Tuesday, June 23, 2020

The Level of Government Spending in 2018

Government spending, excluding spending on old-age social protection, in the countries that made up the EU28 in 2018 was equivalent to around 35.8 per cent of the Gross National Income of the region (GNI* is used for Ireland).  Spending on old-age social protection was equivalent to a a further 10.1 per cent of GNI. 

As shown in the following table, the figures for Ireland were 36.4 per cent and 5.2 per cent. [Click to expand.]

General Government Spending 2018

The figures for the “peer” group are the regional aggregates for the nine countries other than Ireland listed in the table. The “nordic” group are the aggregates for Denmark, Finland and Sweden. In the table, the ten countries are ranked by their total expenditure excluding old-age social protection a a share of national income.  Ireland place sixth. 

The bottom panel compares government spending in Ireland (as a share of GNI*) to the equivalent figures for each region (as a share of GNI).  In aggregate terms, government spending in Ireland excluding old-age social protection is pretty much in line with the outcome for the EU-Peer group (Ireland was lower by 0.2% of national income).

Relative to the EU-Peer group Ireland recorded a higher level of spending for housing, health, education and social protection excluding old age.  Ireland was lower for general public services, defence, economic affairs, environmental protection and recreation and culture.

If we limit the comparison to Denmark, Finland and Sweden, EI-Nordic, then we see that government spending in Ireland in 2018 was around 3.3 per cent of national income lower than the aggregate level for this group.  Ireland was higher than these countries for public order, environmental protection, housing and health while it was lower for general public services, defence, culture, education and social protection excluding old age.

The most significant difference between Ireland and all the groupings of countries shown is for spending on old-age social protection.  To match these groups Ireland would have to spend around five per cent more on this category, which is a doubling of the current level.  For 2018, this would have been equal to additional spending of around €10 billion.

This doesn’t necessarily mean those aged 65 and over in Ireland have a lower income compared to the same groups in other countries.  Ireland has a lower share of this group than other countries and have incomes which are supported by private pensions.  The elderly in Ireland also typically have lower housing costs than their equivalents in our peer countries

In overall terms, Ireland does have a lower level of government spending than in our EU-Peer countries.  The single most important reason for this is spending on old-age social protection.  Those countries raise more in social insurance contributions and pay out more in pensions – with higher benefits going to those who made higher contributions, i.e. had higher incomes.

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