Financing education: the need for bold global action

Next week, the government of Norway, in cooperation with the U.N. Special Envoy for Global Education, Gordon Brown, will host the Oslo Summit on Education for Development. The summit aims to raise the scale of ambition and the level of cooperation between key actors to ensure all children can enjoy a good quality education. Governments, donors, and non-state actors will need to work together to deliver on this promise. Significantly more financing will be needed and resources will need to be spent in the most effective way.

Our recent report: Financing Education: Opportunities for Global Action shows that in the Least Developed Countries (LDCs) spending per child on basic education (pre-primary, primary, and lower secondary) will need to at least double from an average of just over $80 per child recorded in 2012 to about $160 per child by 2020, with further increases beyond to achieve the education Sustainable Development Goals (SDGs) by 2030.

Developing countries are in a better position to finance their educational systems than in earlier years. Domestic revenue mobilization has improved across all developing countries over the past decade. Non-fragile LDCs did particularly well—increasing their ratio of taxes to GDP from an average of 14 to 17 percent. Average domestic public spending on education as a share of GDP increased from 3.1 to 3.8 percent in low-income countries. But education spending as a share of domestic budgets fell in a number of countries and, in particular, fragile states, suggesting growth in spending has been driven by improved tax collection rather than a prioritization of education. Insufficient and ineffective spending has also led to low levels of learning. Moreover, in low-income countries nearly half of public financing for education is spent on the top 10 percent most educated children, often from wealthier segments of society, leaving the poor and marginalized behind.

Even with optimal tax mobilization and domestic revenue allocation efforts in the coming years, financing gaps for basic education in low- and middle-income countries will still add up to a total of at least $25 billion by 2020. The largest gaps between annual costs and projected domestic public spending, as a share of annual cost, will be in LDCs and fragile middle-income countries. Other groups will have much smaller financing gaps or should be able to cover costs from their own resources (e.g. resource-rich countries). If aid flows between 2013 and 2020 reflect the historical pattern of the last decade, just under $10 billion in aid could be available for spending on basic education in 2020, covering just over one-third of the financing gap. More and more effective external support from public and private sources will be needed to cover the total cost. Recent declines in aid—aid to education fell by nearly 10 percent between 2010 and 2013—will need to be reversed.

We highlight four opportunities for action that could be considered at the Oslo Summit and other key fora this year. These actions focus on the global level, and they of course are not the only actions needed. Making progress will require a range of efforts from all the actors, in particular from the participating countries themselves, which are and will remain the main drivers of progress.

Action 1 – Analyze. Mobilize. Socialize.

Establish a Global Commission on Education and Financing – making a compelling case for investment in education using evidence and high-level leadership.

Global action has been held back by a lack of consensus about the steps that can fulfill education goals, by a limited understanding of the financing needs and trade-offs and by a lack of high-level political leadership. A Global Commission on Education and Financing would be a major new international initiative to analyze and communicate strategies and actions to develop high-quality education systems and financing needed. The recent Commission on the Economy and Climate and earlier Lancet Commission on Investing in Health show how this could be done.

Action 2 – War room: getting the generals around the table

Create a global platform for coordination and scale up external support.

We identify a number of key issues that need analysis and coordinated decision-making. While progress in coordinating financing at the country level has been good, there has been much less progress at the global level. Prospects for financing the SDGs would be much greater if there were a senior (ministerial level) platform to discuss key issues:

• How to scale up external support for education focusing on achieving results: Additional resources will need to be found, and they will need to be spent in the most effective way possible, building on existing results-based financing approaches. This will also need to include bringing in non-state actors for whom education has so far not been a high priority (less than 10 percent of corporate philanthropic spending by Fortune 500 companies is directed to education). New financing mechanisms such as impact bonds offer opportunities for greater collaboration between state and non-state actors.
• How to strengthen multilateralism in the education sector: Accounting for both core and non-core funding, only one-third of total education aid flows through the multilateral system, compared to 65 percent in health. The number of donor relationships has increased by more than 10 percent over the past five years and more than one-third of these relations are so small they are considered insignificant by the OECD Development Assistance Committee and in need of rationalization. Lack of coordination has also led to highly uneven allocations of basic education aid across countries, with some low-income countries receiving less than $5 per child and others close to $60 per child.
• How to better tailor the global response to the needs of different countries: The allocation of both concessional and non-concessional external financing needs to be better aligned with countries’ needs and capacity to raise financing through domestic resource mobilization. Aid will need to better leverage domestic resources in fragile countries—where the share of education in budgets has been falling—and non-concessional and private finance in middle-income countries—where education ODA represents less than 2 percent of total public spending on education.

This global platform could take the form of a Humanitarian Fund or a Global Fund building off the Global Partnership for Education, but the precise framework needs to be further examined.

Action 3 – Raise it smartly. Spend it smartly.

Seize opportunities to mobilize and manage domestic finances for education.

Given the vast importance of domestic public finances for basic education, the education community urgently needs to engage more proactively with public finance reforms. This could include an agenda for the mobilization and effective allocation of public spending for education (e.g. through funding formula reform), as well as monitoring it. Win-win opportunities such as the reallocation of distorting energy subsidies to education should be sought. In many countries high spending on energy subsidies is crowding out priority public investments such as education. Most of the subsidy benefits are captured by higher-income households, reinforcing inequality. Some countries, like Indonesia, have successfully reduced subsidies with a positive impact on education progress.

Action 4 – Measure it. Treasure it.

Commit to a data revolution in education linking financing and learning.

Compared to most sectors, the quality of data on financing and impact in education is unacceptably weak. As a result, decisions are often uninformed by evidence. This is unnecessary and must be addressed. A major initiative is needed that would seek to catalyze a data revolution in education, linking data on school characteristics, access, learning, and financing. This initiative would bring together lessons learnt from ongoing initiatives (such as the Australian My School and Philippines Check My School initiatives) and build a global coalition engaging a range of partners.

Education is the number one development priority as voted in global surveys (e.g. the My World global survey and the World Bank client surveys). The world’s governments know this, as do global business and finance leaders. Let’s hope they take the bold action so urgently needed.

The report benefitted from inputs from a number of country case studies (Afghanistan, Lebanon, Malawi, Nigeria and Pakistan) which can be found on the Oslo Summit on Education for Development website.