General Government Spending on Fixed Assets
In the general government accounts we usually think of government capital spending in terms of gross fixed capital formation, i.e. investment in fixed assets by the government sector. The path of this over the past two decades is well understood.
In the final years of the credit boom, government GFCF was ramped up significantly and reached €10 billion in 2008 before falling very significantly. It has been rising in recent years.
The timing of the inclusion of this spending is when the asset is acquired or completed so if the government is undertaking a multi-year project there could be cash spending over a number of years but the GFCF in the general government accounts will be counted when the project is completed. [This is so the GFCF figure can be linked to the capital stock figure.]
Government spending on fixed assets for itself is not the only capital spending the government does. The government can also provide funding for other sectors to do capital spending. This could be refurbishment grants for households; capital grants for sectors such as agriculture or grants for one-off projects like sports stadiums.
It will also include government funding of capital spending of publicly-controlled entities which are classified as being outside the general government sector. This currently includes:
- Airports including
- Dublin Airport Authority
- Aer Rianta
- Cork Airport
- Dublin Airport
- Shannon Airport
- An Post
- Bord na gCon including track companies
- Bord na Móna
- CIE excluding Irish Rail
- Bus Eireann
- Dublin Bus
- Ervia excluding Irish Water
- Gas Networks Ireland
- RTE Transmission Network
- Ports including
- Dublin Port
- Port of Cork
- Port of Waterford
- Universities including
- Dublin City University
- NUI: NUIG, NUIM, UCC, UCD,
- Trinity College Dublin
- University of Limerick
In this instance the general government sector funds the capital spending but the fixed asset is owned outside the general government sector (households, non-profits or non-financial corporate). This type of capital spending by government is recorded as investment grants.
If we add that to the first chart this is what we get:
We see that this leads to an even greater peak in 2008. In that year, general government provided around €3 billion of investment grants. Investment grants in cash are included in the year in which the payment is due to be made. The actual GFCF for the sector receiving the grant will be timed in line with the completion of the project.
The jump in investment grants is likely linked to transport (roads and public transport) and grants for the re-building of the Lansdowne Road stadium.
As with GFCF undertaken by the general government sector itself, investment grants have also been increasing in recent years. They were €900 million in 2013 and were €1,700 million in 2019. The above chart gives a fuller picture of general government spending on fixed assets.
If the data was available we could do one step further and get an overall figure for public sector capital spending. This would include the capital spending of the entities listed above that is not funded from investment grants from general government.
For example, many of those bodies have their own revenue streams (that is a primary reason why they are classified outside the general government sector) and can make autonomous decisions on capital spending. They could also borrow maybe through the placement of bonds (like the ESB have done) or by getting a loan from the European Investment Bank.
However, we do not yet have a set of accounts for publicly-controlled non-financial corporates (S.11001). The UK is the only country that has a full set of sector accounts for this sub-sector published by Eurostat. The data show that in 2018 in the UK:
- the general government sector had £57 billion of GFCF
- the general government sector provided £17 billion of investment grants
- publicly-controlled NFCs had £11 billion of GFCF (and received £1 billion of investment grants)
- households received £4 billion of investment grants
- non-profits received £8 billion of investment grants
- private non-financial corporates received £3.5 billion of investment grants
Over the next 18 to 24 months more countries, including Ireland, are expected to publish figures for publicly-controlled NFCs. Then we might be able to update this with a chart of public sector spending on fixed assets.