Abstract
Most analyses of public budgets – of which social spending is an important element - are based on gross (before tax) public expenditure data. However, a narrow focus on such information can be terribly misleading as it ignores that governments sometimes claw back social spending through taxation of benefit income, while also using tax systems to directly provide social support to households (e.g. child tax credits). Governments also tell or encourage individuals and companies to arrange social support (e.g. mandatory employer-provided sickness payments or favourable tax treatment of private pension contributions). Accounting for the impact of the tax system on budgetary allocations with a social purpose leads to indicators on net public social expenditure. Also capturing private social spending facilitates considering what part of an economy’s domestic production recipients of social benefits draw on: net total social expenditure. These indicators give a comprehensive view of social spending within and across countries.
Highlights
Analyses of public expenditure generally consider the cash and in-kind transfers that are being made by governments
This paper argues that information on gross public social expenditure is not the most appropriate tool for analysing all aspects of social spending
Considering both net public and net private social benefits leads to an identification of that proportion of an economy’s domestic production to which recipients of social benefits lay claim: net total social expenditure
Summary
Analyses of public expenditure generally consider the cash and in-kind transfers that are being made by governments. Public spending quota vary over time with demographic and labour market developments and their overall level is a function of the relative importance of different social policy areas, for example, the provision for retirement, unemployment support or health care (OECD, 2001b; 2001c; and 2001d). These issues, important, are not the focus of this paper. Capturing both the impact tax system have on the net value of transfer spending and private social benefits leads to a more comprehensive view of social effort across countries (Section 4)
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