Domestic resources for education: new GCE-report

Realising the right to education for all requires money: that is, it requires sufficient, well-targeted investment in the interventions most needed to ensure that a quality education is available to all, including the most marginalised. In an increasingly resource-constrained world, governments in low- and middle-income countries are presented with a formidable challenge, which cannot be addressed without more and better use of domestic resources.

In the last 20 years, there have been huge strides forward in improving the educational opportunities of children, youth and non-literate adults. There have been significant falls in the number of children missing out on primary and lower-secondary school, some improvements in youth literacy rates, a narrowing of gender gaps in education, and more children than ever completing a basic education. But much more remains to be done: 127 million children are still out of school, drop-out rates remain high, and the quality of education is often disastrously poor, with up to half of primary school leavers in Africa unable to read and write effectively. Globally, another 1.6 million teachers are needed to achieve universal primary education by 2015 – to which the world committed twice over, in the Millennium Development Goals and in the Education For All goals agreed in the Dakar Framework for Action. Even when teachers are in post, they often lack even basic training.

These challenges will not be overcome without increased and more strategic investments in education. The out-of-school numbers are shifting slowly because the children who are still excluded are those who are hardest to reach: children living in poverty, children with disabilities, those in rural areas, some girls, children from marginalised communities, etc. These children need targeted interventions. The quality of education is often poor and the gap in trained teachers huge because governments are trying to deliver education for all without the tailored strategies and funds necessary to guarantee it.

Many governments have increased funding for education over the last ten to 15 years, some of them significantly so. Even then, it has often not been enough and, in recent years, in the wake of the financial crisis, the trend has been towards reducing rather than expanding financing for education. Against this backdrop, aid for basic education in the world’s lowest- income countries is decreasing, with some donors pulling the plug altogether on their funding in specific countries. All this has contributed to a $38 billion gap in the financing needed globally each year to ensure all children can go to primary and lower secondary school.

This means that more money needs to be found – and fast. Governments have the responsibility to guarantee the right to education for all their citizens, and this includes a responsibility for financing. It also means that there must be a focus on ensuring that all the money that is available is used as effectively as possible. In this briefing, the Global Campaign for Education (GCE) sets out four key steps to respond to this financing challenge by increasing domestic revenues, and spending this more equitably and effectively.

Step 1: implement a fair tax system to increase education budgets

Firstly, there is the need for a fair tax system. This requires a progressive approach to taxation, and, in particular, involves securing more wealth from big multinational companies who operate in developing countries. Too many big companies do not pay the taxes they should in developing countries. In some cases, developing country governments themselves are offering unnecessary free giveaways through incentives like ‘tax holidays’. In other cases, big multinationals and individuals are dodging the taxes they should be paying by using tax havens and international tax loopholes – leaving billions of revenues haemorrhaging out of developing countries. The companies that are making money in a country – whether by locating manufacturing there or selling goods – must give back through a fair contribution in taxation. Dealing with this situation could lead to a huge boost for education: tax exemptions in Nicaragua, for example, are worth two and a half times the primary education budget. In Zambia, the amount lost through corporate tax dodging is more than twice the total annual education budget. In Tanzania, the amount lost to tax dodging could pay for the training of all Tanzania’s untrained primary school teachers, as well as training and salaries for more than 70,000 additional teachers, ensure that every primary school-aged child has a reading and mathematics text book, and build more than 97,000 new classrooms.

Step 2: turn natural resources into a lasting source of national wealth

The second area of focus for increasing revenues that can fund education should be maximising revenues from extractive industries in countries that are resource-rich. This is particularly important as massive new oil and gas deposits are coming on-stream in many of the same countries that are most struggling with providing a quality education for all, particularly (but not only) in Africa. It is crucial that this national wealth is turned into lasting public benefit through providing revenue to invest in education. Governments have a responsibility to ensure that their citizens are benefiting, and not simply the multinational corporations who are extracting the mineral wealth. In Ghana, for example, an estimated $36 million is lost each year through deals that favour mining companies: this is enough to train more than a quarter of Ghana’s untrained primary school teachers. In Peru, estimated cumulative losses from poor collection of mining royalties from 1994 to 2006 could have paid for four years of schooling for every single one of the nearly half a million children of primary or lower secondary school age who are currently out of school in Peru. There are some positive examples of countries, such as Mongolia, that are fighting back against international companies draining natural resource wealth; more of this could mean more financing for education, and a lasting public benefit.

Step 3: spend resources more equitably

Once revenue is collected, there must be equitable and well-directed education spending. Given the severe constraints on education financing, it is crucial to ensure that all available funds are spent fairly and in line with identified needs, and that they have the greatest impact on achieving a quality education for every child and non-literate youth or adult. This entails identifying and targeting the greatest gaps in meeting the Education for All goals, which means that spending must effectively combat exclusion, through public spending approaches and formulae that recognise and target disadvantage and marginalisation. Brazil, for example, has developed spending formulae that help to redress poverty. Spending must also focus on the broadest base, with significant investment in early childhood and primary education and allocation between primary, secondary and post-secondary levels taking into account what proportion of students are progressing through the system – and avoiding spending the bulk of resources on education that is only accessed by a tiny elite. Finally, there is the need for greater investment in quality, with a particular focus and recognition on the importance of well-trained and well-supported professional teachers in enhancing quality education.

Step 4: make ordinary citizens part of budgeting and monitoring

Finally, and closely linked to the previous requirements, is the need for open, transparent and participatory systems for budgeting and spending. Spending education budgets well is not a purely technical matter: by involving citizens, governments can better ensure their budgets target the areas of greatest need, and when governments are open and accountable, there is a much greater chance of funds being spent effectively and as promised. Many GCE national coalitions focus on making budget-setting more responsive and budget execution more transparent: Education For All. Sierra Leone, National Coalition for Education Nepal, Foro Socioeducativo Republica Dominica and Coalition Nationale pour l’Education Pour Tous Burkina Faso are just a few examples. This work can also play a crucial role in creating healthier democracies and breathing lifeblood into the social compact between state and citizens.

→ Download the report A Taxing Business: Financing Education For All Through Domestic Resources