-own resources in COFOG group 01.1 Executive and legislative organs, financial and fiscal affairs, external affairs. Furthermore there was a decrease in government expenditure of €409 m in COFOG division 01. General public services in the year 2008. This can be primarily attributed to the decrease in interest (COFOG group 01.7 Public debt transactions). A further reason are the lower values for amortised state liabilities with reference to credits for export promotion in COFOG group 01.1, which are recorded as Other capital transfers (debt relief) in the National Accounts. COFOG group 01.8 Transfers of a general character between different levels of government comprises necessary contra entries because of consolidation adjustment (see Explanations below) and therefore fluctuates every year. To prevent distortions in the various other COFOG groups, these contra entries were allocated to COFOG group 01.8.

The expenditure in COFOG group 02.1 Military defence shows a decrease of €109 m in the year 2010. This trend and the developments in the years 2008 (+€465 m) and 2009 (-€532 m) can be attributed to payments for the fighter aircrafts. The trend in COFOG group 02.1 was reflected in the expenditure in COFOG division 02. Defence which decreased by 5.1% since 2009.

The expenditure in COFOG group 04.5 Transport decreased by €280 m in 2010. This can be explained on the one hand by lower investments of the municipalities and on the other hand by lower subsidies of federal government in this field. In the year 2009 a decrease of €453 m can be noticed in this COFOG group. This can be explained by the increased values of the year 2008 caused by the payments of federal government for the Austrian Airlines. The distinctive increase by €1.5 bn in COFOG group 04.9 Economic affairs n.e.c. in the year 2010 can be attributed to the payments of federal government to the KA Finanz AG and to the write-off from participation capital to the Hypo Alpe Adria Bank AG.

In the year 2010 the expenditure in COFOG group 05.3 Pollution abatement remains on the high level of the year 2009. This development and the increase in expenditure from 2008 to 2009 in this COFOG group (+€225 m) are mainly caused by increased expenditure for the purchase of emission permits in industrialized, newly industrialized and developing countries. A further reason is increased expenditure on street-cleaning by the municipalities in the years 2009 and 2010. The expenditure for the scrapping premium was another reason for the increase in the year 2009.

In COFOG group 06.1 Housing development a higher increase in expenditure can be noticed in the years 2009 (+€163 m) and 2010 (+€161 m). This can be primarily attributed to increased expenditure on supporting the renovation of houses in the year 2009 and to higher expenditure for housing subsidies in the year 2010.

The decrease in expenditure in 2009 in COFOG group 07.1 Medical products, appliances and equipment by €142 m can be attributed to the reduction of the VAT on medicaments.

The decrease in expenditure in COFOG group 08.2 Cultural Services in 2008 by €172 m can be explained by the increased values of the year 2007. These increased values were due to the recording of the exhibition “Batliner”, which was lent to the museum “Albertina” on a permanent basis, as gross capital formation (Acquisitions less disposals of valuables).

In the year 2010 the expenditure in COFOG group 09.1 Pre-primary and primary education (+5.0%) and in COFOG group 09.2 Secondary education (+1.5%) increased less than 2008 and 2009. These developments in 2010 were mainly due to only slightly increasing expenditure for nursery schools and for general compulsory schools.

An increase in expenditure by €2.2 bn can be noticed in COFOG division 10. Social Protection in 2010. In COFOG group 10.2 Old age the increase of €1.4 bn in the year 2010 was mainly due to the increase of old-age pensions. In the year 2010 the expenditure in COFOG group 10.4 Family and children rose only to a small extent (+€95 m). There was a higher increase in this COFOG group in the years 2008 and 2009. In 2009 this was mainly caused by the increase of the tax credit for families with children. In 2008 payments of the family allowances equalisation fund increased sharply. This was due to the implementation of the 13th family allowance as well as to the change in the system of family allowances for civil servants.

In 2010 the second largest increase within COFOG division 10. Social Protection can be found in COFOG group 10.5 Unemployment with an amount of €238 m. This was for the most part caused by an increase in expenditure for emergency assistance. In 2009 a significant rise in expenditure of 26.0% in this COFOG group can be noticed. This was mainly caused by increased expenditure for unemployment benefits and emergency assistance in this year. In 2008 there was a decrease in expenditure for emergency assistance. Lower payments for unemployment benefits and emergency assistance are visible in COFOG group 10.5 Unemployment in 2007. In 2007 this is overcompensated by an item recorded as Other capital transfers in the National Accounts and resulting from a Higher Administrative Court ruling, in which the unequal treatment of men and women as regards unemployment insurance contributions and age was abolished. According to the previous ruling, unemployment insurance contributions no longer had to be paid by women after their 56th birthday and by men after their 58th birthday. The new ruling stipulates that, as from 1 January 2004, neither men nor women must pay unemployment insurance contributions after their 56th birthday. In 2007 already levied contributions were refunded for the period from 2004 onwards. The developments in the respective COFOG groups led to a 3.6% increase in expenditure in COFOG division 10. Social protection from 2009 to 2010.

Expenditure of General Government by Function (COFOG divisions) 2007-2010, ESA 1995, General Government, consolidated (as a percentage of total expenditure of general government)

Besides the described developments in the individual divisions and groups, the annual increase in the individual divisions relative to the annual increase in total expenditure of general government is also relevant as regards the percentage share of the COFOG divisions vis-à-vis total government expenditure. For instance, an increase in COFOG division 10. Social protection of €2.2 bn in 2010 resulted in an increase of 0.1 percentage points compared to 2009, as total expenditure of general government rose to a lesser extent in this year (+€5.0 bn). The rise in expenditure in COFOG division 04. Economic affairs by €1.3 bn in 2010 resulted in an increase of 0.5 percentage points. Furthermore there was a rise in COFOG division 01. General public services of €311 m in 2010 which resulted in a decrease of 0.2 percentage points.

Explanations

Consolidation adjustment

The expenditure and revenue of sector general government have to be shown as “consolidated”, i.e. intergovernmental flows are not depicted. In order to not affect the net lending/net borrowing as a result of this “consolidation”, intergovernmental expenditure of sector general government has to be identical to intergovernmental revenue. As this is not the case in practice a balancing mechanism is used: At the next highest transaction class level, the ratios “Current transfers within general government” to “Miscellaneous current transfers” and “Investment grants” to “Other capital transfers” are adjusted as necessary so that the figures may then be consolidated. This is known as “consolidation adjustment”.