The earliest years of a child’s life are a crucial period: it is when the foundations of physical, emotional and social development are laid. Public investment in these early years can reap huge benefits in terms of supporting every child to reach their full potential.

At Nesta, we wanted to understand where resources are being prioritised in Wales and how spending on Wales’ youngest citizens has changed over time. We commissioned Alma Economics to carry out a review of public spending on children aged 0–4 in Wales between 2010 and 2023.

All monetary amounts are adjusted for inflation and presented in 2025 prices. Due to gaps in the data, the amounts shown here are estimates.

Here are our five key takeaways from the report.

Overall spending on the early years in 2022-2023 was approximately £930 million - similar to 2014-2015 levels. However, over those eight years there was a U-shaped trend of decline and recovery: spend gradually decreased by approximately 75 million (an 8% decrease) before rising again. And whilst the figures themselves are similar in 2014-2015 and 2022-2023, spending on early years has dropped as a share of total public expenditure, from 2.3% in 2014-2015 to 1.6% in 2022-2023.

Overall spending can tell us one thing, but to understand what this means for individual children, we need to look at spending per child. There has been an increase of 15% in estimated per-child spending - from £5,380 to £6,200 - since 2014-2015. This increase is largely due to a smaller early years population, which has shrunk by 17%, rather than significant new funding for this cohort.

The analysis suggests that spending is becoming less targeted and more universal as there has been a decrease in welfare spending (such as child benefit and Universal Credit) which is highly targeted and an increase in spend on healthcare and childcare, which tend to be less focused on particular populations. However, the data available doesn’t allow for a unified analysis of how early years spending in Wales differs by socio-economic group, meaning it is difficult to understand if the investment is reaching the children who need it most, and if Welsh Government spending is delivering A More Equal Wales.

Over the last eight years, the estimated proportion of early years spending allocated to welfare has decreased from over two-thirds (69%) to just over half (55%). Whilst welfare spend for all children in Wales has dropped, the fall for the early years is particularly stark: estimated spending for children aged 0–4 dropped by 18%, compared to a 9.5% decrease for the 0–18 population as a whole.

Children living in poverty are more likely to miss out on the resources and experiences needed for healthy development. In Wales, 40% of children under five live in poverty: the highest percentage of any age group. Given the importance of the early years on future development, the link between poverty and life chances, and the number of young children in Wales living in poverty, this decrease in welfare funding for Wales’ youngest citizens is highly concerning. The removal of the two-child limit in the UK is a welcome first step, but more public expenditure in Wales needs to be focused on targeted support to alleviate poverty and ensure that children under four living in poverty get the same opportunities to thrive as their more affluent peers.

Excluding the Healthy Child Wales programme (due to missing data and methodological constraints), estimated spending per child on healthcare grew by 25% from approximately £740 in 2014-2015 to £900 in 2023-2024 for the 0–4 group. This significantly outpaces a broader increase of 4% for the 0–18 group.

While primary care spending fell by 12%, reactive spending saw massive spikes, particularly in A&E, which increased by 130% and in mental health, which increased by 181%. Per-child healthcare spending has increased across all quartiles but remains highest in the poorest areas.

It’s not clear exactly what is driving these changes. Similar patterns around A&E have been seen in England and Scotland, although the percentage increase in Wales are the most substantial of the three nations. This increased spend could be, in part, a result of reduced preventative care, decline in health visiting contacts, and limited access to GPs meaning parents instead take their child to A&E, particularly following the Covid-19 pandemic.

Both estimated per-child and overall spending on children’s services and social care have steadily increased. Spending per child has surged by 60%, from £820 in 2010-2011 to £1,340 in 2023-2024. The increase is primarily driven by a 64% rise in spending on children looked after services.

In 2023-2024, over half of children’s services and social care spend went towards children looked after services. Wales has both higher overall rates of children looked after, and a steeper recent increase, than any English region.

Per-child spending has also risen steadily in two other areas: Children’s Centres/Flying Start (up from £150 to £210) and Total Family Support Services (up from £110 to £150) between 2013-2014 and 2024-2025. Higher spending on Children’s Centres, Flying Start, and Early Years reflects the Welsh Government’s commitment over this time to childcare expansion, including the current phased rollout of the Flying Start programme.

Significant gaps in the data make it difficult to identify some of the details of how public funds are being spent. Notably, missing data includes the Healthy Child Wales programme, maternity services, specific Welsh Government household support and the inability to de-tangle Flying Start spend.

Wales has a duty under the Wellbeing of Future Generations Act to be preventative - but the way the data is currently reported and classified means it is not possible to cleanly separate preventative spend from reactive, demand-led spend. A similar issue was reported in Scotland. For an analysis of preventative/reactive spend to be possible in the future, the Welsh Government will need a classification framework that enables the identification of primary, secondary and tertiary spend. Examples of how this could be done for children’s social care have been put forward in Counting What Matters, a joint report by Demos and The Health Foundation.

Data tracking needs to improve if we are to truly understand how the Welsh Government is supporting Wales’ youngest citizens. In order to more effectively track where the money is going and evaluate if policies are working as intended, there will need to be improvements in the data collected on children’s outcomes, as well as closer tracking of how public funds are being spent.

The goal isn’t to simply collect more numbers. A more intentional approach to data collection will allow the Welsh Government to answer key questions such as ‘Is the spend reaching the families that need it most?’ - paving the way for spend to be directed where it will have the greatest impact for children in their earliest years.