China's Budget System and the Financing of Education and Health Services for Children
UNICEF and Chinese Government release final report of study on the financing of education and health services BEIJING, 22 November 2006 China's continued progress in reducing child and maternal mortality and ensuring universal access to quality education will depend on higher budget allocations and larger fiscal transfers to poor counties, according to a major study released today by the United Nations Children's Fund (UNICEF) and the Office of the National Working Committee on Children and Women (NWCCW). China's Budget System and the Financing of Education and Health Services for Children, by Mei Hong and Wang Xiaolin, United Nations Children's Fund and Office of the National Working Committee on Children and Women under the State Council, 135 pages, November 2006. "There is a marked disparity in education development between rural and urban areas, among different regions and among different education levels,' said Mme. Wan Yan, Deputy Director General of the Office of NWCCW, which is a coordinating body under the State Council. ‘Financial inadequacy still remains a hurdle to the advancement of education." Echoing these views, Dr. Christian Voumard, UNICEF Representative in China, called for "adjustments in public expenditure and the strengthening of public financial management, so that a much higher volume of public funds goes to the social sectors, in particular in the most disadvantaged areas, where the challenges are greatest but the resources scarcest". The report presents the findings of a major study on China's budget system and the financing of education and health services for children. While noting that government expenditure on the provision of services for children has risen substantially in real terms over the past decade and a half, resulting in considerable progress towards the achievement of the MDGs and the NPA targets, it highlights several weaknesses in financing that have limited the extent of progress: - Relative to the size of China's economy and the overall government budget, expenditure on the social sectors remains low by international standards. The report makes a series of policy recommendations to tackle these weaknesses. First, it calls for an increase in the overall level of government expenditure on the social sectors relative to GDP and total government expenditure. It endorses the Government's target of raising education spending (2.8% in 2004) to 4%, and suggests that government health spending relative to GDP could be more than doubled, from 0.8% in 2004 to 2%. It argues that these levels, which would be more in line with international practice, should be easy to achieve in a context of rapidly rising government revenue. Second, the report recommends an increase in the share of services for children within budgeted expenditure on the social sectors, including in particular for pre-school education (only 1.3% of government education expenditure in 2004) and compulsory education (51.5%), as well as maternal and child health care services, which accounted for only 3.1% of expenditure by health facilities in 2004. Third, in order to overcome the large disparities in the provision of services for children, the report calls for a substantial increase in fiscal transfer payments to poor counties. Arguing that this is essential in order to achieve the Government's goal of balanced development between urban and rural areas and among different regions, the report says that "transfer payments from central government need to be substantially increased on the basis of clear criteria that take into account local levels of economic and social development and tax revenue". A fourth and related challenge is to improve the effectiveness and efficiency of expenditure, notably by investing in the strengthening of budget management capacity at the county level, which is responsible for most social sector expenditure in China. Fifth, the proposed increase in government expenditure on education and health services would make it possible to eliminate or reduce substantially the burden of fees, which is much larger than in most developing countries and is weighing heavily on the rural and urban poor. The report lauds the elimination of fees for compulsory education throughout rural China, while proposing the extension of the policy to urban areas, especially for migrant children, and proposing increased social assistance for the extreme poor to offset the opportunity costs of sending children to school. The report also urges improvements in the Rural Cooperative Medical System (RCMS) to provide higher levels of benefits, while also underscoring the need for wider health insurance coverage in the urban areas and the importance of expanding medical assistance for the extreme poor who cannot afford health insurance. Sixth, the report advocates improvements in the budget system itself. Besides an overhaul of the mechanisms and criteria for inter-governmental fiscal transfers, to make these more equalizing and thereby strengthen the fiscal capacity of poor areas, the report urges closer links between policies, plans and budget allocations, the establishment of a medium term fiscal framework (in order to plan shifts in expenditure priorities over a medium term horizon) and the strengthening of performance evaluation. Last, the report urges the government to publish more detailed, disaggregated budget data, especially on the financing of services for children, to facilitate analysis and the refinement of budget policies.
|
