Transforming the Financing of Education

Firstly, the focus must shift to domestic financing. Over the past 40 years most international meetings and policy documents on education finance have focused on international aid or concessional loans. But these make up only 3% of the financing of education. Over 97% of finance comes from domestic sources and shifting attention is part of decolonising the whole understanding of education financing, moving beyond the North-South transfer of resources to look at universal, sustainable and systemic solutions. The latest discussion paper on education finance recognises this and reinforces the well-established international benchmark that calls on governments to allocate between 15-20% of national budgets to education. Renewed commitment to this is important, especially for governments that are falling short, but even a 20% share of a small pie is a small amount and there is an urgent need to shift the focus to the size of the pie. This means going beyond the comfort zone of most people working on international education.

Secondly then, the governments must review the size of national budgets overall and in particular review action on tax. The average low income country has a tax-to-GDP ratio of just 16%, falling way short of middle income countries that are nearer to 30% or high income countries that often exceed 40%. The IMF estimates that most countries could raise these ratios by  five percentage points by 2030 – which would allow a doubling of spending on education and health and some other services. In the face of a cost of living crisis worldwide it is important that this expansion of tax revenues is based on progressive tax reforms that target the income and wealth of the individuals and companies who can most afford it. But national action needs to be matched by international action to ensure global tax rules are set in a fair way, for example through a UN Tax Convention, as recently called for by African Ministers of Finance.

Thirdly, we need action on the new global debt crisis which means many countries are spending more on debt servicing than they do on education and health. This is another area where bold international action is needed, far beyond the recent Debt Service Suspension Initiative that offered too little help to too few countries at the height of Covid.  Any country that spends more on debt servicing than on education ought to be prioritised for debt renegotiation and access to a new debt workout mechanism.

Fourthly, we have to see a move away from the politics of austerity, particularly the pressure for cuts to public sector wage bills. The Global Austerity Alert raises an alarming picture and even the IMF headquarters has raised concerns that a premature return to fiscal consolidation could be damaging – but at country level austerity is often the IMF’s default recommendation. This is felt most acutely in education when overall public sector wage bill constraints are recommended. Teachers are usually the largest group on the public sector wage bill, so any overall cuts or freezes end up blocking recruitment of new teachers (even where there are shortages) or blocking improvements in pay (even where teachers barely earn the minimum wage). The IMF could transform the financing of education by making an unequivocal commitment to stop using these constraints and to actively encourage countries to increase the percentage of GDP spent on the wage bill. Nothing is more important to quality learning than quality teachers.

A fifth crucial change is about a transformation in mindsets. Owing to short-medium term economic cycles Ministers of Finance treat education spending as pure ‘consumption’ – but in the long-term, education is probably the soundest economic investment a country can make. There is a need to move towards a longer term view where investment in education is recognised for its contribution to economic and social development, facilitating a more strategic dialogue and acknowledging that the education sector is part of the core infrastructure of a country so spending should be protected even at the height of a recession.

Sixthly and finally, of course aid and concessional loans for education have a role to play - but these should not be the central focus. Perhaps most obviously, donors ought to deliver on their commitment to 0.7% of GNP in aid and they should also match the commitments expected of governments, allocating 15-20% of that aid to education (rather than the present 8%). But that aid needs to be offered in deep solidarity with countries, respecting sovereignty, and should be harmonised and aligned behind national education plans developed by governments with their own citizens. Increases in humanitarian aid for education should also be prioritised.

This six-point plan represents a radical re-framing and a transformative approach to increasing the volume of financing for education that is gathering wide support already. It must be matched by actions to ensure finances are allocated equitably, efficiently, and accountably – issues that are also elaborated on in the official discussion paper on education finance.

In summary this means increasing 4 Ss: the Size of government budgets overall (determined by tax, debt, macro-economic policies, trade etc); the Share of national budgets dedicated to education; the Sensitivity of education budget allocations – driven by equity and efficiency; and the Scrutiny of education spending in practice – so resources are tracked especially in the most disadvantaged communities.

When put together this could forge a new global compact for education that connects increased domestic commitments with international action on issues affecting education financing. Shaping such a bold initiative for Heads of State to agree in New York in September is essential if we are to truly transform public education systems around the world.