Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European system of national and regional accounts in the European Union Text with EEA relevance

• 22.57The EAA consist of a production account, a generation of income account, an entrepreneurial income account and a capital account for agricultural production. The production account contains an elaborate breakdown showing output for a range of agricultural products, as well as non-agricultural secondary activities; substantial detail is also presented for intermediate consumption and capital formation. Data for the production account and gross fixed capital formation are at both current prices and in volume terms. In addition, three agricultural income indicators are presented as follows:

• (a) index of the real income of factors in agriculture per annual work unit, which is taken as the full-time equivalent;

• (b) index of real net agricultural entrepreneurial income per non-salaried annual work unit, which is taken as the full-time equivalent;

• (c) net entrepreneurial income of agriculture.

• The indices and changes in real terms of the values of the income indicators are obtained by deflating the corresponding nominal data with the implicit price index of GDP.

• 22.58The agricultural industry in the EAA closely resembles the agricultural industry in the central framework. However, there are some differences. For example, units engaged in seed production for research or certification or units for which the agricultural activity represents solely a leisure activity, are left out. But most of the agricultural activities of units whose principal activity is not agricultural are included in the agricultural industry.

• 22.59The EAA focus on the production process and the income derived from it. However, in principle a satellite account on agriculture need not correspond fully to the EAA. Agricultural accounts could also include a supply and use table providing a systematic overview of the supply and use of agricultural products. This would provide information on the role of imports including the role of import duties, and developments in the demand for agricultural products such as exports and final consumption by households, and the role of related taxes and subsidies. The agricultural accounts could also be expanded by including secondary non-agricultural activities, such as those for leisure activity. This can reveal important trends and substitution mechanisms. The interaction with the government can be made explicit by adding a table showing all income and capital transfers by local, central, or European government to the agricultural industry; this may also include special treatments in the tax system. Agricultural accounts could also be designed like a special sector account and include a full sequence of accounts including balance sheets and financial accounts, for farmers and corporations engaged in agriculture.

Environmental accounts

• 22.60In the international guidelines on environmental accounts (System of Environmental-Economic Accounting, SEEA, 2003) ([^E0036]), an elaborate accounting framework is presented for describing and analysing the environment and its interactions with the economy. The environmental accounts are a satellite account of the national accounts. This implies that the same classifications and concepts are used; modifications are introduced only where it is necessary for the purpose of environmental accounts.

• 22.61The integrated set of accounts for economic and environmental information permits an analysis of the contribution of the environment to the economy and the impact of the economy on the environment. It meets the needs of policymakers by providing indicators and descriptive statistics to monitor the interaction between the environment and the economy. It can also serve as a tool for strategic planning and policy analysis to identify more sustainable development paths. For example, policymakers determining the development of industries making extensive use of environmental resources either as inputs or sinks need to be aware of the long-term environmental effects. Policymakers setting environmental standards also need to be aware of the likely consequences for the economy, e.g. which industries are likely to suffer and what the consequences for employment and purchasing power are. Alternative environmental strategies can be compared by taking into account the economic consequences.

• 22.62In the central framework, various aspects of environmental accounting have been taken into account. In particular, many cost and capital items of accounting for natural resources are identified separately in the classifications and accounts dealing with stocks and other volume changes of assets. For example, the classification of non-produced assets shows separate items for subsoil assets like oil reserves, mineral reserves, non-cultivated biological resources and water resources. Such features facilitate the use of the central framework as a point of departure for environmental accounting. However, several elements of the central framework, particularly those in the account for other volume changes, are broken down further and reclassified in the satellite account, and other elements are added.

• 22.63From an environmental point of view, there are two major drawbacks with the central framework and its key aggregates such as GDP, capital formation and saving. First, the depletion and scarcity of natural resources has limited coverage, and these factors can threaten the sustained productivity of the economy. Second, the central framework does not cover the degradation of environmental quality and the consequences for human health and welfare.

• 22.64In the central framework, only produced assets are taken into account in the calculation of net value added. The cost of their use is reflected in intermediate consumption and consumption of fixed capital. Non-produced natural assets — such as land, mineral reserves and forests — are included in the asset boundary insofar as they are under the effective control of institutional units. However, their use is not accounted for in the costs of production. This implies either that the price of the products does not reflect such costs, or, in case of depletion costs, that such costs are included with other unidentified elements in the residual derivation of operating surplus. Environmental accounts allow such costs to be explicitly recognised and estimated.

• 22.65The SEEA 2003 environmental accounting framework comprises five categories:

• (a) physical and hybrid flow accounts;

• (b) economic accounts for environmental transactions;

• (c) environmental asset accounts in physical and monetary terms;

• (d) accounts for defensive expenditure and depletion;

• (e) modifying aggregates from the central framework to account for degradation.

• 22.66Physical and hybrid flow accounts record four different types of flows:

• (a) natural resources: mineral, energy resources, water, soil and biological resources. At the moment they are sold on markets, they enter the economic sphere and can be characterised as products;

• (b) ecosystem inputs: oxygen necessary for combustion and water through rainfall or natural watercourses and other natural inputs like nutrients and carbon dioxide required by plants for growth; this excludes water, nutrients or oxygen supplied as products by the economy;

• (c) products: goods and services produced within the economic sphere and used within it, including flows of goods and services between the national economy and the rest of the world. This includes cultivated biological assets, natural resources sold or bought such as oil, wood and water, and scrap materials with an economic value;

• (d) residuals: incidental and undesired outputs from the economy that have a zero or negative value to the generator. Residuals cover solid, liquid and gaseous wastes. They may be recycled or reused, or discharged into the environment. Residuals may have a positive value for a unit other than the generation. For example, household waste collected for recycling has no value to the household but may have some value to the recycler. Scrap materials that have a value realisable by the generator, like discarded equipment, are treated as products and not as residuals.

• 22.67Physical flows are measured in units of quantity, which reflect the physical characteristics of the material, energy or residuals in question. A physical flow can be measured in alternative units depending on the physical characteristic that is taken into consideration. The appropriateness of one particular unit depends on the purpose and intended use of the flow account. For physical flow accounting, weight and volume are the most frequently used physical characteristics. In case of energy flows, joules or tonnes of oil equivalent are the most common unit used. The quantity units in the physical flow accounts differ from the volumes used in the central framework. For example, in the central framework the volume of a computer is not its weight, but is a weighted mix of the characteristics desired by the user, such as speed of calculation.

• 22.68Physical flow accounts can be presented as supply and use tables. This is shown in Tables 22.12 and 22.13.

• 22.69Hybrid flow accounts is a single matrix presentation containing both national accounts in monetary terms and physical flow accounts. An important type of hybrid accounts are hybrid supply and use tables; they combine information from the physical supply and use tables with that of supply and use tables in monetary terms.

• 22.70The information in the hybrid flow accounts can be linked to environmental themes addressing particular environmental concerns, like the ‘greenhouse’ effect, ozone layer depletion and acidification. This requires conversion factors to translate the figures for specific substances into aggregated indicators for environmental themes. This can then result in an overview table showing the contribution of consumption and the production of various industries to the various environmental themes and GDP as in Table 22.14.

Table 22.12 —  Physical supply and use table

Physical supply table

Table 22.13. —  Physical supply and use table (continued)

Physical use table

Table 22.14 —  Net contribution of consumption and production to GDP and to six environmental themes in the Netherlands, 1993

Percentage

• 22.71The economic accounts for environmental transactions consist of environmental protection accounts and accounts for other environmentally related transactions, such as taxes, subsidies, investment grants, property income and the acquisition of emission and property rights.

• 22.72For describing environmental protection, a functional approach combined with a kind of activity and product analysis is very useful. Environmental protection covers a wide range of economic activities and products. Examples are investment in clean technologies, restoring the environment after it has been polluted, recycling, the production of environmental goods and services, conservation and the management of natural assets and resources. A national aggregate of environmental protection expenditure can be defined to include ancillary activities and connected products.

• 22.73In the environmental asset accounts, three different types of environmental assets are distinguished: natural resources; land and surface water; and ecosystems. Several of these environmental assets are not recorded in the central framework. This applies to environmental assets over which ownership right cannot be established. These include elements of the environment such as air, major water bodies and ecosystems that are so vast or uncontrollable that effective ownership rights cannot be enforced. Likewise, resources whose existence has not been clearly established by exploration and development such as speculative oil deposits, or that are currently inaccessible such as remote forests, are not considered assets in the central framework. The same is true for resources that have been established geologically or are readily accessible but that bring no current economic benefit because they cannot yet be profitably exploited.

• 22.74Environmental asset accounts in physical and monetary terms describe the stocks of the various environmental assets and their changes. While such an account can be drawn up in monetary terms for some of the assets, for some others only physical accounts are possible. For ecosystems assets, it is unlikely that sufficient information is available to draw up stocks or changes during a year in exactly the same manner as for the other environmental assets. For these assets, it is more useful to concentrate on measuring changes in quality, most of which will relate to degradation, e.g. acidification of land and water and defoliation of timber.

• 22.75The aggregates in the central framework can be modified to better account for the environmental issues. Three types of adjustments are commonly recommended: for depletion, for defensive expenditure by the government, and for degradation.

• 22.76From an environmental point of view, the adjustment for depletion should be made because GDP and its growth rate do not make an allowance for the depletion of various environmental assets, such as oil and non-cultivated fish and forests. How to account for depletion is not straightforward, and many different options are available. One extreme option is to regard the whole use of such non-produced natural assets as depletion and therefore not as income from production. The other extreme option is to regard all the revenues from selling such assets as income contributing to domestic income. All the other options split the use of the assets into a component for depletion and a component for income. Different principles and different assumptions for life times and discount rates result in different figures for the adjustment for depletion.

• 22.77Defensive expenditure on the environment does not consist only of environmental protection expenditure. It may be for the administration to establish and monitor fishing quotas or health expenditure related to atmospheric pollution or a nuclear disaster. An adjustment for defensive expenditure by the government is recommended in order to avoid them increasing GDP: they are intended to mitigate or undo negative environmental externalities of production or consumption not at all recorded in GDP. In terms of net domestic product, a solution can be to record all defensive expenditure by the government as capital formation and simultaneously as capital consumption. However, in terms of the more commonly used GDP, this makes no difference.

• 22.78Domestic product, saving and other key aggregates can be adjusted for degradation, such as the impact of pollution in air and water. However, incorporating the effects of degradation is more difficult, less certain and more controversial than making adjustments to the accounts for either depletion or defensive expenditure. For example, how to account for damage to human health or for plants or animals growing more slowly, reproducing less and dying earlier because of environmental pollution? Should disasters be recorded as being the result of human economic activity and therefore be deducted from GDP?

Health accounts

• 22.79The health accounts (see OECD, A System of Health Accounts, 2000) are an international framework for health data aimed at serving analysis and policy needs, national as well as European and international. The framework is designed for countries with a wide range of different models of organising their national health systems. The framework is a major tool for monitoring fast changing and increasingly complex health care systems. It measures and presents structural changes, such as shifts from in-patient to out-patient care and the emergence of multifunctional providers.

• 22.80The health accounts provide answers to three basic questions:

• (a) What kind of services and goods are purchased for health purposes?

• (b) Who is the provider of these services and goods?

• (c) What are the sources of funding?

• 22.81Health care goods and services are split by function. Three categories are distinguished: personal health care services and goods; collective health care services; and health related functions.

• 22.82The major types of personal health care services and goods distinguished are: services of curative care; services of rehabilitative care; services of long-term nursing care; ancillary services to health care; and medical goods dispensed to out-patients. For these personal services, a subdivision by mode of production is very useful: in-patient care, day care, out-patient care and home care. Also many other dimensions for classifying personal health care are important, such as by age, gender and income level for major categories of health care or by major disease groups, which is useful for cost of illness studies.

• 22.83In comparison to the central framework, the production boundary is extended in two respects:

• (a) occupational health care such as medical check-ups of employees or emergency health care services on or off business premises is not recorded as ancillary services;

• (b) cash transfers to households for home care for the sick and disabled are treated as paid household production of health care; however, all such care with no link to cash transfers, are still excluded.

• 22.84Two types of collective health services are distinguished:

• (a) prevention and public health service;

• (b) health administration and health insurance.

• 22.85Seven types of health-related functions are distinguished:

• (a) capital formation of health care provider institutions;

• (b) education and training of health personnel;

• (c) research and development in health;

• (d) food, hygiene and drinking water control;

• (e) environmental health;

• (f) administration and provision of social services in kind to assist living with disease and impairment; and

• (g) administration and provision of health-related cash-benefits.

• 22.86For the providers of health care, a detailed industry classification has been developed; for this purpose, the International Standard Industrial Classification was refined and modified.

• 22.87Basically, health care financing can be recorded from two different perspectives. The first perspective gives a breakdown of expenditure on health into the complex range of third-party-payment arrangements plus the direct payments by households or other direct funders such as government provided health care. The second perspective seeks the ultimate burden of financing born by source of finance. This implies that the sources of financing of intermediary sources of funding are traced back to their origin. Additional transfers such as inter-governmental transfers, tax deductions, subsidies to providers and financing by the rest of the world are included to complete the picture.

• 22.88Simple overview tables showing the importance of health in the national economy can be derived from health accounts, as in Table 22.15.

Table 22.15 —  Key-statistic on health

Household production accounts

• 22.89In the central framework, household activities such as the services of owner-occupied dwellings; the production of agricultural production for own consumption; and own-account construction of dwellings; are recorded as production. However, two major types of household activity, unpaid services by household members consumed within the same household, and volunteer services, are not recorded as production. Even in the context of a satellite account, the issues of unpaid and voluntary household services raise difficult conceptual and measurement problems. They are an area of ongoing research. The purpose of a satellite account for household production ([^E0037]) is to provide a complete picture of household production; to show income, consumption and saving of different types of households; and the interactions with the rest of the economy.

• Major questions addressed are as follows:

• (a) Which services are provided?

• (b) Who is providing the services?

• (c) What is the value of the services?

• (d) What are the capital inputs and what happens to productivity?

• (e) What are the implications for the size and distribution of income, consumption and saving over various types of households and over the life cycle?

• (f) Are there shifts between paid and unpaid household services, due to structural economic and social developments, business cycle effects or government policy such as taxation issues or subsidies for paid child care?

• 22.90Household production accounts may be of particular interest for the analysis of long-term economic developments and for the international comparison of levels of production, income and consumption. The major data sources used for compiling household production accounts are household budget surveys and time use surveys, and annual aggregates from these sources are distorted by sampling errors, which prevents the calculation of accurate annual growth rates. Household production accounts are therefore compiled on a regular but not annual basis, such as at five-yearly intervals and linked to an extensive time use survey.

• 22.91Household production includes only services that can be delegated to someone other than the person benefiting from it, and this is known as the third party principle. As a consequence, personal care for oneself, studying, sleeping and leisure time activities are excluded.

• 22.92For household production, different principal functions can be distinguished: housing, nutrition, clothing, care of children, adults and pets, and volunteer work which is by definition consumed in another household. For each of these principal functions, main or characteristic activities can be defined. This allows the allocation of expenditure or time use on such activities to those principal functions. However, some activities, like shopping, travel and household management, refer to various functions. As a consequence, the expenditure or time use of these activities is split over these functions.

• 22.93In the central framework, expenditure on consumer durables are part of final consumption expenditure. However, in the household production accounts, expenditure such as expenditure on vehicles, refrigerators and equipment for construction and repair, is recorded as capital formation. The capital services of such assets are inputs to household production.

• 22.94The output and value added of household production can be valued using an input or an output method. The output method is that household production is valued at market prices, i.e. at the price observed for similar services sold on the market. For the input method, valuing output as the sum of costs, the choice of valuation method for labour inputs is crucial. The possibilities include valuing wages including or excluding social security contributions, and different choices of reference group — average wages over all workers, wages of specialist workers or wages of housekeepers.

• 22.95A major issue for household production accounts is the size and composition of household production and the links with the central framework. This is shown in the form of a use table as in Table 22.16.

Table 22.16 —  A use table for household production

Labour accounts and SAM

• 22.96In many countries, a wide range of labour market data are collected. Population and establishment censuses, household and enterprise surveys on the labour force, hours of work, earnings and labour costs, as well as registers of population, taxes and social security provide data for monitoring and analysing labour market developments on a regular basis. Despite the availability of a large amount of such statistical information, they do not provide a complete and reliable picture of the labour market. The major measurement problems are as follows:

• (a) contradictory results between different data sources;

• (b) many different concepts without a clear linkage;

• (c) incomplete coverage;

• (d) limitations in describing labour market dynamics;

• (e) absence of links between labour market statistics and national accounts, demographic data, and other social and economic statistics such as education and social security.

• A system of labour accounts can resolve such problems by combining all information on the labour market and showing the links with the major concepts and classifications of the labour market in the national accounts, such as the concepts of compensation of employees and classification by industry. A strong link with the national accounts improves the compilation of both national accounts and labour accounts, and is helpful in describing the relationship between the labour market and the rest of the economy.

• 22.97A simple system of labour accounts is shown in Table 22.17. It exploits accounting identities between compensation of employees, hours worked, number of jobs, persons employed and the active and potential labour force. It is a simple system in that it shows a limited breakdown by socio-economic characteristics such as gender, but not age or level of education, and a simple breakdown by only three industries, with no cross-border workers.

• 22.98A social accounting matrix (SAM) is a matrix presentation which shows the links between the supply and use tables and the institutional sector accounts. A SAM commonly provides additional information on the level and composition of employment, via a subdivision of compensation of employees and mixed income by type of person employed. This subdivision applies both to the use of labour by industry, as shown in the use tables, and the supply of labour by socio-economic subgroup, as shown in the allocation of primary income account for subsectors of the sector households. In this way, the supply and use of paid labour is shown systematically. A SAM can be thought of as an expanded system of labour accounts put in a matrix-format. Like the labour accounts and the national accounts, a SAM shows aggregates and allows analysis only in terms of aggregates and averages. Therefore, for many socio-economic analyses, the preferred models use an extended micro-database with information on socio-economic characteristics per person and household.

Table 22.17 —  A simple system of labour accounts

Productivity and growth accounts

• 22.99A major use of the national accounts is to describe, monitor and analyse productivity growth (for an extended overview on productivity analysis, see OECD, OECD Manual — Measuring Productivity: Measurement of Aggregate and Industry-level Productivity Growth, 2001). Measuring and analysing productivity growth is used in understanding the major changes in industry structure and the rise in living standards during the past century in many countries. Measuring and analysing productivity growth is also used to form policies that stimulate productivity growth and raise prosperity, while also taking into account other policy considerations such as equity and environmental issues.

• 22.100Economic growth in national accounts terms is the volume growth of GDP, and this can be decomposed into components including changes in labour productivity, the productivity per unit of labour, and changes in the volume of labour. The same breakdown can be made for the volume change of value added by industry. This simple approach provides a framework for monitoring and analysing economic growth by industry. More homogeneous figures on labour inputs obtained by using not just the number of employed, but full time equivalents or hours worked and distinguishing between various qualities of labour, will result in more detailed labour productivity figures.

• 22.101This simple approach omits the role of other inputs, such as capital services and intermediate products. This can be very misleading. For example, labour productivity may apparently increase substantially due to much higher capital intensity but may also increase due to efficiency gains while using the same amount of capital. By also accounting for other inputs, multifactor productivity is measured and the sources of productivity growth can be better understood. Measuring multifactor productivity amounts to decomposing the change in the volume of output into changes in the various volumes of all inputs plus a residual: multifactor productivity growth. Multifactor productivity growth reflects all that is not explained by the various inputs, i.e. the role of other inputs. However, it may also reflect measurement errors in the outputs or inputs.

• 22.102The volume of capital input from the fixed capital stock can be measured in various ways. There are three crucial choices to be made:

• (a) the form of the age-efficiency or age-price function for each type of asset; common options are straight-line, geometric or hyperbolic;

• (b) the nature of the weights that are used to aggregate across different types of assets: user cost weights or market prices;

• (c) the index number formula by which this aggregation takes place. Options are a base weighted index number such as Laspeyres, or a mixed weighted index number such as Fisher and Törnqvist.

• 22.103Multifactor productivity measurement helps to identify the direct growth contributions of labour, capital, intermediate inputs and multifactor productivity change. It is used in reviewing past growth patterns and for assessing the potential for future economic growth. However, for analysis and policy, in interpreting multifactor productivity measures, the following must be considered.

• (a) Not all technical changes translate into multifactor productivity growth. Embodied technological change may be accounted for via the volumes of capital and intermediate inputs. Embodied technological change represents advances in the design and quality of new vintages of capital and intermediate inputs and its effects are attributed to the respective factors as long as the factor is remunerated accordingly. In contrast, disembodied technical change is considered to be ‘costless’, for example in the form of general knowledge, blueprints, network effects or spillovers from other factors of production including better management and organisational change. Such technical change ends up by definition in the residual, i.e. multifactor productivity growth.

• (b) Multifactor productivity growth is not necessarily caused by technological change: other non-technology factors will also be picked up by the residual. This includes adjustment costs, scale effects, business cycle effects, pure changes in efficiency and measurement errors.

• (c) Multifactor productivity growth is a static measure and fails to explicitly measures feedback effects between productivity change and capital, e.g. extra output per person may lead to additional savings and investment and to a rise in the capital-labour ratio. As a consequence, it tends to understate the eventual importance of productivity change in stimulating the growth of output.

• (d) Multifactor productivity measurement helps to identify the relative importance of different sources of productivity growth. However, it has to be complemented by institutional, historical and case studies to explore the underlying causes of growth, innovation and productivity change.

• 22.104For better measuring, analysing and monitoring growth and productivity, KLEMS Growth and Productivity Accounts have been developed all over the world. A key objective is to move beneath the aggregate economy level and examine the productivity performance of individual industries and their contributions to economic growth. In order to reveal the enormous heterogeneity in output and productivity growth across industries, many different industries are distinguished and, in the Union, EU-KLEMS distinguishes seventy two. The accounts include quantities and prices of output, capital (K), labour (L), energy (E), material (M) and services (S) inputs at the industry level. Output and productivity measures are provided in terms of growth rates and relative levels. Additional measures on knowledge creation such as R&D, patents, embodied technological change, other innovation activity and cooperation are under development. Such measures are developed for individual Member States, and linked with KLEMS databases across the rest of the world.

• 22.105The accounts consist of three interdependent modules: an analytical module and two statistical modules.

• 22.106The analytical module provides a research database for use in the academic world and by policymakers. It uses ‘best practice’ techniques in growth accounting, focuses on international comparability, and aims at achieving full coverage in terms of number of countries, industries and variables. It can also adopt alternative or pioneering assumptions with regard to statistical conventions, such as how to treat ICT goods, non-market services and the measurement of capital services.

• 22.107The statistical modules of the database are developed in parallel with the analytical module. They include data which are broadly consistent with those published by national statistical institutes. Its methods correspond to those in the central framework of the national accounts, e.g. supply and use tables are used as the coordinating framework for productivity analysis and chain indices are applied. The statistical module includes not only national accounts data, but also supplementary information, such as employment statistics on the quantity (persons and working hours) and quality (distribution of quantities by age, gender and education level) of labour input per industry.

Research and development accounts

• 22.108In the central framework, research and development expenditure is treated as intermediate consumption, i.e. as current expenditure benefiting production for the current period only. This runs counter to the nature of R&D, the aim of which is to improve production for future periods. In order to resolve the conceptual and practical issues of recording R&D as capital formation, R&D satellite tables recognising R&D as capital formation will be drawn up by Members States. This will enable Member States to develop robust and comparable methods and estimates. In a second stage, when a sufficiently high level of reliability and comparability has been achieved, R&D will be capitalised in the core accounts of the Member States.

• 22.109In addition to this supplementary experimental table, a set of R&D accounts can be drawn up. The purpose of such R&D accounts is to show the role of R&D in the national economy. Questions answered include the following:

• (a) Who is producing R&D?

• (b) Who is financing R&D?

• (c) Who is using R&D?

• (d) What is the value of R&D assets in comparison to the various other assets?

• (e) What are the consequences for productivity and economic growth?

• A supply and use table provides an overview of who is producing and using R&D, and this is shown in Tables 22.18 and 22.19.

Table 22.18 —  The supply of R&D

Table 22.19 —  The use of R&D

Social protection accounts

• 22.110Social protection and its interaction with issues such as ageing, health care and social exclusion is a major issue for national and European economic and social policy. For monitoring, forecasting, analysing, and discussing social protection issues, detailed, comparable and up-to-date information on the organisation, current standing and developments of social protection in the Member States and beyond is required.

• 22.111Social protection benefits are transfers to households or individuals, in cash or kind intended to relieve them from a number of risks or needs. The risks or needs of social protection refer to the functions: disability, sickness/health care, old age, survivors, family/children, unemployment, housing and social exclusion not elsewhere classified. In principle, education is not included as a risk or need unless it is a support to indigent families with children.

• 22.112Social protection benefits are made through social protection schemes. These are administered and organised by public or private bodies, such as social security funds, government agencies, insurance companies, public or private employers and private welfare and social assistances institutions. The schemes do not necessarily refer to specific institutions, regulations or laws; although they do in many cases. All schemes that are solely based on individual arrangements or where simultaneous reciprocal agreements exist are not regarded as social protection.

• 22.113Where the reciprocal arrangement from the employee is not simultaneous, the expenditure is classified as social protection. This applies to retirement and survivors’ pensions paid by an employer and free housing offered to retired employees. The continued payment of wages and salaries, while an employee is unable to work during sickness, maternity, disability, redundancy and so on, is regarded as social protection benefits provided by the employer.

• 22.114Government-controlled schemes are where the government takes all the principal decisions about the level of benefits, the terms on which they are paid and the ways in which the scheme is financed. Government-controlled social protection is usually established by law or regulation. It includes schemes that provide social protection to public servants on the same lines as that provided to the general population by government-controlled schemes. However, it excludes schemes that government may set up in its role of employer without government-controlled counterparts in the private sector.

• 22.115Examples of government-controlled schemes are as follows:

• (a) non-contributory schemes set up by government to meet its general social responsibility, such as an income support scheme for destitute people or a rent benefit scheme;

• (b) schemes run by social security funds;

• (c) schemes originally established in the private sector and for which the government has later assumed responsibility.

• 22.116Examples of non-government-controlled schemes are as follows:

• (a) schemes run by non-profit institutions, like mutual benefits societies, friendly societies and institutions co-administered by the social partners;

• (b) schemes administered by commercial insurance companies;

• (c) non-autonomous schemes run by employers; this covers both funded schemes where there are separate reserves in the balance sheet to cover the liability to pay benefits in the future, and unfunded schemes with no such separate reserves.

• 22.117Using information on specific individual schemes, the accounts for social protection provide a multidimensional overview of social protection, as described in The European System of integrated Social PROtection Statistics (ESSPROS), (Eurostat, 2008). The accounts describe the size and composition of social protection benefits, their financing and the administrative costs involved. Social protection benefits are classified by function such as sickness and old age, by type such as in cash and in kind, and whether they are means tested. Underlying schemes are classified according to whether they are government-controlled schemes or not, or whether they are basic versus supplementary schemes.

• 22.118For each individual social protection scheme, information is provided on revenue and expenditure and a whole range of qualitative information, such as the scope, financing, history and major modifications over time.

• 22.119The standard information on the various individual social protection schemes is known as the core social protection system, and is supplemented by various modules. Possible modules are as follows:

• (a) a module covering the number of pension beneficiaries;

• (b) a module on net social protection benefits. This covers the influence of taxes and social contributions paid on benefits by beneficiaries and the extent to which social benefits are provided in the form of tax rebates or tax reductions.

• 22.120The concepts and classifications in the accounts for social protection are closely linked to those in the central framework. The major difference between social protection benefits and social benefits in the central framework is that the latter cover also expenditure on education; another difference is that social protection benefits may include capital transfers with a social purpose. A simple overview table as given in Table 22.20 shows these links and at the same time provides an overview of the size and composition of social protection benefits in a country.

Table 22.20 —  Overview of social (protection) benefits by social risk/need and transaction