General government final consumption expenditure consists of expenditure incurred by government in its production of non-market final goods and services (except gross fixed capital formation) and market goods and services provided as social transfers in kind. Total general government final consumption is perhaps of less political relevance, from a fiscal perspective, than general government expenditure (see TES13S, Total expenditure of general government) but its importance as a component of total GDP, and, so, as a reflection of its direct role as a "consumer" of final goods and services is significant.

The implementation of the 2008 SNA caused government consumption expenditures to be revised (the main changes relate to the reclassification of expenditures related to R&D and weapons systems that are now recorded as gross fixed capital formation. See annex B for a description of the main changes).

Definition

General government final consumption can be broken down into two distinct groups.

The first reflects expenditures for collective consumption (defence, justice, etc.) which benefit society as a whole, or large parts of society, and are often known as public goods and services.

The second relates to expenditures for individual consumption (health care, housing, education, etc.), that reflect expenditures incurred by government on behalf of an individual household (see also P31S14_S15S, Household final consumption expenditure). This category of expenditure is equal to social transfers in kind from government to households (see B6GS14_S15HCPC, Gross household disposable income per capita) and so includes expenditure by government on market goods and services provided to households.

As goods and services produced by government usually do not have a market price, the relevant products are valued at the sum of costs needed to produce these goods and services. These costs mainly consist of compensation of employees, intermediate consumption and depreciation. Final consumption of government can then be estimated as the difference between on the one hand government output, and on the other hand payments made for goods and services produced by government and the relevant output that is used for fixed capital formation.

The borderline between individual and collective consumption is in some cases not completely clear. For example, expenditures incurred by Ministries of Health and Education institutions at a national level are included in collective services, reflecting their role as producers of policy, standards and regulation. But expenditures on the administration or functioning of a group of hospitals say are recorded as individual. To assist in this delineation the SNA provides guidance based on the Classification of the Functions of Government (COFOG), see also section 24. It states that all government final consumption expenditures under the following headings (Health, Recreational and sporting services, Cultural services, Education and social protection) should be treated as expenditures on individual services except for expenditures on general administration, regulation, research, etc.