A/HRC/30/39 A. Public finance for water, sanitation and hygiene: Who benefits and who does not? 37. Almost all large-scale water and sanitation systems receive some level of public financing. For sanitation in particular, while it has long been known that the costs of not having access far exceed the actual cost of providing access, it has been hoped that private sector participation would be sufficient to improve access to sanitation. However, more recently, research by the World Bank and others is beginning to show that it is unrealistic for the private sector to fill the service gap alone. 23 States must be the driving force in investments in sanitation, in particular to cover the costs of constructing and maintaining infrastructure, and in some cases also for operation, for example where pit-emptying is prohibitively expensive. 38. In many instances, however, public financing is unequally distributed. Middle-class households often benefit from subsidies, both direct subsidies and “hidden” subsidies. Direct subsidies include tax breaks or financial incentives for constructing a toilet, which, when poorly targeted tend to benefit middle-income families. Subsidies are “hidden” when public financing is used to construct infrastructure and services that are intended to be used by all, but in fact are only available to middle- and high-income households. 1. Public finance for networked provision 39. Public finance is very common in large-scale piped water and sewerage systems, with governments (and other funders, such as multilateral and bilateral donors) investing significantly in networks, water treatment plants, wastewater treatment plants and trunk sewers. Provided that all households within a city are able to connect to use these services, this may be an efficient approach to ensuring that public finances are used well for water and sanitation service provision, even if it also results in subsidizing service provision for those who would not need such support to ensure affordability. 40. In the majority of developing countries, piped water and sewerage systems are accessible only to a minority of those living in urban areas – and to very few of those living in rural areas.24 Focusing public finance on networked provision thus disproportionately benefits comparatively better-off households, unless specific action is taken to extend networked provision to all residents. 41. Public finance may also be provided for the maintenance and extension of water and sanitation services and facilities, including for connection charges. Where extensions are expected to reach all households, they can be an appropriate form of providing support to low-income households, as they will ensure more affordable and regular charges for water and sanitation than charges of informal provision. 23 24 World Bank, Keynote Speech at the 2014 Sanitation and Water for All High Level Meeting by Shanta Devarajan, Chief Economist, World Bank, April 11th 2014, available from http://sanitationandwaterforall.org/?download=663; Guy Norman, Catarina Fonseca and Sophie Trémolet (2015), “Domestic public finance for WASH: what, why, how?” Finance Brief 1, Public Finance for WASH, available from http://www.publicfinanceforwash.com/sites/default/files/uploads/Finance_Brief_1__Domestic_public_finance_for_WASH.pdf . World Health Organization (WHO)/United Nations Children’s Fund, Joint Monitoring Programme, “Progress on Sanitation and Drinking Water 2015 Update and MDG Assessment” (Geneva, 2015), pp. 8-9. 11