Public Sector and it s Functions. The framework. Why we need public sector? What is the public sector?

Transcription

1 Public Sector and it s Functions The framework What is the public sector? Roles of the public sector, and its main functions Distribution of functions Why we need public sector? The market mechanism cannot perform all economic functions and will not ensure full employment Public sector policy is necessary to direct, adjust and supplement the workings of the private sector The size of the public sector is a technical and not an ideological issue 1

2 Objectives Provide public goods and services Adjustment of income distribution to ensure what is socially acceptable Use of budgetary policy as a means to maintain high levels of employment, price stability and economic growth Government and functions The government of a country consists of the public authorities and their agencies, which are entities established through political processes that exercise legislative, judicial, and executive authority within a territorial area. The principal economic functions of a government are: to assume responsibility for the provision of goods and services to the community on a non market basis, either for collective or individual consumption to redistribute income and wealth by means of transfer payments. these activities must be financed primarily by taxation or other compulsory transfers. A government may, of course, also finance a portion of its activities in a specific period by borrowing or by acquiring funds from sources other than compulsory transfers, such as interest revenue, incidental sales of goods and services, or the rent of subsoil assets. Public sector - Analytical framework IMF (2001), Manual on Government Financial Statistics, Washington DC. United Nation (1993), System of National Accounts, Washington DC. Eurostat (1995), European System of Accounts 2

3 What is the public sector? PUBLIC SECTOR Central government (Ministries and agencies) Public corporations Extrabudgatary funds Financial public corporations Non financial public corporation (e.g. Public enterprises) State government Monetary public corporations (including Central bank) Local government (municipalities, cities) Non monetary financial corporations Public sector It consists of all institutional units primarily engaged in non market operations. the public sector is defined to capture the impact on fiscal policy of the activities of public corporations. It includes all units of the general government sector plus all public corporations. In addition, a number of sub sectors of the general government and public sectors are defined because of their likely analytic usefulness. Central government The political authority of a country s central government extends over the entire territory of the country. The central government can impose taxes on all resident institutional units and on non resident units engaged in economic activities within the country. The central government typically is responsible for providing collective services for the benefit of the community as a whole, such as national defence, relations with other countries, public order and safety, and the efficient operation of the social and economic system of the country. In addition, it may incur expenses on the provision of services, such as education or health, primarily for the benefit of individual households, and it may make transfers to other institutional units, including other levels of government 3

4 Central government The central government sub sector is a large and complex sub sector in most countries. It is generally composed of a central group of departments or ministries that make up a single institutional unit. In many countries, other units operating under the authority of the central government with a separate legal identity and enough autonomy to form additional government units. A state, province, or region A state, province, or region is the largest geographical area into which the country as a whole may be divided for political or administrative purposes. These areas may be described by other terms, such as provinces, cantons, republics, prefectures, or administrative regions. The legislative, judicial, and executive authority of a state government extends over the entire area of an individual state, which usually includes numerous localities, but does not extend over other states. In some countries, individual states and state governments may not exist. In other countries, especially those with federal constitutions, considerable powers and responsibilities may be assigned to state governments. State government A state government usually has the fiscal authority to levy taxes on institutional units that are resident in or engage in economic activities in its area of competence. To be recognized as a government unit the entity must be able to own assets, raise funds, and incur liabilities on its own account, and it must also be entitled to spend or allocate at least some of the taxes or other income that it receives according to its own policies. The entity may, however, receive transfers from the central government that are tied to certain specified purposes. A state government should also be able to appoint its own officers independently of external administrative control. 4

5 Local government The legislative, judicial, and executive authority of local government units is restricted to the smallest geographic areas distinguished for administrative and political purposes. The scope of a local government s authority is generally much less than that of the central or state governments, and such governments may or may not be entitled to levy taxes on institutional units or economic activities taking place in their areas. They are often heavily dependent on grants from higher levels of government, and they may also act as agents of central or state governments to some extent. Local government functions Functions assigned to local government are usually: primary and secondary fire protection education primary health care local road maintenance and public infrastructure Minimum national standards should be established to guarantee minimum level of provision for certain service at the local level. Extrabudgetary funds A social security fund is a particular kind of government unit that is devoted to the operation of one or more social security schemes. it must be separately organized from the other activities of government units, hold its assets and liabilities separately, and engage in financial transactions on its own account. 5

6 Extrabudgetary funds Accounting: a. Croatian Institute for Retirement Insurance b. Croatian Institute for Health Insurance c. Institution for Employment d. Children's Benefit Fund e. Regional Development Fund f. Employment Fund 1. Croatian Waters, Public Corporation 2. Croatian Roads, Public Corporation 3. Croatian Motorways, Public Corporation 4. Government Bank Restructuring Agency 5. Privatisation Fund/State property management A. 6. Croatian Bank for Reconstruction and Development budgetary budgetary corporate corporate banking General government in Croatia State budget Ministries and agencies Ministries Extrabudgetary funds Local government General government in Croatia 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% central gov. extrabudgetary funds local government 6

7 Norway Finland Luxembourg Estonia Sweden Bulgaria Croatia Denmark Czech Republic Slovenia Lithuania Latvia Romania Slovakia Poland Ireland Netherlands Cyprus Spain Austria Iceland Germany France Malta Hungary Portugal Belgium Italy Greece Norway Finland Iceland Sweden Luxembourg Croatia Denmark Ireland Czech Republic Slovenia Estonia Latvia Netherlands France Poland Lithuania Austria Greece Portugal Bulgaria Germany Italy Spain Malta Hungary Cyprus Slovakia Romania Belgium GG Financial assets, as % GDP GG Net financial assets (% GDP) Financial public corporations financial corporations sector, consists of entities engaged in providing financial services for the market; The financial corporations sector consists of all corporations, quasi-corporations, and market NPIs principally engaged in financial intermediation or in auxiliary financial activities closely related to financial intermediation. Public financial institutions are often founded in order to provide certain quasi fiscal services. Thus, usually, government development banks will make loans to certain selected sectors or firms on non-commercial terms (for example at rates of interest lower than market). In some cases, this sector is disaggregated into three sub sectors: the central bank, other depository corporations, and financial corporations not elsewhere classified. 7

8 Monetary public corporations Monetary public corporations other than the central bank all resident depository corporations other than the central bank that are controlled by general government units. Monetary financial public companies accounting: Web address: 1. Croatian National bank Bank 2. Croatia bank Bank 3. Croatian postal bank Bank 4. Croatian bank for reconstruction and development Bank 5. Croatia insurance Insurance companies Non monetary financial public corporations All resident financial corporations controlled by general government units except the central bank and other public depository corporations. Depository corporations are financial corporations, quasicorporations, or market NPIs whose principal activity is financial intermediation and who have liabilities in the form of deposits or financial instruments that are close substitutes for deposits. 8

9 Monetary non financial public corporations accounting: Web address 1. Privatization fond/state Property Management Agency /since 2011 Nonprofit 2. Financial Agency Corporate 3. State Agency for deposit Insurance and bank rehabilitation 4. Capital market regulatory and supervisory consultative agency Nonprofit Nonprofit Central depository agency Nonprofit 6. Money market Zagreb d.d. Corporate 7. Zagreb stock exchange d.d. Corporate Non financial public corporations Non financial corporations sector, consists of entities created for the purpose of producing goods and nonfinancial services for the market. In many countries non-financial public corporations provide services on a non-commercial basis, usually in the form of prices lower than those needed to cover costs (for example, charging for electricity below market price for rural households). These non commercial activities can be financed via crosssubsidizing among various consumer groups (some consumers pay a higher and some a lower price for the same service) or perhaps the losses of the non-financial public corporations will be covered from the budget. Such activities cloud transparency in the relationship between non-financial public corporations and general government and should be taken into account when consideration of the fiscal position of a country. Nonfinancial public corporations accounting: Web address: 1. Plovput Corporate 2. Croatian Post Corporate 3. Jadrolinija Corporate 4. Narodne novine (Official Gazette) Corporate 5. Croatian radio and television Corporate 6. Croatian electricity Corporate 7. Croatian water Non-profit 8. Croatian Roads Corporate 9. Croatian Highway Corporate INA (oil company) Corporate Croatian Railway Corporate Croatia airlines Corporate Croatian Forest Corporate Hrvatska lutrija (lottery) Corporate Vjesnik (daily newspaper) Corporate Jadranski naftovod (oil pipeline) Corporate ACI CLUB Corporate 9

10 The need for a public sector? Market mechanisms do not carry out efficient allocation of resources Inefficiency of competition Protection and legal coercion of government Problems of externalities Income distribution Stabilisation Main public sector functions Allocation the best combination of public and private goods Distribution of income and wealth for the provision of socially acceptable distribution Stabilisation budgetary functions 10