Early years spending in Scotland spans both devolved and reserved policy, and hence comes from a combination of UK government and Scottish Government or Scottish local authority budgets. Healthcare, early education and childcare, and children’s services and social care are devolved policy areas in Scotland. Following the Scotland Act 2016 and the Social Security (Scotland) Act 2018, a significant amount of welfare policy has also been devolved to Scotland. However, much of welfare in Scotland remains reserved, controlled by the UK government.

This report provides a comprehensive analysis of public spending on early years support in Scotland. We examine trends in the level and composition of spending in four areas: welfare, healthcare, children’s services and social care, and early education and childcare.

• Early years spending in Scotland. The report identified that public spending on children aged 0-4 in Scotland amounted to £9,700 per child on average or £2.4 billion in total in 2022/23. The largest broad area of early years spending is early education and childcare, at £4,600 per child in 2022/23 (£1.1 billion in total) or 48% of the total.
• Changes in spending. The total level of early years spending per child in Scotland changed little in real terms from 2010/11 to 2019/20, remaining at around £7,200 per child. Between 2019/20 and 2022/23, it increased to almost £9,700.
  • Welfare spending per 0-4-year-old fell from £3,820 per child in 2010/11 to a low of £2,390 per child in 2019/20, and has since risen to £2,960 per child by 2022/23. This is still about 30% below its 2010/11 level.
  • Healthcare spending per 0-4-year-old increased from £910 in 2010/11 to £1,290 by 2023/24 (a 39% increase).
  • Children’s services and social care spending per 0-4-year-old increased from £840 in 2010/11 to a peak of £920 in 2019/20 and then stabilised at £880 in 2023/24 (a 5% increase).
  • Early education and childcare spending per 0-4-year-old almost tripled from £1,600 in 2010/11 to £4,670 in 2023/24.
• Big shift in composition of spending since 2010. There has been a shift in the composition of spending happening throughout the period – mostly away from welfare (which fell during the 2010s and has stabilised since) and towards early education and childcare (which has risen almost continually).
  • Welfare has fallen from 53% to 30% of total early years spending in Scotland.
  • Early education and childcare has risen from 22% to 48%.
  • Children’s services and social care has fallen slightly from 12% to 9% of the total. This reflects little overall change in the level of spending per child in real terms (alongside increases in per-child early years spending overall).
  • Healthcare has remained stable at around 13% of total early years spend, meaning it has grown approximately in line with total early years spending.
• Some clear links to policy choices.
  • Falls in welfare spending are the consequence of large cuts to the generosity of many benefits and tax credits made by the UK government during the austerity of the 2010s. These cuts have affected all working-age families in receipt of benefits and were not explicitly targeted at the early years, though a number of them were targeted specifically at families with children. Since 2019/20, welfare spending in Scotland has stabilised and, in fact, slightly increased, in part due to the introduction of the Scottish Child Payment (SCP) for Universal Credit recipients in 2021, and its subsequent increases in generosity (which will have a further increased effect in future data releases, given the timeline of those increases).
  • The expansion of funded childcare hours from 600 to 1,140 annually for eligible 2-year-olds and all 3-year-olds in August 2021 has been a key driver of the significant increases in early education and childcare spending in recent years.
• Distributional implications. Although total early years spending has increased in the last few years, changes are highly unlikely to have affected different types of families in the same way. Welfare is by far the most strongly targeted towards low-income households among the spending areas, with receipts highly concentrated among low-income households, but it is where the largest cuts to early years spending have been made since 2010/11, due to UK-wide cuts. Conversely, we show that spending on early education and childcare, which has been the major rising area of early years spending, is relatively equally distributed between areas with high child poverty rates and areas with low child poverty rates.