Public expenditure can be divided into "
Classification of the Functions of Government" (COFOG) categories, a form of classification defined by the
United Nations Statistics Division. Those categories are: •
Social protection : pensions,
subsidies for family and children,
unemployment subsidies, R&D (Research and Development) on social protection. • Health :
public health services,
medical products,
medical appliances and equipment,
hospital services,
R&D on healthcare. •
General Public Services :
executive and legislative organs, financial and fiscal affairs,
external affairs,
foreign economic aid,
public debt transactions, R&D related to general public services • Education :
pre-primary, primary, secondary, tertiary education, R&D on education etc. See also
List of countries by spending on education as percentage of government spending. • Economic Affairs : general economic, agriculture, fuel and energy, commercial and
labour affairs, forestry, fishing and hunting, mining, manufacturing, transport, communication etc. • Public order and safety/emergency services : police, fire-protection services, emergency medical services, law courts, prisons, etc. • Defence : Military defence,
civil defence, foreign military aid. • Recreation, culture and religion : Recreational and sporting services,
cultural services, broadcasting and publishing services, religious services etc. • Environmental protection : waste management, pollution abatement, protection of biodiversity and landscape etc. • Housing and community services : Housing development, community amenities,
water supply, street lighting etc.
Final consumption Government spending on goods and services for current use to directly satisfy individual or collective needs of the members of the community is called
government final consumption expenditure (GFCE) It is a purchase from the national accounts "use of income account" for goods and services directly satisfying of individual needs (
individual consumption) or collective needs of members of the community (
collective consumption). GFCE consists of the value of the goods and services produced by the government itself other than own-account
capital formation and sales and of purchases by the government of goods and services produced by market producers that are supplied to households—without any transformation—as "social transfers" in kind. Government spending or government expenditure can be divided into three primary groups, government consumption, transfer payments, and interest payments. • Government consumption refers to government purchases of goods and services. Examples include road and infrastructure repairs, national defence, schools, healthcare, and government workers' salaries. • Investments in sciences and strategic technological innovations to serve the public needs. • Transfer payments are government payments to individuals. Such payments are made without the exchange of good or services, for example old-age security payments, employment insurance benefits, veteran and civil service pensions, foreign aid, and social assistance payments. Subsidies to businesses are also included in this category. • Interest payments are the interest paid to the holders of government bonds, such as
saving bonds and
treasury bills, including securities held by the government's central bank. The interest paid out to the central bank on these securities effectively is interest paid out on reserve balances deposited with the central bank.
National defense spending Stated reasons for defense spending include
deterrence and active military operations. The countries with highest total military spending are USA and China, and the countries with highest military spending as percentage of GDP in 2023 among top 20 military spenders are Ukraine, Algeria, Saudi Arabia and Russia. Some sources say that
Russian and Chinese military spending are actually far higher.
Healthcare and medical research Research Australia found 91% of Australians think 'improving hospitals and the health system' should be the Australian Government's first spending priority. Crowding 'in' also happens in university life science research Subsidies, funding and government business or projects like this are often justified on the basis of their positive return on investment. Life science crowding in contrasts with crowding out in public funding of research more widely: "10% increase in government R&D funding reduced private R&D expenditure by 3%...In Australia, the average cost of public funds is estimated to be $1.20 and $1.30 for each dollar raised (Robson, 2005). The marginal cost is probably higher, but estimates differ widely depending on the tax that is increased". In the US the total investment in medical and health research and development (R&D) in the US had grown by 27% over the five years from 2013 to 2017, and it is led by industry and the federal government. However, the industry accounted for 67% of total spending in 2017, followed by the federal government at 22%. According to the
National Institute of Health (NIH) accounted for the lion's share of federal spending in medical and health research in 2017 was $32.4 billion or 82.1%. Also, academic and research institutions, this includes colleges, and universities, independent research (IRIs), and independent hospital medical research centres also increased spending, dedicating more than $14.2 billion of their own funds (endowment, donations etc.) to medical and health R&D in 2017. Although other funding sources – foundations, state and local government, voluntary health associations and professional societies – accounted for 3.7% of total medical and health R&D expenditure. On the other hand, global health spending continues to increase and rise rapidly – to US$7.8 trillion in 2017 or about 10% of GDP and $1.80 per capita – up from US£7.6 trillion in 2016. In addition, about 605 of this spending was public and 40% private, with donor funding representing less than 0.2% of the total although the health spending in real terms has risen by 3.79% in a year while global GDP had grown by 3.0%. According to the World Health Organisation (WHO), the increase in health spending in low-income countries, and it rose by 7.8% a year between 2000 and 2017, while their economies grew by 6.4%, it is explained in the figure. However, the middle-income economies health spending grew more than 6%, and average annual growth in high-income countries was 3.5%, which is about twice as fast as economic growth. In contrast, health spending by the high-income countries continues to represent to be the largest share of global spending, which is about 81%, despite it covers only 16% of world's population; although it down from 87% in 2000. The primary drivers of this change in global spending on healthcare are India and China, which they moved to higher-income groups. Furthermore, just over 40% of the world population lived in low-income countries, which is now dropped to 10%. Moreover, significant spending increments were in upper-middle-income economies, where population share has more than doubled over the period, and share of global health spending nearly also doubled due to China and India's vast population joining that group. Unfortunately, all other spending share income groups had declined. From the continent view, North America, Western Europe, and Oceanic countries have the highest levels of spending, and West Central Asia, and East Africa the lowest, which is closely followed by South Asia, it is explained in the figure. It is also true that fast economic growth is associated with increased health spending and sustained rapid economic growth between 2000 and 2017. Even more, fast economic growth which is generally associated with the higher government revenues and health spending is mostly located in Asia such as China, India and Indonesia followed by the Middle East and Latin America. In these countries, the real health spending per capita grew by 2.2 times and increased by 0.6 percentage point as per a share of GDP from 2000 to 2017.
Gross fixed capital formation Government acquisition intended to create future benefits, such as infrastructure investment or research spending, is called gross fixed capital formation, or government investment, which usually is the largest part of the government. Acquisition of goods and services is made through production by the government (using the government's labour force, fixed assets and purchased goods and services for
intermediate consumption) or through purchases of goods and services from market producers. In
economic theory or in
macroeconomics, investment is the amount purchased of
goods which are not consumed but are to be used for future production (i.e.
capital). Examples include railroad or factory construction. Infrastructure spending is considered government investment because it can save money in the long run, but can
crowd out private investment. Spending on
physical infrastructure in the U.S. returns an average of about $1.92 for each $1.00 spent on nonresidential construction because it is almost always less expensive to maintain than repair or replace once it has become unusable. Likewise, government spending on
social infrastructure, such as
preventative health care, can save several hundreds of billions of dollars per year in the U.S., because for example cancer patients are more likely to be diagnosed at
Stage I where curative treatment is typically a few outpatient visits, instead of at
Stage III or later in an
emergency room where treatment can involve years of hospitalization and is often terminal.
Energy infrastructure Science funding Governments fund various research beyond healthcare and medical research and defense research . Sometimes, relevant funding decision-making makes use of
coordinative and prioritizing tools, data or methods, such as evaluated relevances to
global issues or
international goals or national goals or
major causes of human diseases and early deaths (health impacts).
Travel Although expenditure on ministerial, elected member and staff travel makes up only a small amount of central government expenditure, and the great majority of work trips by officials are undertaken at standard or economy class, the UK's
National Audit Office has noted that this is an aspect of expenditure attracting high levels of public interest. ==Government spending by country==