Private school fees

The Development Ministry’s recent decision paving the way for the liberalization of private school fees touched off intense reaction. Critics claim that education, even when it is available through private institutions, is a public good and must therefore receive the protection of the State. This much is true, but the State should only protect it with regard to the content of the curriculum and the quality of studies. That is where its authority ends. The fees are subject to free market principles and cannot be dictated from above. Neither can the State turn a blind eye to the various tricks that private schools employ in a bid to ensure higher revenues (like charging excessive prices for supplementary services and activities). Private schools are first and foremost businesses. They make significant investments in buildings and personnel, and their uppermost priority is to ensure their own economic viability. In other words, considering the demand for their services they have to price them accordingly. The question, therefore, is whether the State should interfere with the level of school fees. We believe that the State should not get involved in such price interference. Costs are shaped by a wide range of factors, and experience demonstrates that state interference leads to market distortions that eventually push prices upward. What the State must do, however, is improve the quality and the environment of public schools. Much depends on its success in this area, including private school fees. The State’s failure to upgrade public education only fuels demand for the private version. And increasing demand for private education inevitably leads to higher fees. On the other hand, if public education regains some of its recognition in society, the role of private institutions will diminish. Besides, excessive demand cannot be met by imposing an artificial lid on prices. Prices will move toward an equilibrium one way or another. This can be seen in many examples, including the case of private schools. Where fees are considered to be set at a low level, sponsorships are sought or other mandatory services are included, which then are set at a very high price. At the end of the day, the State cannot intervene for the high-income classes. This is a principle that cannot be abolished. The State can only keep a check on fees by improving the quality of public education. That is where its attention should focus. The rest should be left with the market.