Jamila Headley (BA, MPH), PhD Student, University of Oxford

1. In plenty and in time of needThe political economy of allocating public resources to health in Barbados Jamila Headley (BA, MPH), PhD Student, University of Oxford Priorities 2010, April 23-25, Boston MA

2. Objectives To make the case for more public health research on the allocation of public resources to health To discuss general trends in health expenditure in Barbados from 1974 to present To describe the nature of the budgetary process, especially as it relates to health To consider how public expenditure on health is affected in times of economic crisis To consider the implications for changes in the overall size of the health budget for priority setting

3. Priority Setting and the Public Budget Governments must divide scarce financial resources between health, education, the building of roads etc. At the national level, this is done through the public budgetary process The process determines both the overall size of the health budget and often how these resources will be distributed at the macro-level Yet the study of public budgets, and the overall allocation of public resources for health, has been largely neglected in the field of public health

4. Why the neglect? • It is thought to go beyond the technical remit of public health • Budgeting is incremental, relatively predictable and therefore not very interesting.

5. Incremental theories of budgeting • Rose to prominence in the early 1960s • Charles Lindblom (1959), Aaron Wildavsky (1964) and Richard Fenno (1966) • The most influential descriptive and explanatory theory of public budgeting • Budgets display a high degree of stability over time • Each year’s budget varies only marginally from the previous year’s • Generally the budget increases slightly year after year Background Main ideas

6. What are budgets? A mechanism for allocating scarce resources A historical record A plan for the future The result of a political process What do they tell us? How government will generate revenue and how much government will spend What government’s priorities are National consensus about the role of government A whole lot about the distribution and dynamics of power Why are they important? They redistribute wealth They have fiscal and economic consequences They allow citizens to hold government accountable Financial resources are critical to implementation Source: Wildavsky A. The Politics of the Budgetary Process. Boston: Little, Brown; 1964.

7. Budgets are “the most operational expression of national priorities in the public sector” Aaron Wildavsky (1964) “The Politics of the Budgetary Process”

8. Barbados: A brief background • Only 166 square miles (430 square km) • Population: 285,000 • Former British colony, which gained independence in 1966 • GDP per capita $13,003 USD (2007) • HDI rank 37 • Life expectancy of 74 years • IMR of 11 per 1,000 live births • Small island developing state

9. The data • Yearly ‘Approved Estimates’ records from the MoF • Components used to compute health spending are consistent • All data has been adjusted for inflation and population growth, where appropriate. • Interviews with key actors in the process • Non-participant observation of the budgetary process over a 2 year period

10. The Budget: Actors & Process MoH, Heads of Agencies, HPU Prime Minister, Cabinet, MoF Each agency/service area prepares their budget Internal consultations with Minister, PS and HPU Central Bank, MoF Prime Minister, Parliament, Senate MoF, MoH, Heads of Agencies Ceilings are set for each ministry/area based on Cabinets priorities Policies for revenue generation devised MoF advises health ministry of ceiling Estimates are debated Any changes are made and vote is taken to approve estimates Consultations to finalize health budget Any ceiling overruns and defended and considered Targets are set for deficit and inflation Level of revenue estimated and total expenditure recommended Political and socio-economic environment Domestic interest groups International actors (e.g. WB, IMF, IADB)

11. General trends in public spending, 1974-2010 • Government revenue as a percentage of GDP has gradually increased (from 20-34%) • Government expenditure has more than tripled • Spending is usually pro-cyclical (i.e. very responsive to changes in revenue) • Signs of a counter-cyclical response to the current economic crisis • Two main parties are both generally fiscally conservative

12. Public resource allocation to health, 1974-2010 • Real public spending on health has doubled since 1974 • Per capita expenditure on health increased from $273 to $543 USD. • Generally incremental, but with sharp decreases and increases at several points • Health funding was relatively stagnant from 1974 to 1986 • Changes in government revenues does not fully account for fluctuations

13. Fluctuating priority for health • The percentage of GGE allocated to health gives us an idea of priority status • Percentage of GGE for health has ranged between 8.9 and 15.9% • Priority for health has been quite dynamic over the study period • Since 1996 there has been a general trend of public divestment from health

14. Key factors affecting public resources for health • Elections • Political ideology/development model • Other priorities • Economic growth • Recessions • IMF austerity programs Political Factors Economic factors

15. Risky elections and priority for health

16. Public resources for health in difficult economic times

17. Resources for health in times of economic crisis

18. A tale of four recessions

19. Some observations • The findings of the effects of economic recessions on public resources for health are mixed • In 2 cases priority for health was protected or augmented • In the remaining cases, the priority status of health was reduced considerably • The occurrence of general elections (1991), and IMF intervention (1982-83) might hold some explanatory power • The relationship between the macroeconomic environment and public financing for health is not clear-cut

20. IMF austerity program (late 1991-1993) Cause • High government spending leading up to the 1991 elections against a backdrop of global recessionary conditions, resulted in depleted foreign reserves and BOP problems. Features • Expenditure reduction – 8% cut in wages across the entire public sector, lay-offs of over 2000 public sector employees • Increased taxation - surtax between 1.5-4% on income, increased consumption taxes and levies Effects of the health sector • 21% decline in real public expenditure on health over the duration of the program • The percentage of government expenditure allocated to health was reduced by 2.13%

21. Contrasting concerns in the current crisis(Based on observation of the budgetary process and interviews) Ministry of Finance Ministry of Health • Size of deficit • Containing inflation • Level of Foreign reserves • Political support • Unemployment/job creation • Stimulating economic growth • At least maintaining the budget at the previous year’s level • Providing health care in the face of increasing demand • Protecting the size of the health workforce • Maintaining and improving quality of care

22. In this clash of concerns, the Ministry of Finance generally comes out on top

23. Implications for the public health sector • More stringent enforcement of budget ceilings • Programs funded by foreign sources are protected, causing others to disproportionately bear the brunt of cuts. • There is a resultant squeeze on capital expenditure and goods and services • Unpredictability in actual month-to-month disbursement of funds • However, personal emoluments are generally safe-guarded.

24. Preserving priority for health in the hard times • The role and power of choice by policy makers • Use of evidence in decision-making and opportunities for improved efficiency, effectiveness and equity in the health system • Addressing the impact of IMF stabilization programs on the health system

25. Concluding thoughts • Public financing for health is extremely vulnerable in times of crisis • The WHO is encouraging countries to protect health spending in the wake of this global economic crisis • In Barbados, and other developing countries, I do not believe that the task WHO has set before us is an impossible one.

26. Thank you!