I have written this article as my personal contribution towards the public discourse on the proposed introduction of hospitals fees and hike of fees in public schools. My view is that government has all reasons to impose hospital fees, and to hike school fees. I even recommend a speedy abolition of the free primary education which was a politically driven policy in 1994 to excite Malawians into celebrating Democracy and human rights, but an unsustainable and catastrophic economic policy.
Many people regret that introducing hospital fees and increasing school and college fees is unfair to the less privileged in our country. This is very true because government has the responsibility to consider the welfare and livelihood of the poor. But the poor too have the responsibility to consider a poor government and that is exactly what I want to argue for.
TAXES AND AID
When poor people are confronted with a poor government amid them, it is very important that the role of government in their lives and how government performs that role be appreciated. Otherwise political opportunists can take advantage of public discontent and ignorance and stir an unnecessary revolution.
In order to understand why it is necessary to introduce fees in public hospitals and hike fees in public schools and colleges, and even abolish free primary education, we must first understand where government gets the money which it uses to build the hospital, stock it with medicine, buy ambulances and fuel them, pay doctors and staff, give food to patients and manage all expenses that enables hundreds of hospitals to function every month in this country.
We must understand where government gets the money that it requires to build schools, put desks and texts books in them and employ teachers and manage all expenses that are required to run thousands of schools in this country every month.
The answer is simple, taxes. Government gets the money from taxes. What are taxes? Taxes can be defined as “the charge imposed by government on people or property for public purpose.” There are several types of taxes which include income tax, where people that have jobs are taxed from their salaries.
This is the main source of tax (revenue) for government. But other taxes include; corporate tax which is charged on companies, levies on certain products, sales tax on products we buy, property tax on some property we own, duty on imports and other forms of taxes.
Government also gets extra money from bilateral donors which are countries that have diplomatic relations with our government and supports us with aid, and in other cases with grants and loans. There are several types of aid, but in this case I shall be referring to budgetary aid. The countries that give us these packages are the USA, UK, Germany, China and others. Another source of money for government is loan facilities which it gets from multilateral lending institutions like the IMF, ADB and similar institutions.
TAXES NOT ENOUGH
Government has never been able to collect enough tax in the history of Malawi that is why we have always relied on donor aid and loans. The reason is mainly because there are never enough Malawians with jobs and businesses that government can tax on. This is with regards to corresponding population of Malawi which demands affordable public goods. Remember that the reason government collects tax is mainly to subsidize public goods so that the poor population can access services at a cheaper cost or for free where possible.
Now, when any citizen or poor person is going to a public hospital or school, he or she must first understand that they will get medicine and health services which government has paid for on their behalf and government got that money from their fellow Malawians who are working and running businesses. When our youths go to public schools and colleges, they must appreciate, while they make noise about allowances, that government is spending money on them which it collected from their fellow Malawians who are working. Or it got the money from donors.
Donor money too, is the money which citizens of other countries work for. It is not free money in economic terms. In America and European countries and China, where we get aid from, people work even throughout the night while we sleep and snore in our country, and most of them work two or three jobs just to give us that aid.
Therefore, in order for government to maintain free health services for the poor and free primary education and reduce school and college fees, many Malawians must get jobs, or create businesses so that government can get more tax. You cannot expect government to buy medicine for you and maintain lower fees without giving it the money to buy the medicine and run the schools in the first place. Get jobs and create businesses and pay taxes faithfully, and then demand affordable public goods.
While tax is not enough on one hand, aid and loans too are not good for the economy. Aid has economic and political conditions and effects that are injurious to indigenous growth. That is why for the past 50 years aid has failed to develop Malawi and Africa in general. Loans from multilateral institutions too are burdensome to the economy because they are paid back with interest and have unfavorable conditions.
And since we are always borrowing our foreign debt keep increasing. Unfortunately, it does not only increase because of perpetual borrowing, but also owing to our unstable currency which keep devaluing. As a result, our taxes which are already insufficient to run government operations and fund development budgets, are used to settle huge foreign debt and loans.
At this point, where government collects less taxes, which is usually 60% of an already small budget and government is not receiving any aid to boost the revenue, and it has huge foreign debt to settle which keeps increasing, government must cut its budget allocations on certain public goods. And the first public goods to consider cutting costs on are education and hospitals where fees can be introduced and get hiked, because in the short run, government does not suffer from adopting such position, but stands to harvest huge benefits. I will explain this in my next article.
Some people among us assert that we already pay tax therefore government must not punish us with hospital fees and hike schools because we cannot afford. But the truth is that the taxes have never been enough and are not enough to allow government to provide such services for free. Others claim that money is already lost through corruption and if government can curb corruption then we do not need hospital fees and hiked school fees.
The truth is that even without corruption, government would still not have enough money to sustain huge subsidies on public goods because corruption takes away 40% of the national budget which is equivalent to donor aid. And even with a 100 percent funded budget without corruption, Malawi can still not sustain huge subsidies because the budget is already small to consider the wide range of public goods from national defense, internal security, infrastructure development and other services that government must fund for a 16 million population which the only product it manufactures are babies.
Note: In Vol 2. I will discuss why introducing hospitals fees, abolishing free primary education and hiking school and college fees is the right policy to stimulate the economy and grease government machinery to operate efficiently and effectively.Follow and Subscribe Nyasa TV :