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Public expenditure across the EU

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on 24 November 2015

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Transcript of Public expenditure across the EU

Public expenditure across the EU

Public Expenditure
Agenda
I. Introduction
II. Presenting economic condition and budget balance in EU
III. Functional classification of public expenditures and perceptible trends in EU
IV. Structure of public spending in chosen EU countries
main trend and forecasts
Katarzyna Król
Justyna Pindel
Joanna Reczyńska

Wydział Finansów
Introduction
What is Public Expenditure?
Public expenditure refers to Government Expenditure. It is incurred by central state and local governments of a country

What are functions of public spending?
Public Expenditures may fulfil various objectives, such as fairness and redistribution, macroeconomic stabilisation, homogeneous service coverage across the whole national territory, sustainable development through environmental protection

How should it influence the National Economy?
Specific categories of government expenditure should support growth by improving the economy's endowment of production factors (labour and capital) or their productivity

What are the key economy areas?
Particular attention must be given to investment into future-oriented areas directly related to the economy's growth potential and ensuring the sustainability of pension systems

What about long-run growth?
the macroeconomic link between the size of government and long-run growth is not clear cut, but there is a need to ensure that governments are efficient and do not become a drag on the economy

A few things we want you to know before we really start
NON TRANSFER EXPENDITURE
TRANSFER EXPENDITURE
National Old Age Pension Schemes
Subsidies
Welfare benefits to weaker sections
Interest Payments
Internal law and order and defence
Public administration
Economic infrastructure (irrigation, power, transport etc.)
Social infrastructure (education, health and family welfare)
Qualities of Public Expenditure
(should be: )
Efficient
Costeffective
maximising results for given inputs
reaching a certain level of results with minimum inputs
Principles of Public Expenditures
1. Maximum Social Benefit

2. Canon of Economy

3. Canon of Sanction

4. Canon of Elasticity

5.  Balanced Budget

6. Beneficial result on Production as well as Distribution


The GDP
GDP real growth in 2014

Deficit and surplus
Deficit / surplus in 2010
Deficit / surplus in 2012
Deficit / surplus in 2011
Deficit / surplus in 2013
Revenue and expenditure
Classificiation of Public Expenditure
Revenue and Capital Expenditure
Transfer and Non-Transfer Expenditure
Productive and Unproductive Expenditure
Development and Non-Development Expenditure
Grants and Purchase Price
Classification According to Benefits
Hugh Dalton's Classification of Public Expenditure
Functional Classification
Public Expenditure
SOCIAL PROTECTION
sickness and disability
old age
survivors
family and children
unemployment
housing
social exclusion n.e.c.
R&D social protection
social protection n.e.c.
10.
2.
DEFENCE
military defence
civil defence
foreign military aid
R&D defence
defence n.e.c.
3.
PUBLIC ORDER AND SAFETY
police services
fire protection services
law courts
prisons
R&D public order and safety
R&D public order
and safety n.e.c.
1.
GENERAL PUBLIC SERVICES
executive and legislative organs, financial and fiscal affairs, external affairs
transfers of a general character between different levels of government

general public services n.e.c.
foreign economic aid
general services
basic research
R&D General public services
public debt transactions

4.
ECONOMIC AFFAIRS
transport
communication
fuel and energy
economic affairs n.e.c.
general economic commercial and labour affairs
agriculture forestry and hunting
mining, manufacturing and construction
R&D economic affairs
other industries
5.
5.
ENVIRONMENTAL PROTECTION
waste managament
waste water managament
pollution abatement
biodiversity and landscape protection
R&D environmental protection
environmental protection n.e.c.
6.
HOUSING AND COMMUNITY AMENITIES
housing development
community development
water supply
street lighting
R&D
n.e.c.
7.
HEALTH
R&D health
health n.e.c.
hospital services
medical products and appliances
outpatient services
public health services
8.
RECREATION, CULTURE AND RELIGION
R&D
n.e.c.
cultural services
recreational and sporting services
religious and communities services
broadcasting and publishing services
9.
EDUCATION
education R&D
pre-primary&primary
secondary education
post-secondary and non-tertriary
education not definable by level
subsidiary services to education
education n.e.c.
tertiary education
The structure of the EU countries spendings
General public services
Defence
Public order and safety
Economic affairs
Environment protection
Health
Education
Social protection
Housing and community amenities
Recreation, culture and religion
Public expenditure in 2012 (% of the all public expenditures)
Social protecion, general public services, health
General Public Services
The highest
The lowest
13,8% of GDP
12,4% of GDP
3,6% of GDP
3,7% of GDP
Defence
The highest
The lowest
2,4% of GDP
2,3% of GDP
0,4% of GDP
0,4% of GDP
Environmental Protection
The highest
The lowest
1,7% of GDP
1,7% of GDP
0,3% of GDP
0,3% of GDP
Social Protection
Across the countries
The highest expenditure on ‘social protection’ as a percentage of GDP was found in
Denmark
,
France
and
Finland
.

At the other end of the scale were
Slovakia
,
Cyprus
and
Latvia
. With the exception of Iceland, the Nordic countries all exhibit a relatively high level.
Per inhabitant
Looking at expenditure per inhabitant, the ranking of countries is slightly different with
Luxembourg
,
Norway

and
Denmark
showing the highest values, indicating a strong correlation between national wealth and the absolute per capita level of social expenditures.
"Old age" category domination
In all countries, the category ‘old age’ which includes most pension schemes, is predominant and represents at least 40 % of total public spending on social protection
All benefits related to sickness and disability often come as the second group of social protection expenditure, representing 20 % or more in the
Scandinavian countries
,
Ireland
,
Hungary
,
Lithuania
and
the Netherlands
.
Sickness and disability
Children and unemployment
Other relatively important categories concern benefits to families for dependent children (21 % of total spending on social protection in
Denmark
and
Luxembourg
) and unemployment allowances (nearly 20 % of social protection expenditure in
Ireland
and
Spain
).
Health
Across the countries
Within the EU, government health expenditure ranges from less than 5 % of GDP in
Cyprus
and
Romania
,
Latvia
,
Bulgaria
,
Poland
and
Luxembourg
to over 8.0 % in
the UK
,
France
,
Denmark
and
the Netherlands
.

This indicator is lower than the EU average for almost all the most recent Member States with the exception of
the Czech Republic
. This share seems also particularly low in
Switzerland
where public outlays on health represented 2.1 % of GDP and is consistent with a generally low relative level of government spending and a strong tradition of private coverage of health risks.
Subcategories
Looking at the most detailed categories of the health division, the situation also reveals rather different organisations and structures across countries with an even more widespread breakdown than between the social protection sub-categories. This said, the dominant group generally concerns public expenditure related to services of general and specialist hospitals.
Questions for you
1. What are the main causes of growth of Public Expenditure?

2. Should the governments reduce Public Expenditure? Which categories? Why? How?

3. What are the risks behind growing expenditures?

4. Do Public Expenditures really help to reduce the effects of bad economic indicators like unemployment, social inequality etc?
1. Increase in public revenue - with rise in public revenue government is bound to increase the public expenditure. This is because the demand for public goods tends to expand with the rise in per capita income.

2. Welfare State Ideology - the modern State is a welfare state. It aims at promoting the economic, political, and social well-being of its citizens. It makes every effort to improve the living standard of the common people.

3. Resource Mobilisation and Ability to Finance - when the government innovates more and more methods of taxation and resource mobilisation, its ability to finance public expenditure increases and the size of public expenditure grows.

4. Inflation - with the rising prices, the government has to keep on increasing public expenditure to carry out its functions and maintain the supply of public goods intact.

5. The Role of Democracy and Socialism - the recent growth of democracy and socialism everywhere in the world has caused public expenditure to increase very much. A democratic structure of government is inevitably more expensive than a totalitarian government.

6. The Urbanisation Effect - expenses on water supply, electricity, provision of transport, maintenance of roads, schools and colleges, traffic controls, public health, parks and libraries, playgrounds, etc. are growing

7. Population growth - it increases with the increase in population, more of investment is required to be done by government on law and order, education, infrastructure, etc. investment in different fields depending on the different age group is required.

8. Defense Expenditure - due to modernization of costly defense equipment by navy, army and airforce to prepare the country for war or for prevention
%GDP
- due to high costs of public debt transactions


- due to high costs of upkeeping of the central government
Greece
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