Public expenditure

Background

Estimating drug-related public expenditure and developing the economic evaluation of drug policy have been on the European agenda for more than a decade. However, only a few countries have produced comprehensive estimates of drug-related public expenditure. Moreover, those who have done it have generally used non-comparable methodologies. As a consequence, a European cost-benefit evaluation of drug policies is still in its infancy and an overall picture of European drug-related public expenditure does not exist. The EMCDDA actively supports the development of national and supra-national estimates of drug-related public expenditure in Europe. 

This approach has so far contributed to developing national estimates but it has also highlighted several methodological issues and practical difficulties that require attention. One key difficulty is that only a small portion of drug-related public expenditure can be traced back directly in the government’s budget and accountancy documents, i.e., it is labelled. The largest share of drug-related expenditure needs to be estimated with models and secondary data sets, i.e., it is unlabelled.

The EMCDDA has been developing a series of publications with the goal of discussing the topic and tackling the methods used to estimate unlabelled drug-related expenditure. The agency aims to support national and European estimates of drug-related public expenditure, to stimulate a constructive and pragmatic debate among researchers, and to provide a common understanding of how much is spent on the different areas of drug policy in Europe.

Terms and definitions

General government and public expenditure

A country’s General government is the set of institutional units producing non-market services for individual/collective consumption and redistributing income and wealth. It mainly consists of central, regional and local government units together with social security funds. It also includes non-profit institutions engaged in non-market production that are controlled and mainly financed by government units or social security funds (1).

Public expenditure is the amount of funds that a government spends on the compensation of civil servants, social benefits, interest on the public debt, subsidies, and gross fixed capital formation (2) This spending is used for different purposes. Drug-related public expenditure is the public spending which aims to tackle the drugs problem.

Systems used to classify drug-related public expenditure

There are two main systems that are used to classify public expenditure according to drug policy objectives. The first — the Classification of the Functions of Government (COFOG) — breaks down expenditure by a government’s main socio-economic functions (3).The COFOG system comprises two levels of disaggregation. The first splits expenditure into ten general functions, such as ‘defence’, ‘public order and safety’, ‘health’ and ‘social protection’. The second level of disaggregation breaks down expenditure into 69 groups with more specific items such as ‘police services’, ‘law courts’, ‘prisons’, ‘hospital services’, ‘outpatient services’, etc.

The second classification system was set up by Reuters and is currently known as the Reuters classification system (4).This system breaks down drug-related expenditure into four main groups: prevention, harm reduction, treatment and law enforcement. According to Reuters, prevention programmes reduce initiation or the probability of progress from experimental to regular drug use, either by persuasion or by reducing the accessibility of drugs for novice users. Harm reduction programmes seek explicitly to reduce the adverse consequences of drug use. There are two categories in this group: harm prevention aims to reduce the risk of harm conditional on the drug; harm amelioration aims to reduce the severity of specific harms after their occurrence (e.g. treatment of HIV positive patients, psychiatric treatment for co-morbidities). Treatment programmes reduce drug use by experienced users through direct individual service (e.g. medical and counselling services). Enforcement programmes aimed at traffickers and producers to shift up the supply curve for drugs should raise the price of drugs and lower quantity. Enforcement programmes aimed at users and retailers raise the transaction costs of buying drugs; these efforts shift the demand curve downwards and lower prices and quantities.

There are two different ways of accounting for drug-related public expenditure. The first is called ‘labelled expenditure’ and refers to the ex-ante planned public expenditure made by general government in the budget that reflects the public and voluntary commitment of a country in the field of drugs. The second is called ‘unlabelled expenditure’ and concerns the non-planned or non publicly announced ex-post public expenditure incurred by the general government in tackling drugs that is not identified as drug-related in the budget. The total drug-related public expenditure is the sum of the labelled and unlabelled expenditure.

Notes

• (1) The OECD glossary of statistical terms.
• (2) Eurostat: Government revenue and expenditure.
• (3) United Nations (2008), ‘Detailed structure and explanatory notes’ COFOG, United Nations Statistics Division.
• (4) Reuter, P. (2006), ‘What drug policies cost. Estimating government drug policy expenditures’, Addiction, 101, pp. 315–322.