FUNCTION (COFOG DATA)
3.3.1. Mandate and motivation
In May 2008 the ECOFIN Council confirmed earlier requests, addressed to Member States and to Eurostat, in order to further step up their efforts in the provision and dissemination of detailed data on government expenditure by function (COFOG) (54), in the context of the analysis of the
quality of public finances. While taking note of the progress achieved with the delivery of COFOG II level figures, and in order to allow further analysis of past trends in the composition of public expenditure, the Council concluded that the remaining gaps need to be filled in as soon as possible, and best efforts must be pursued to make
(54) Classification of the Functions of Government–for its
detailed breakdown see: http://unstats.un.org/unsd/cr/registry/regcst.asp?Cl=4
data publicly available on the basis of the results of the end-2008 data transmission. This request has been further reinforced in the ECOFIN conclusions of November 2008 in the context of the update of the EFC Status Report on information requirements.
3.3.2. Some methodological aspects
COFOG classifies government expenditure purposes into ten main categories (divisions–seen as broad objectives of government, and known as the COFOG I level breakdown). These divisions are further broken down into "groups" (COFOG II level) and in some cases even into more detailed "classes" (COFOG III). COFOG data are an integral part of the ESA95 Transmission Programme. The transmission of COFOG I level breakdown is compulsory for the years 1995- onwards and takes place twelve months after the end of the reference period. Information on a more detailed COFOG II level is provided on a voluntary basis.
Being compiled under the ESA95 (European System of Accounts) framework, the COFOG dataset follows all of the methodological guidelines set in ESA95 (55) and the conventions
adopted in the working groups of national accountants. In particular, the general government sector according to ESA95 is not equivalent to the public sector, since the public sector also includes all public corporations. This can affect the inter- country comparability of spending on a particular COFOG group since in some Member States public universities, hospitals or transport companies can be included as part of general government, whereas in others they are classified as public corporations. From this it can be inferred that users should be aware of the various administrative arrangements in place in countries before undertaking detailed analysis and cross- country comparisons. From the practical point of view, disaggregating the data into COFOG II level statistics may also create some practical compilation problems affecting data quality. It should also be stressed that for some Member States the compilation of back series for historical
(55) http://circa.europa.eu/irc/dsis/nfaccount/info/data/esa95/
Part II Evolving budgetary surveillance
years is very difficult because of the lack of source information.
ranking were health (6.6% and 6.5% of GDP) and education (5.1% and 4.8% of GDP). Spending on economic affairs was close to 4% of GDP (3.8% in both, EU27 and euro area) and slightly less primary expenditure was dedicated to general public services (3.5% in EU27 and 3.7% in the euro area). Less than 2% of GDP was spent on average on each of the further COFOG functions, i.e. public order and safety, defence, recreation, culture and religion, housing and community amenities, and environmental protection (Graph II.3.4).
COFOG has several links with other international statistics and classifications. (56) In particular,
since COFOG systematises the purposes of all the government activities and it interrelates with many more specialized statistical domains, e.g. R&D statistics, environmental accounts, health accounts, the European System of Integrated Social Protection Statistics (ESSPROS), and the International Standard Classification of Education (ISCED) and UOE data collection for education.
3.3.3. Data availability
COFOG I level data are available in Eurostat databases. As COFOG II level data are requested on a voluntary basis, Eurostat proceeds to publish this breakdown, if considered of sufficient quality, for those countries that agreed with their publication or did not explicitly opposed. While, at the end of 2006, no data was publicly disseminated, currently Eurostat has released COFOG II level data for over twenty countries (some of them flagged as "provisional"). (57)
Data presented in this section come from the latest transmission of ESA95 table 11 (COFOG dataset) at the end-December 2008, for those countries which transmitted data and did not object to their publication. For Ireland, Slovenia and Romania the full COFOG II level structure is not available. For most countries 2007 data are provisional.
3.3.4. The major spending categories
In 2007 on average (weighted by countries' GDP) the government primary expenditure (58) devoted
to social protection in EU27 and euro area amounted to 18.0% and 18.7% of GDP, respectively. The next COFOG functions in
(56) This is further developed in the Manual of sources and
methods on COFOG statistics, which can be found at: http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1073, 46587259&_dad=portal&_schema=PORTAL&p_product_ code=KS-RA-07-022
(57) The data are available at:
http://epp.eurostat.ec.europa.eu/portal/page?_pageid=0,113 6173,0_45570701&_dad=portal&_schema=PORTAL (58) Primary expenditure is defined as total expenditure of
general government excluding payable property income, that consists mostly from interest paid by government.
Looking at particular countries (Graph II.3.5), social protection is the most important COFOG spending purpose for all of them, ranging in 2007 from close to or over 22% of GDP in France, Denmark and Sweden to 10% or below for Ireland, Cyprus, Romania, Estonia, and Latvia (with the lowest level of 8.4% of GDP). (59) For more than
half of the Member States and Norway the next spending purpose in importance would be health. From the structure of government expenditure according to COFOG purpose (COFOG II level data) it appears that COFOG categories exceeding 3% of national GDP, in any of the Member States (60) are old age, hospital services, public
debt transactions, family and children, sickness and disability, executive and legislative organs, transport, pre-primary and primary education, secondary education and general services. These groups are concentrated in five COFOG divisions: three of them relating to social protection and general public services, two of them to education, and one to health and economic affairs.
The most important COFOG group in all Member States is old age, ranging in 2007 from 12.7% of GDP in Greece to 2.9% in Ireland. Only Norway devotes more of its government expenditure to a different purpose (sickness and disability; 5.9% of GDP), whereas its spending on old age amounted in 2007 to 4.9% of GDP.
(59) For inter-country comparisons it should be considered that
in some countries social benefits are paid and reported gross of income tax that can inflate the social protection related spending.
(60) Ireland and Romania, which both delivered partial datasets,
have not reported so far any COFOG group exceeding 3% of GDP. In the Slovenian partial dataset only expenditure on 'old age' exceeds 3% of GDP.
Graph II.3.4: Structure of the EU's and euro area's government expenditure by COFOG I function, 2007 3.5 1.8 3.8 0.8 1.0 6.6 1.1 5.1 18.0 3.7 3.8 0.7 1.0 6.5 1.1 4.8 18.7 1.51.3 1.6 0 2 4 6 8 10 12 14 16 18 20 General public services
Defence Public order
and safety Economic affairs Environmental protection Housing and community affairs Health Recreation, culture and religion Education Social protection (% o f G D P) EU27 EA16 Source: Eurostat.
Graph II.3.5: Structure of government expenditure by countries, 2007
Old age is in general the only COFOG group for which expenditure exceeds 3% of GDP in Bulgaria (ignoring one-off transactions), Germany, and Lithuania.
The next sections present a detailed breakdown of the three most important COFOG divisions in most countries (social protection, education and health).
0 5 10 15 20 25 30 35 40 45 50 55 BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK NO (% o f GD P )
Social protection Health Education Economic affairs General public services Defence Public order and safety Environmental protection Housing and community affairs Recreation, culture and religion
Part II Evolving budgetary surveillance
Graph II.3.6: COFOG II level breakdown of 2007 government expenditure on social protection
Social protection, being the largest expenditure at COFOG first level purpose, integrates three categories indicated before as main COFOG groups. As it can be observed from Graph II.3.6, in eleven Member States (Bulgaria, Czech Republic, Estonia, Greece, Italy, Latvia, Malta, Austria, Poland, Portugal, Slovenia) expenditure on old age constitutes over 50% of all spending on social protection (for Bulgaria the share being almost 75%, and for Italy and Greece above 67%). The detailed structure of the expenditure on education in 2007 shows a concentration on three education levels (Graph II.3.7): pre-primary and primary education, secondary education, and tertiary education.
Graph II.3.8 shows the detailed structure of health spending. In 18 countries hospital services exceed two fifths of the total division expenditure, with the United Kingdom reporting a share over 90%. Seven Member States report expenditure on outpatient services over 30% (Belgium, Germany, Italy, Portugal, Slovenia, Finland and Sweden). Portugal and Greece spend over 30% of their government health expenditure on medical products, appliances and equipment. Over 50% of
health spending for Cyprus has been assigned to the category 'not-elsewhere classified'.
3.3.5. Conclusions
To conclude, the availability of COFOG detailed data has very substantially increased in recent years. Notwithstanding the methodological and practical difficulties, they provide a relevant input for the analysis of the quality of public finances. With the help of the countries represented in the Task Force on COFOG, significant progress has also been achieved in the comparability with other related statistics, analysis of country practices, and on methodological issues which have been collected in the manual referred above. Eurostat reported to the EPC Working Group on Quality of Public Finances and to the EPC in March 2009, and the progress was acknowledged positively by both groups. It is expected that countries will further transmit more detailed information in next transmissions, in order to promote their use for institutional users, international organisations, and the public in general. Over the medium term, COFOG data could possibly also be extended to the regional level as indicated in a recent technical assistance study. 0 5 10 15 20 BG CZ DE EE IE GR ES IT CY LV LT HU MT AT PL PT SI FI SE UK NO (% of G D P )
Sickness and disability Old age Survivors
Family and children Unemployment Housing
Social exclusion (not elsewhere classified) R&D Social protection Social protection (not elsewhere classified)
Graph II.3.7: COFOG II level breakdown of 2007 government expenditure on education 0 1 2 3 4 5 6 7 8 BG CZ DE EE IE GR ES IT CY LV LT HU MT AT PL PT RO SI FI SE UK NO (% o fG D P )
Pre-primary and primary education Secondary education Post-secondary non-tertiary education
Tertiary education Education not definable by level Subsidiary services to education
R&D Education Education (not elsewhere classified)
Source: Eurostat.
Graph II.3.8: COFOG II level breakdown of 2007 government expenditure on health
0 1 2 3 4 5 6 7 8 BG CZ DE EE GR ES IT CY LV LT HU MT AT PL PT SI FI SE UK NO (% o fG D P)
Medical products, appliances and equipment Outpatient sevices
Hospital services Public health services
R&D Health Health (not elsewhere classified)