The first question to ask is whether excreta management should be subsidised at all. Gregersen (1984; cited in Pardo 1990) pointed out that public incentives to private individuals are justified in an economic sense when the social benefits go beyond the private benefits associated with a given private action. The public health benefits of good sanitation go beyond the private benefits which the individual gains by choosing open defecation over latrine use, therefore subsidising excreta management is justifiable. This turns the subsidy question not into one of why but how.

The negative effects of incorrectly applied subsidies are similar in the sanitation sector as they are in other sectors, namely:

• Dependency - If householders become reliant on subsidies for building latrines, it grows into an expectation and an unsubsidized replacement latrine is not built when the subsidised latrine reaches the end of its life. Householders have to consider latrine building and maintenance as their own responsibility and have to value its benefits.

• Buying participation – Where there is no real demand for using a latrine, organisations can entice householders to build a latrine by offering free latrine components. Householders, adopting an attitude of “Its free, it would be silly to refuse it”, obtain a slab even though they have no intention of using it or completing the latrine. The implementing organisations may recognise the problem but find it difficult to make changes to their approach as the assumption that every distributed latrine slab is equivalent to a completed and fully used latrine is a convenient assumption to make when reporting to a donor.

• Costly – Providing long term support for latrine building is expensive and unsustainable. There is not enough public money to close the sanitation gap if the government had to provide every household with a toilet, even a very basic one (Methra and Knapp 2005). This makes the scaling up and replication of subsidy dependent sanitation projects prohibitive and impossible.

• Poor use of public money – When a construction subsidy is given preferentially to one producer to supply households with toilets, as is often the case with supply-led sanitation projects, this can lead to inefficient production and distort the behaviour of the private supply market.

• Inattention to affordability and replication - If the subsidy cushions the price the consumer has to pay and makes say a $250 ventilated improved pit latrine available to the householders for just $50, when the subsidy is removed the VIP latrine becomes unaffordable to the intended customers and the likelihood of replication without external support highly improbable.

• Does not reach the poor – Typical construction subsidies used for sanitation have tended to be captured by the wealthy and middle class, for many reasons and do not reach the poor for whom they were created and who are most in need. When subsidies are built into the production of a component or the construction of a facility, it is impossible to target and screen for those households within a community who are truly in need of it. The “one-size” blanket subsidy does not fit the needs if it is also locked into a particular technology option and that option is not suited to the situation of the poor. The issues of size and wealth of families, which will differ greatly even within poor areas, is also ignored as is the fact that latrine construction costs vary from place to place within a country or area depending on many factors (Mukherjee 2001).

• Slows rates of adoption – Households who can afford to and would have invested their own money in latrine building wait to adopt improvements in the hope of gaining subsidised support. Yet because there is never enough subsidy to go around, delay leads to no action at all.