www.create-rpc.org

Who Pays the Piper?

Can Low Price, Fee Paying Schools

Self Finance

and Enrol the Poorest?

Keith M Lewin

•

Meanings, Markets, Mechanisms and Motives

•Definitions and Concepts

•Setting the Scene for Discussions of Finance and

Effectiveness

•Do Efficient Market Propositions Hold for School Choice?

• How far is affordability a constraint and what are the

prices needed for solvent school financing?

Privatisation of public or publicisation of private?

Outline

• Private school are schools financed wholly by income from fees and chargesfor students (and voluntary donations by others?); to qualify private schools must be or aspire to be legal entities subject to public benefit regulation

• This definition excludes many other types of privately managed but publicly financed schools and community financed schools that are run with CSO type governance and are not for profit.

• Private schools must have a business model (they are businesses); they must be legal entities, they must publish accounts, they must declare beneficial ownership, and it should be clear how they are financed, and what rates of return they generate on invested and borrowed capital

• Private schools must employ teachers and other staff legally at or above minimum wages.

• There is no private schooling (pedagogy, curriculum, examination), only privately financed schoolng, that may or may not emphasise different methods, choice of content, and may elect to take different (public) examinations.

•• There is no private school system in most counties, but a collection of private

sector providers mostly operating independently

Definitions and Key Concepts

0

10

20

30

40

50

60

70

80

90

100

Devt

LDC

GDP

%GDP for

Govt%Govt

Budget

for Ed

%GDP

for Ed

Financing Education: States and Markets – Who Pays for What?

Demographics, Labour Markets and Choice

More workersthan children

Falling numbersenter labour

market

Demographics, Labour Markets and Choice

Fewer workersthan children

Growing numbersenter labour

market

Zones of Inclusion and Exclusion

Where are the Private Sector Providers?

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20

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60

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100

1 2 3 4 5 6 7 8 9 10

% P

art

icip

ati

ng

Should

Enrol

Unlikely

to Enrol

Zone 3 At Risk

Overage, Low Attenders and Achievers

Zone 4

Primary Leavers

Zone 2

Primary Drop Outs

Primary Grades

Zone 1

Never

Enrol

Lower Secondary Grades

Zone 5 Drop Outs

Zone 6 At Risk

Zone O

No

Pre-

School

CREATE

Zones of Exclusion

www.create-rpc.org

Access

No

Access

No

Access

No

Access

At Risk

Secure Enrolment, Attendance and Achievement

Performance Skews and Implications

0

10

20

30

40

50

60

70

Q1Q2Q3Q4Q5

Quintile of School by Average Score

Perc

en

tag

e o

f S

ch

oo

ls -

Ac

cra

Public

0

10

20

30

40

50

60

70

Q1Q2Q3Q4Q5

Quintile of School by Average Score

Pe

rce

nta

ge

of

Sc

ho

ols

- A

cc

ra

Private

Public

India

Where are the private schools?

• Choice is only determined by price and not constrained by wealth, location, social/religious group, transfer costs, opportunity costs etc

• The universe of possible choices is wide i.e. many viable options

• Information is freely available (e.g. on performance, facilities, fees charges) to all actors in a timely way and is independently verified

• There are no significant barriers to exercising choice (e.g. enrolment fees, calling in of credit, opportunity costs, social exclusion)

• Principal (purchaser) and agent (service provider) share the same goals and motivations and are not displaced by intermediaries; what is sold is what is bought

• Supply and demand are not distorted by public subsidies either open (e.g. capitation, scholarships, teachers salaries) or concealed (teacher training, curriculum development, cost of buildings)

• Markets for capital do not fail, and behave rationally in seeking returns

The Efficient Market Hypothesis

Are the Propositions Valid for LFPS for the Poor

Choice, and Location

High FeeMid FeeLow FeePublic

Constraints on Choice

Costs

Transfer Costs

Distance

Safety

Social Group

Information

Capacity

Choice, Affordability and Perceived Quality

Costs

Perceived Quality

Tanzania - Affordability

Affordability

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

1 5 9

13

17

21

25

29

33

37

41

45

49

53

57

61

65

69

73

77

81

85

89

93

97

101

105

109

113

117

121

125

129

133

137

141

145

149

Total Urban Household Expenditure/ month

Total Rural Household Expenditure/ month

Government School Fees ++ /month

Poorest = GBP 200 week = USD 300 = USD15,600 per year10% on education costs = USD 1560 per year per householdIncome per class PTR 25:1 = 25* 1560 = USD 39,000 No default

Direct cost of qualified teacher = USD 50,000 + on costs = USD 75,000Infrastructure, ancillary staff, overheads = +USD 75,000Building costs/ rent = USD 75,000?Profit/investment = USD 25,000 Total Income needed per 25 students =USD 250,000

Fee per student =USD 10,000Low cost private schools in London charge USD 11,000 = £7,000This is affordable at 10% for income £70,000 = USD 100,000+

Affordable Costs for Households + School Cost Drivers

Self Financing Fee Costs - Simulations

Primary Lower Sec Upper Sec HE + Other Total

Pupil Teacher Ratio 30 25 20

Teacher salaries /GNP/capita 1.5 2 2.5

Non teaching salaries/GNP/capita 0.5 1 2

Non salary expenditure/GNP/capita 0.5 1 2

Teacher salaries as % of total recurrent 60% 50% 38%

Total unit cost % GNP /cap 8% 16% 33%

School age pop as % total pop 20% 6% 5%

% school age pop enrolled (GER) 110% 105% 105%

% budget on higher ed + other education 20%

%GNP Needed 1.83% 1.01% 1.71% 0.91% 5.46%

GDP Primary L Sec U Sec

500 42 80 163

1000 83 160 325

1500 125 240 488

2000 167 320 650

10000 833 1600 3250

50000 4167 8000 16250

• States are failing to met the educational needs of their populations; the private sector can reach the places and people the public sector cannot in ways which are equitable

• The private sector is more efficient and effective than the public sector in delivering educational services to the poor;

• Effective demand generates affordable low cost providers

• Competition between the private and public sector for children, teachers, and other resources promotes improved standards and has no adverse effects

• The private sector has sufficient capacity to meet a substantialproportion of additional demand for educational services

• “Public Private Partnerships” can offer enhanced service delivery with more access, greater efficiency and effectiveness,and positive effects on equity – but for which services, for which purposes, at which levels, under what conditions, and what kind of impact on equity?

Markets and States – Contentious Propositions

Are they True?

www.create-rpc.org

Who Pays the Piper?

Can Low Price, Fee Paying Schools

Self Finance

and Enrol the Poorest?

Keith M Lewin