Why public finance isn’t a dirty word

Published on: 03/10/2013

Three moments stood out for me in a busy week in Stockholm. The first was when WSUP’s Guy Norman said that Public Finance wasn’t a dirty word – a point that I couldn’t agree with more or more wholeheartedly – and that is often overlooked in the rush to identify market-based solutions. Guy made the point during a WSP organised session on sanitation for the urban poor (link below, although unfortunately his presentation doesn’t seem to be included), and talked about the specific example of adding a surcharge to the water (and sewerage) bills of connected urban households to provide sanitation services to the unconnected urban poor. However, I think his point was broader than this specific example and seemed to resonate with a lot of the people I talked to during the week. Certainly, our own WASHCost work has made me personally convinced that if we’re not prepared to look at public finance – either through the sort of measures that Guy was presenting, or through direct transfers from national government to service providers – we can forget about bringing decent quality services to either the rural or urban poor.

If we're not prepared to look at public finance, we can forget about bringing decent quality services to either the rural or urban poor.

This isn’t about trying to wind back the clock or to deny the role of the private sector in providing services. It is about challenging the pretence (explicit or implicit) that we can somehow provide decent quality services to the poor through completely fee-based approaches – that somehow the poor can bootstrap themselves out of their poverty – and that by correlation the better off have no responsibility for helping them.  This isn’t true in the rich countries of the world – where the lives of the poor(er) are massively subsidised through redistributive taxation – and it won’t and can’t be in the poorest countries on the planet. Without public finance we can’t and won’t achieve the MDGs and we can’t and won’t achieve total coverage in WASH services. The second highlight for me was when, during a lively session by DGIS and IRC on sustainability (written up in more detail in a great blog by Harold Lockwood), recognition was given to Dick van Ginhoven for the bold step taken by DGIS in introducing a sustainability clause into their grant agreements.  Under this clause, recipients are responsible for ensuring the sustainability of the systems they deliver for 10 years. As Dick puts it, “time for a handpump to be replaced or a latrine pit to fill and have to be emptied”. The announcement of this clause in Stockholm last year was something I blogged about enthusiastically at the time – so it was great to have this check in on progress a year later.

DFID’s Guy Howard was a dissenting voice from a generally appreciative audience – he felt that the sustainability clause was the wrong approach and, if I understood correctly, that the clause was a blunt instrument that undermined the responsibility of national government for service delivery. Guy spoke of DFID’s work on improving governance – which he felt was a better approach, seeing WASH sustainability challenges as being in essence about governance. I’m a strong believer in improved local governance for water service delivery – I’ve even written books about it (link below) and I completely agree that only improved governance (and public finance) will bring us to universal WASH service delivery. That said, I can’t help but feel that Guy’s words are somewhat undermined by his own department’s recent launching of a “challenge fund” for WASH which is squarely focused on providing new hardware in the run-up to the 2015 MDG deadline (7.1 million new people served by December 2015) and that doesn’t obviously tackle either sustainability or governance. I’m prepared to bet money that in the case that DFID carries out post-implementation monitoring on these schemes it will find the same high levels of failure and low levels of service delivery that we – and many others – are finding elsewhere* (to make this prediction SMART – I’d bet that five years post implementation at least 30% of the schemes funded will have severe problems or be completely non-functional.  I’d also bet that in the unlikely event of the schemes being monitored for actual service delivered – that they will do so for less than 30% of the target population).

My own feeling – which I expressed during the meeting – is that when we KNOW that the current approach isn’t working and we KNOW that (broad brush) 30% of systems are failing within a few years of implementation, then it simply isn’t good enough to keep pouring tax payers' money into the same ways of doing business. And that “lack of evidence” that other approaches (such as the sustainability clause) will work is not an excuse for inaction (there never will be any evidence if we don’t at least try something different).  It was therefore great during the session to have USAID’s Chris Holmes express his support for DGIS’ bold step, despite expressing doubts about whether USAID could follow them. Yes DGIS' approach is a step in the dark, yes there are cons as well as pros (see Harold’s blog for more detail) – but at least it is something new with the potential to be transformative – and is already having impact through, for example, its support to UNICEF’s innovative compacts. And my own niggle on the DGIS approach?  That it is still, essentially, focused on the sustainability of individual pieces of hardware. 

Providing a service means building in redundancy and it means focusing on the right metrics.

Until we shift beyond this to the sustainability of the actual service itself – the quantity, quality, reliability and ease of access of water and sanitation provided to a defined population – we will still be doing and measuring the wrong things. Sitting on the plane on the way back from Stockholm I wondered what it would be like if airlines approached business as much of the WASH sector approaches theirs. They would focus obsessively on buying new planes to meet demand.  They’d agonise over the sustainability of individual planes. But in the meantime, when one plane broke down I’d be left waiting for the replacement to be bought from accrued cash – and if enough hadn’t accrued (or the treasurer had absconded with it) – then bad luck!.

Providing a service means building in redundancy and it means focusing on the right metrics – for aviation that means on-time arrivals, for water it’s litres per person per day of safe water (with additional qualifiers for ease of access and reliability), for sanitation its safe separation from your own and other peoples excreta (again with qualifiers that tell you the standard of service). Finally, Stockholm was an opportunity for a low key launch of 'Everyone Forever' – a joint vision of where the sector should be heading currently shared by IRC, Water for People and WSUP – but open to anyone. I particularly enjoyed the session that we co-organised between “mayors” (elected local government representatives) and national level actors from government water agencies.  In a week that can be high on rhetoric and concepts, this was an opportunity to hear from people who are critical to – but often overlooked – in the struggle to provide WASH services in messy reality.

* Full transparency: IRC has been approached by consortia interested in bidding on this work – and may take part.  We will in that case be focusing particularly on sustainability.