Review of the Proposed School Fees Price Controls in Uganda

Review of the Proposed School Fees Price Controls in Uganda

Background

On 27^th August, 2015, The Ugandan Daily Monitor ran a headline article “We can’t stop high school fees - Govt” and Uganda National Association of Private Schools (UNAPSI) took a depth review of the proposed request from parents for Government to control school fees in particular reference to private schools.  Uganda’s government schools are often mistaken to be the only option for children from disadvantaged   backgrounds.  Private   school   enrollment   has   been   increasing   at   rates comparable  to  government  schools  even  after  the  government  started  implementing  its flagship  program of UPE and USE  for  universalizing  education.  The percentage of children in the 6-14 years age group in rural Uganda enrolled in private schools increased (UBOS Education Report 2014). The figures for urban Uganda have also increased. This is a clear indicator that parents prefer private schools, if they can afford it. It may also be noted that the number of private schools which charge very low fees and function in low income areas have been identified to be on the increase, in response to this demand.

The focus of private schools on English Speaking and the significance of English in the social mobility aspirations of people is one of the primary reasons that poor parents prefer private schools. But this is only one side of the story. As the Education reports indicate, districts with higher enrollment in private schools also perform better in testing of learning outcomes. Most of these private schools in rural areas and poorer sections of urban areas function at costs much lesser than what the government allocates for its schools. Thus, due to several such reasons the private schools  in  Uganda  share  a  huge  load  of  the  education  sector and  this  is  without  even considering the smaller private schools that are not recognized by any education board.

While parents increasingly send their children to private schools, they are also simultaneously affected by the increasing cost of living every year. Private schools charge fees based on demand and this serves as a method of eliminating competition to select students. This has created a situation whereby the students from relatively better-off households get preference over children from economically weaker sections for school admissions. But since parents want their children to be educated in a private school, but cannot afford it, they have sought the help  of  the  government  to  control  the  price  of  the  service  offered  by  private  schools. It is in this context, that some parents are requesting government to implement laws to fix the maximum tuition fees that can be charged by private schools. The economic and subsequent social, effect of controlling the price of education needs to be further explored, especially since free government schools exist, which benefit from an increased education budget every year.

                     Regulation of Collection of Fees Act in Uganda

Uganda does not have a Regulation of Collection of Fees Act in its constitution or by the Government. The Act or Control would be understood as a reaction to be expected from the government which has a history of ceding to public demand. While complaints from parents and the media about some private schools charging exorbitant fees were cited as the reason for such a move, it is important to understand the unseen factors contributing to this problem. Under the Act, a district committee would decide the maximum fee that can be charged by a private school.

The factors to be taken into account under the Program to fix the fees charged by schools, other than administrative costs and a “reasonable surplus required for growth” are:

1.   Locality  of  the  school,  namely,  Rural  area,  Town,  Municipality,  District

Headquarters, Corporation

2.   Strength of the students

3.   Classes of study, and

4.   Status of the school, as indicated below:-

a.   Schools having minimum infrastructure facilities as prescribed by the Government from time to time

b.   Schools having infrastructure facilities more than prescribed:-

i.          Schools having more than minimum requirement of laboratory, more number of library books, classroom facilities and other sanitary and drinking water facilities

ii.         Schools having more than adequate classroom facilities, lab facilities, library area, number of books, very good sanitation facilities, highly protected drinking water facilities and other sanitary facilities together with high percentage of results

iii.        Schools fully equipped with modern facilities like Air Conditioner with 100%

results

While schools may object to the fixed fee once, the ruling of the committee would be optional and the fee could be fixed for a particular period of time. Schools may apply for a revision of fees after this time period. The committee would also have the power to verify whether schools that are already affiliated with the Ministry of Education and Sports (MOES) charge fees commensurate with the facilities (Government Recommendations).

The law would take into account the qualifications of teachers as an additional factor for the district-level and/or any committee that decide the fees for private schools for a three-year period. With the Right to Education principle, being implemented across Uganda as a strong government initiative to universalize education, the private schools in the country would be under much financial and administrative pressure to comply with the rules as Education is considered as a Public Good. The imposition of a maximum cap on the fees that can be charged by private schools can be an additional burden that exacerbates the problem and  Members of Private Associations are protesting this proposal.

                        Current Situation of Private Schools

Private schools affiliated with the Ministry of Education and Sports (MOES) claim that most schools are already charging very low fees and the Control would mean that the fees would be charged at a much lower level leading to a situation where they would have to be closed down.

The problems with the School Fee Regulation and Control are manifold. First of all, the complaints against unreasonably high fees charged by private schools are relevant for only a small section of private schools. The vast majority of private schools charges very little and function in disadvantaged areas, already bearing the weight of extra compliance costs. Secondly, government schools already exist in all these areas and people are choosing to send their children to private schools instead. Therefore, the underlying problem is that government schools are perceived to be worse than private schools when it comes to learning outcomes.   But   rather than focusing on improving government schools, the government is being tempted to make it tougher for private schools, which are already performing better, to function efficiently. Thirdly, even if the regulation of fees in private schools can somehow be justified, the task personnel formed to decide the fees have no representation from stakeholders given the current practical situation of the private schools education sector. Bureaucrats, who are in charge of the government school system or are part of it, will make up the committees. And these committees are set up to be the monitoring system for themselves, considering that all complaints with the decisions of the committee are directed or redirected to the committee itself.

                        Price-control: Intended Effects & Actual Effects

The proposed imposition of fee regulation on private schools can be understood to be a reaction to the demands of some parents against large private schools charging high fees for their services. This can also be seen as a direct result of the assumption that these are the only types of private schools that exist, which is not the case. While consumers are always seeking lower costs in any economy, the problem with the government is that its attempts to help the poor, it reduces costs at the expense of the producers. While this artificial reduction of price may be seen as a positive impact by the consumers in the short-term, in the long-run the effects will be disastrous for them as well. Producers, who see no chance of increasing prices end up having to cut costs, are unable to function efficiently and lose incentive to perform better. The regulation of fees therefore has the unintended consequence of lowering the standards of private schools, by destroying the competition in the market.

The regulation of price has always proved disastrous. It is ironic that though the intentions are always to protect the disadvantaged section of the population from being exploited, price control often has the opposite effect.  Socio-economists argue that when price is controlled artificially in one sector (Fiona Scott), it leads to the talent and entrepreneurs in that sector to migrate towards others that benefit more. This is the case not just with setting the price at a lower level than the market price, but for setting it at a higher level as well. One of the problems with setting prices at a lower level is that it creates an entry barrier in the market, thus leading to a shortage in  the  competition.  In this case, that  would  mean  fewer entrepreneurs will be willing to start schools since it is not profitable. It is also the case that existing schools will have to close down because they cannot meet running costs, and/or due to a lack of demand because of falling quality as a result of lower fixed fees.

Scott also provides numerous instances in history where the control of prices led to problems for the consumers, that it was actually supposed to solve. The regulation of commodity price in Paris in 1973 resulted in producers reducing the quality of their products and in the rise of a parallel black market to provide services that the legal market could not provide at the fixed prices (Scott 2001). In the case of education, a parallel market would mean unrecognized schools that cannot be regulated by the government. Such schools already exist because they cannot meet the infrastructure requirements that the government and education boards set down, and yet they continue to attract students. This should surely serve as an indicator for the results to be expected from setting more regulations on private schools.

Another analogy is the example David Tarr gives, of television sets in communist Poland. The government kept the prices of television sets artificially low, meaning that there were fewer producers and they alone could not meet the demand generated by the lower price. The situation was such that the cost of regulation of television sets to Poland’s economy was ten times the industry’s total sales (Tarr  2009).  Both  government  and  private  schools  have maximum capacities, and when the prices are lowered leading to fewer number of schools, this means there will be more students out of school simply because there are not enough schools. In the Ugandan scenario, where more and more parents are sending their children to private schools, the destruction of the private school ecosystem would mean that a large number of students will be out of school because the government school system will not be able to accommodate such a large number of students.

Thus, while the intention of fee regulation is to decrease cost of education and therefore increase the access to education, the effect is that it creates a supply deficit which in turn ends up reducing the access to education for the very population it had hoped to help. Drawing from Tarr’s analysis of television sets in Poland, the logical result would be that the government would have to spend much more than it hopes to, or is able to, on government schools, to offset this supply deficit.

The effect of price control on a commodity, as can be seen, will ultimately be a costly form of rationing of the commodity because of the scarcity that artificial prices generate by making the market for the commodity less attractive for potential and existing investors. The importance of education to a society is accepted and education is now seen as a necessary service. The attempts at increasing accessibility to these services, while justified, are misinformed. Schools are expected to offer services without expecting profits, as is made obvious from international practice that encourages schools to be registered as non-profit institutions. But the service offered comes at a cost and high levels of risk for the school management. With the imposition of the infrastructure requirements under the Right to Education principle, potential investors are likely to find opening schools to be an almost certain loss. Existing schools are being threatened to close down because they are not able to meet infrastructure requirements at the low fees that they charge. Price controls on top of this, will make this situation more severe for the education market and ultimately, to the accessibility of a service that is fundamental to the growth of any society.

Coping with Fee Regulation

The regulation of school fees have been in effect in some countries and the associations of private schools are still engaged in seeking legal recourse.  While there are  obvious difficulties of not being able to run schools with the same quality as before at lower costs, school owners also raise issue with the process of determination of fees. In some instances, the salary paid to teachers is not a factor in the calculation of fees. Several schools which were earlier offering annual hikes for teachers who gain experience change and put it on hold as a part of cost cutting measures. Costs are increasing every year and while most schools are struggling to survive at the current level of fixed fees, school owners are unsure of whether they will be able to run the schools in the following years.

Private schools which offer extracurricular activities will either remove them or make them exclusive for students who pay extra for them. This move may be challenged in court to uphold the right of schools to charge for extracurricular activities as long as they are optional for the students, as the regulation applied only for admission and tuition fees. School owners also admit that with the expected demand for admission increasing due to lower fixed fees, there will be a larger cost involved in the screening process as the capacity of schools will be limited. The forced lowering of fees will mean that the chances of growth to accommodate more students will also be negligible. It will also increase costs for the schools while not giving them the opportunity to make up for these costs by controlling the fees that can be charged.

Private school owners in Uganda have an additional factor that has been in play. According to MOES memos, reports and recommendations, private schools need to meet reasonable land requirements to be eligible for renewal of  recognition. However, the cost of expansion may not be covered in the process of determination of fees by the district committees, according to school owners and private school association representatives.

School owners suggest that most parents whose children are admitted in their schools understand the facilities that they provide and are willing to pay the fees charged but it is only a few parents who have made it a political issue. The enforcing of different laws, together with this recent proposed move to regulate the fees, overlapping simultaneously has created confusion for the schools on how to comply with all the regulations, and the government may make it a point not to renew the recognition of existing schools that do not meet some requirement and to identify the unrecognized schools to shut them down.

Conclusion

The regulation of fees collected by private schools would seem like a reasonable move considering the mainstream understanding that all private schools charge high fees. But the problem with the mainstream understanding is that there is a vast majority of private schools that charge low fees and cater to disadvantaged populations of Uganda. What is also worth noting is that more and more parents want to send their children to private schools anyway but the supply does not meet the demand. This is why parents want the fees to be lowered. Private schools generate demand due to a variety of reasons from better learning outcomes, greater accessibility and English medium instruction to provision of extracurricular activities. Consumers want the price to be lowered because there are not enough private schools and the existing ones can charge higher fees and still attract enough demand. If, instead of taking measures to increase the supply of private schools and increase competition among private schools so that they lower the price by themselves to survive in the market, the government is being requested to force the prices down, it will only lead to a larger supply deficit which ironically ends up further from the consumer need that the supply should meet their demand.

Once  this  scenario  is  understood,  the  regulation  of  fees  seems  puzzling.  The effects of regulation of fees are basically that schools struggle to meet running costs and look for ways to cut costs when they are already registered as non-profit institutions or operate as nonprofit institutions offering a public good. On top of this, there are other government regulations like the Right to Education principles, across Uganda, and the land requirement laws that these private schools are expected to  meet  for recognition. Thus, the not only are the extra costs not considered by the district committees that may decide the fees to be charged by every school but the school are expected to meet several government regulations that they do not currently meet, at the same time. This is in sync with the existing government education policy that focuses on input norms like infrastructure but ignore the learning outcomes that schools produce. Private schools generate demand from parents precisely because they meet their expectations of learning outcomes but the government continues  to judge private schools  based on input norms. In this context,  it becomes fairly obvious that the private schools would struggle to survive in an environment governed by a policy that is uninformed of the causes and effects that occur in the education economy. The ever-increasing penetration of free government schools is often the only primary premise that drives policy.

A basic understanding of economics will suffice to explain how artificially keeping prices low would mean that there is less competition, which would result in the fewer players in the market. In the case of education, the controlling of the fees charged by private schools is a result of the complaints against big private schools charging high fees. The controlling of fees, on top of other unfair regulations that private schools are expected to meet, has meant that smaller schools are struggling to cut costs and facing a dip in performance which would mean that they would close down sooner or later leaving the market to fewer private schools. Thus, while the proposed control of fees by the government was intended to help the parents who couldn’t afford the fees charged by big private schools, it ends up leaving fewer schools to choose from.  May be the Government or any respective private organization would only provide price guidelines and timely market trends of the private schools sector to both parents and schools administrators but not fix prices as currently requested by parents.