What Australia can learn from the UK’s free childcare funding model

The United Kingdom’s bold expansion of free childcare has been described as both a “fantastic success story” and a policy at risk of collapse. The soaring demand for subsidised places has exceeded expectations, placing enormous pressure on funding and service delivery. 

For Australia, which is also grappling with childcare affordability and workforce pressures, the UK experience offers critical lessons.

According to Yahoo News,The UK government’s promise of 30 hours of free childcare for children aged nine months to five years has been hugely popular. Enrolments surged 25 per cent above predictions, with 379,000 children accessing the program compared to an initial estimate of 302,000.

While Education Secretary Bridget Phillipson called this surge a “good problem to have”, the cost blowout is significant. The program spent £2 billion last year against a planned £1.6 billion, and the Institute for Fiscal Studies (IFS) warns the shortfall could exceed £1 billion annually as the scheme expands.

IFS Associate Director Christine Farquharson cautioned that the Department for Education may face “difficult choices”, including cuts to other education spending, to keep the scheme afloat.

Beyond funding, the UK sector is struggling with staff shortages and rising operational costs. 

The Early Years Alliance has warned that 80 per cent of hours delivered under the program are government-funded but inadequately resourced, creating conditions for a slow infrastructure collapse.

Neil Leitch, CEO of the alliance, warned:

“If you don’t give providers enough money to deliver a service, at some point they stop.”

Nurseries have flagged that many will be forced to limit places, raise fees, or close without urgent investment. The National Day Nurseries Association (NDNA) reports almost 70 per cent of services cannot offer the full number of places they have capacity for due to staffing issues.

Lessons for Australia

Australia’s Child Care Subsidy (CCS) has been central to affordability reforms, but recent data suggests savings are being eroded by rising fees and cost-of-living pressures. Reporting by The Sector has highlighted how cheaper childcare savings continue to erode as prices rise again and how out-of-pocket expenses for families have increased by 1.3% despite government efforts.

Earlier analysis also found that changes to the CCS yielded only modest increases in long day care attendance, raising questions about whether current reforms are achieving their intended outcomes.

The UK’s experience identifies key considerations for Australian policymakers:

• Funding must match actual delivery costs – underfunded subsidies risk driving providers out of the sector.
• Workforce investment is critical – recruitment and retention remain persistent challenges in both countries.
• Expansion without infrastructure – without enough services or staff, increased demand simply creates waiting lists and parent frustration.
• Affordability and quality must align – cost reductions cannot come at the expense of children’s learning outcomes or educator wellbeing.

Supporters of the UK scheme argue that higher uptake indicates success, with more parents, particularly mothers, entering or increasing participation in the workforce. This aligns with Australian research linking affordable childcare to economic growth.

However, the UK case shows that popularity alone does not ensure sustainability. Without a funding model that reflects the true cost of delivering quality early learning, demand will outstrip supply, undermining both workforce participation goals and service quality.

Australia is currently pursuing its own affordability reforms through the Cheaper Child Care package. But as previously reported by The Sector, four key challenges remain, including fee inflation, workforce shortages, and limited access in some regions.

The UK’s experience highlights that ambitious childcare policies require equally ambitious investment. Subsidies must keep pace with actual costs, and reforms must be paired with strategies to strengthen the educator workforce and ensure services can sustainably meet demand.

Australia’s childcare affordability debate is far from settled. While there is strong support for making early education more accessible, the UK shows how underestimating demand and underfunding delivery can destabilise an entire sector.

The message is clear: if Australia moves towards more extensive subsidies and free childcare it must ensure the policy is backed by robust funding, workforce planning, and quality safeguards.

Providing greater access to early learning is a goal worth pursuing. But, as the UK case demonstrates, success depends on matching ambition with investment.

This article is based on reporting from Yahoo News and The Sector Publishing.