Government Subsidies for Private Community Services: The Case of School Education

Abstract

Governments confront potentially competing demands for increased provision of community services, prudent budgetary management and no expansion in taxes. In the areas of primary and secondary education, the federal government has attempted to deal with these pressures by using government subsidies for private schools to expand the size of the private school system and free up more resources for those who remain in the public education system. This initiative will be most successful when the demand for private education is highly responsive to private school fees and the subsidies are targeted at those segments of the school and student population that are most responsive to reductions in private school fees. The current system based on the overall Socio- Economic Status of each schools student population is probably an improvement over previous schemes, but it is still potentially inefficient because it does not target funds at the most fee-responsive groups.