Some of England’s largest councils have warned that the increasing cost of supporting children with special educational needs and disabilities (SEND) could push some local authorities to bankruptcy within a few years.
The County Councils Network said many local authorities were struggling to cope with increased demand and that the money councils receive from central government under the Dedicated Schools Grant (DSG) was not sufficient.
The report states the national high-needs block deficit will hit £6.6 billion in 2025/26, and, without urgent reform, will more than double to £13.4 billion by March 2028, when the statutory override that currently shields councils’ balance sheets is due to end.
One in three councils say they could be forced to effectively declare bankruptcy before the override ends because of increased costs. That rises to nearly nine in ten once the override is lifted, the report warned.
Kevin McDonnell, headteacher at Stormont House School (a school for children with SEND in Hackney, London) said: “If we truly want a high-quality, inclusive education system we will need to resource it properly. The current system is adversarial and often unhelpful.”
Even with the override currently in place, councils are experiencing severe financial pressures. Lost interest, borrowing requirements and other associated costs are expected to total £400 million this year, rising to nearly £1 billion by 2028/29. Finance officers warn this is already eroding day-to-day budgets at a time when councils are struggling to maintain core services.
Mr McDonnell said: “The statutory override is hiding the scale of the problem and in March 2028 we risk an implosion of local authority services through bankruptcy. This is surely something all political parties would wish to avoid. Wouldn’t it be great if politicians could agree how to address this before we reach the point of crisis, taking into account the views of those directly involved?”
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Ninety percent of councils could declare bankruptcy
By 2026/27, the national SEND deficit is expected to exceed all local authorities’ usable reserves. Two years later, it will surpass both usable and ring-fenced reserves combined, leaving councils without the financial capacity to absorb the losses.
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Finance leaders say that without government intervention, deficits currently concealed within ring-fenced accounts will soon overwhelm the entire local government system.
Warnings from senior finance leaders
Owen Mapley, chief executive of CIPFA (The Chartered Institute of Public Finance and Accountancy), said the latest figures confirm the severity of the crisis: “CIPFA has long warned that the broken SEND funding system threatens councils’ financial stability.
The latest ALATS, (Association of Local Authority Treasurers’ Societies), data confirms the situation is now critical.
“Even with the statutory override, some authorities could face effective bankruptcy unless the government sets out how these deficits will be resolved and the system reformed,” said Lorna Baxter, the President of ALATS. She added that councils can no longer sustain the financial strain:
“The ALATS survey has clearly demonstrated the scale of the financial crisis in SEND.
“We often hear of the black hole in public finances but SEND deficits totalling billions of pounds are being hidden in local authority accounts. Without prompt government intervention, we risk an unprecedented local authority financial crisis.”
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CIPFA and ALATS are now asking ministers to urgently outline how existing SEND deficits will be funded and to develop a sustainable long-term settlement that protects the future of council finances.
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Rachel Filmer, Campaigns Manager for Special Needs Jungle, co-founders of the Save Our Children’s Rights campaign said: “Due to a complete failure to invest in the infrastructure and early intervention needed by children and young people with SEND, councils are now paying out billions a year to private schools and transport companies.
“This is not the fault of disabled children or their families, who need and are legally entitled to an accessible education.”
A Department for Education spokesperson said: “This Government inherited a Send system on its knees, with thousands of families struggling to get the right support.
“We’re determined to put that right by improving mainstream inclusion so every child can thrive at their local school.
“We’ve held over 100 listening sessions with families and will continue engaging parents as we deliver reform through the Schools White Paper.
“We’re already making progress – with better training for teachers, £740 million for more specialist places, earlier intervention for speech and language needs, and Send leads in every Best Start Family Hub.”
