Over the next few months, policymakers will have incredibly difficult choices to make about how to spend Westminster government resources to achieve its priorities. To provide context and inform these choices, Nesta commissioned an audit of public spending on children aged 0-4 in England across welfare, health, education (childcare) and children’s services and social care. The report looks at how the level, composition and distribution of spend has changed between 2010/11 and 2022/23, the latest year all these data were available. 

In 2022/23, public spending on children aged 0-4 in England amounted to £6,400 per child, or £21 billion in total. This figure has changed little since 2010/11 when spending amounted to £6,600 per child. This could be seen as good news because since 2010, public spending on many areas of public services has fallen. Bluntly, it could have been worse for the early years. However, standing still is unlikely to deliver better outcomes.

This government has an ambitious agenda to radically shift the trajectory of early childhood outcomes, and it is difficult to imagine how it will achieve this without increasing spending on children 0-4. With money being exceptionally tight at the moment, if the Prime Minister wants to achieve improvements in school readiness as set out in his Plan for Change and the Secretary of State for Education really wants the early years to be her number one priority, then additional funding will need to be found from other parts of the budget to allow for this.

Raising a happy, healthy, learning, safe and engaged child requires meeting a range of needs that extend far beyond educational settings. Health services, from midwifery to health visiting and mental health services, play a critical role in supporting parents and especially mothers’ physical and mental health, in providing information and support to promote nurturing care, and ensuring that developmental problems are picked up early. Similarly, supporting (via benefits) families who are hit the hardest by the financial cost of raising a family, parent-friendly workplace policies, and secure housing has been shown to have long-lasting impacts on child outcomes. 

Yet, too often we focus solely on early education and childcare, a Department of Education (DfE) responsibility, when thinking about the early years in England. Focusing only on this part of the picture misses an opportunity for more systemic approaches that leverage all parts of the system and all the touchpoints between families and the state to improve early childhood outcomes. It can also present a misleading picture of the state of spending in the early years. For instance, while DfE spending on early education and childcare has increased a lot over the last 15 years, this has been offset by reduced spending elsewhere. To make significant improvements in school readiness levels, investment on children aged 0-4 will likely require increases in spending across areas of public spending beyond early education and childcare.

Just as important as how much we spend are the questions of what and who we spend money on. The report helpfully sheds light on a number of changes in the composition and distribution of spend across families.

First, there has been a shift in spend from more preventative to more reactive services.

As well as reductions in total spending on children’s services and social care (from £1,200 to £900 per child and reduced from 18% to 14% of total spend), there have also been significant compositional changes within this category. Broadly speaking, preventative services spend, for example on early-years family services, went from about 60% of all spend within this category to 30%, while children’s social care spending went from 40% to 70%.

Healthcare spending has almost doubled from £800 to £1300 per child per year, with this overall increase driven disproportionately by spending on children from lower-income households. While it was out of scope for this research to dig into the factors driving these changes, the report notes that they are unlikely to be the result of a deliberate policy shift and rather a reflection of increased levels of need. 

Going forward, a shift back to a more preventative approach is critical to unlock the potential of early intervention to reduce future spending pressures. Such a shift is always difficult to achieve, and especially so in a fiscally tight environment, but the fact that early years is high on the political agenda provides an opportunity to do that. This however will require not being too myopically focused on hitting the 2028 target and investing enough in the system to join up around improving the early outcomes of all children (even those who may not contribute to hitting the target). 

Second, spending has become less intentional about mitigating the impact of disadvantage on children over time.

The second notable compositional and distributional shift described in the report is the reduced dominance of welfare spending and the increased dominance of childcare spending. Childcare spending per year per child has gone from £700 to £2,000. Meanwhile, welfare spending has gone from £3,950 to £2,950.

While these changes may have had a fairly neutral overall impact on the public purse, they have not had a neutral impact on private purses. Expanded childcare subsidies have increasingly benefited working families, with at least half of the free entitlements now being used by families in the top half of the income distribution. Welfare cuts have hit families on the lowest income the hardest.

Going forward, if the government is serious about raising the chances that all children reach their full potential in the early years regardless of family background, it will require particular attention – and spending – to support the needs of lower-income children whose developmental outcomes are on average far behind their more affluent peers by the time they start school.