Beyond Spend: Why the UK faces a structural Early Years challenge

Beyond Spend: Why the UK faces a structural Early Years challenge 

We teamed up with the Henry Smith Foundation to undertake a rapid evidence review on the financing of Early Years education and care across 10 European countries, and what the UK can learn. The clear conclusion is that outcomes and quality of provision depend less on total spending and more on the financing system architecture - who pays, who controls provision, and the levels of funding for workforce development and remuneration.

Context And Purpose

The UK’s early years debate often gets stuck in a familiar loop: families can’t afford childcare, providers can’t make the numbers work, and the workforce is stretched thin. Those pressures are real, but they are also interconnected. This review was produced to examine what sits underneath them.

Across higher-performing countries, financing is not just a way of paying for services. It sets the rules of the system. It determines whether access to services and support is consistent, whether quality can be sustained, and whether early years is treated as a public good or a private purchase. The UK’s challenges are therefore primarily structural, and that is why incremental changes rarely deliver lasting change.

What The Report Covers

The report reviews evidence and system design across 10 European countries recognised for their strong child outcomes and childcare provision: Austria, Denmark, Finland, France, Italy, Lithuania, Portugal, Slovenia, Spain, and Sweden.

It focuses on how money flows through ECEC systems: who is entitled to what, how funding enables and protects affordability for families, how provision is governed and regulated, and how workforce development is funded and sustained. It draws out common patterns across higher-performing systems and contrasts them with the UK approach, specifying England where the evidence or policy is England-specific.

Key Findings

The key principle across all countries reviewed was that ECEC works best when it is designed as a right, not a commodity.

In higher-performing systems, early years is positioned as a public good. Children have clear entitlements, and families can rely on predictable access. That framing supports stable funding and clearer expectations of quality, rather than patchy provision shaped by household income or employment status.

Affordability is protected through progressive financing.

Rather than expecting families to carry the cost risk, stronger systems use progressive mechanisms that limit fees and protect lower incomes. The outcome is not only lower cost pressure, but a simpler experience, fewer cliff-edges, fewer overlapping supports, and fewer families falling through gaps. In contrast, the UK system is widely experienced by families as expensive and hard to navigate, with multiple varying benefits, rights to access, subsidies, and fees – making it hard for families to navigate and even more significantly resulting in  unequal access.

Provision is usually publicly-provided – providing accountability and stability

Across the review, provision is predominantly public, publicly controlled, or tightly governed in ways that ensure public accountability. Where for-profit provision exists, it tends to play a more limited role. This matters because financing design shapes provider behaviour: whether the system can plan for capacity, invest in quality, and remain resilient through shocks. The UK stands out for its reliance on private for-profit provision, including private equity-backed chains, within a market where financial pressures can pull against long-term quality and workforce investment.

Quality is built through the workforce, funded accordingly.

High-performing systems treat workforce investment as core infrastructure. Pay, training, professional status, and working conditions are funded as the mechanism through which quality is delivered. The UK’s workforce challenges - recruitment, retention, and variation - are not separate from financing design. They are a predictable result of what the system funds, and what it does not.

The UK’s problem is design and complexity, not simply spend.

The report does not argue that spend levels are irrelevant. However the structure of how funding works and is managed is key. The UK invests around 0.3–0.5% of GDP in early years, compared with countries such as Sweden at around 1.6% and Denmark at around 1.2% (with France slightly above 1%). In England, the state pays for around 80% of provision (approximately £8.5bn), yet families still face high fees and providers face tight margins. That combination points to a system where money flows through multiple routes, with friction built in  - and costs and risks are shifted around rather than resolved.

Country Example: Denmark

Denmark illustrates what coherent financing design can enable. Public funding plays a central role, affordability is protected, and the workforce is treated as a skilled profession within a stable delivery environment. The lesson is not that the UK should copy Denmark wholesale. It is that structural choices including rights, public accountability, and investment in the workforce, create the conditions for consistently stronger outcomes.

Outcomes And implications

The research clearly indicates the UK will not solve its early years challenges through marginal changes alone. If the problem is structural, the response has to be structural.

For policymakers, this means shifting from tweaking entitlements and subsidy rates towards redesigning how the system is financed and governed. This incorporates clear entitlements for children and families, making early years care affordable across all income levels (particularly the most underserved) wherever you live, and embedding a workforce strategy into the national funding model.

The review reinforces what many in the sector already know: market fragility, workforce strain, and uneven access are symptoms of a system that is difficult to run sustainably. Stability and simplicity are not optional extras; they are prerequisites for reliable delivery.

For funders and advocacy organisations, the review offers a shared evidence base for pushing for system-level change. It also sharpens what “reform” needs to mean: not simply more money, but better system architecture - clearer rights to early years provision for all, consistent affordability, accountability over providers, and sustained workforce investment.

What happens next?

We will use this review to inform ongoing conversations with policymakers, sector leaders, funders, and advocates about what structural reform could realistically look like in the UK context. The aim is to support a more confident move away from short-term fixes and towards long-term system design.