WIREDGOV

Eight in 10 councils warn they will become insolvent over mounting deficits related to the cost of supporting children and young people with special educational needs and disabilities, a new survey by the Local Government Association suggests.  

The LGA said cost pressures reflect a sharp rise in need for support. There were nearly 640,000 Education, Health and Care Plans as of January 2025. The number has increased each year since their introduction in 2014.  

Councils are firmly committed to upholding the entitlements of all children and young people with SEND but are clear that the system needs urgent reform so children and young people receive the high quality support they need and experiences are improved for families.       

Councils are currently able to keep high needs deficits – an overspend where SEND costs exceed the budget available – off their main balance sheets through a temporary accounting mechanism known as a “statutory override”.  The survey found 95 per cent of councils responding had high needs dedicated schools grant (DSG) deficits.  

With this ‘override’ due to end in March 2028 when the deficits would move on to councils’ books, 79 per cent of councils responding to the survey said they will not be able to set a balanced general fund budget in 2028/29.  

Without action, the LGA said this risks undermining their ability to plan sustainable services and improve outcomes for children and families.  Despite record levels of investment and the high rate of assessment and identification of needs, there is no clear evidence that outcomes for children with SEND have been improving.

The provisional Local Government Finance Settlement in December indicated the Government would act on the deficits. With the final settlement expected to be published soon, the LGA is urging the Government to write off councils’ high needs deficits.   

The Government is expected to set out its plans to reform the SEND system in the upcoming Schools White Paper.  

The importance of reform is demonstrated by the fact that councils said that if the deficits were removed in 2028 but the system was not reformed almost all who responded said they would end up having to continue to overspend – meaning that the deficits would quickly return.  

The Office for Budget Responsibility has forecast that councils’ cumulative high needs deficits will reach £14 billion by the end of 2027/28.  

The LGA said reform must be designed around better outcomes for children and young people and a system that works with families rather than against them.

Cllr Amanda Hopgood, Chair of the Local Government Association’s Children, Young People and Families Committee, said:  

“There is a widely held consensus that the SEND system is broken and not working for children, their families and councils.  

“Councils are committed to supporting every child and young person to achieve their potential and clearly what is important is that children and young people get the support they need. But under the current system, the rise in support need has left many councils buckling under the strain.   

“The huge costs in providing support are threatening most councils with insolvency.   

“This is why we are urging government to write off councils’ high needs deficits in the final Local Government Finance Settlement.

“However, it is important to note that the challenges within the SEND system are not just financial. The Schools White Paper must deliver brave and bold reform where more children are able to get the support they need in a mainstream school, without having to go down the route of needing a statutory plan.”  

Notes to editors  

Questions on DSG deficits and SEND were included in a wider survey distributed to chief financial officers of the 315 English principal authorities in LGA membership between 19 December 2025 and 16 January 2026 and 154 responses were received – a response rate of 49 per cent. DSG and SEND questions were only relevant to social care councils 87 of whom responded. A response rate of 56 per cent. All figures in this press release are based on those 87 respondents.  

Table 1: Survey questions and responses – DSG deficits and SEND reform  

Councils are also seeing the impact of treasury management costs for funding their deficits from cash. Using cash in this way means it is not available to councils to invest and accrue interest. Equally, where councils have depleted their cash they may have to borrow.  

Official EHCP statistics https://explore-education-statistics.service.gov.uk/find-statistics/education-health-and-care-plans/2025  

The survey found that 77 per cent of councils said that these losses and costs will have a significant or moderate negative effect on budget setting for the next financial year (2026/27). For instance, one Chief Financial Officer stated that their council currently incurs £10.5 million annually in lost interest and additional borrowing costs as a direct result of their deficit.