World Development Report 2004, chapter 4: clients and providers

Improving the welfare of poor people is the reason for providing public services. This chapter of the 2004 World Development Report asserts that to make these services work better, the interests of the poor must be made to matter for service providers. It examines the policy issues involved in improving client power over service provision, including improving client choice and participation by poor people.

Although user fees systems can ensure that benefits from providing a service follow the client – in the form of direct payments – the authors acknowledge that they can discriminate against the poor. They set out options for improving the purchasing power of poor people, including voucher systems and flexible transfers such as pensions or education grants. In the form of a flowchart, they present the questions that must be considered when deciding whether and when user fees are an appropriate policy option for public services.

The key questions to guide policy are identified:

• Is it possible to keep people who do not pay from benefiting?: If not, it is impossible to charge for service.
• Can the poor be distinguished from the non-poor?: If so, the poor can be given money to pay user fees, or granted exemptions from payment.
• Can charges vary with the amounts used?: If so, fees can be charged at levels of use above a specified ‘essential use’ limit.
• Is the service disproportionately used by poor people?: If not, user fees should be charged.
• Will the service be adequately delivered without user fees?: If not, user fees are a necessary evil.
• Will the service be over-used without user fees? – If so, fees should be set at an optimal level to manage demand; if not, no fee should be charged.

An important implication for policy is that there is no single, ‘blanket’ policy for public service user fees. For policy makers, user fees must enhance service provision and are an appropriate option in situations where:

• Private benefits outweigh the benefits to society as a whole of providing the service
• Poor people are not disproportionately excluded from accessing the service
• The service could not be provided without revenue from fee payments
• Charging for service is the must efficient mechanism to manage demand which would otherwise be excessive.