An accounting loophole keeping spiralling SEND deficits from bankrupting councils has been extended for two years.
The Ministry of Housing, Communities and Local Government has confirmed today that the so-called SEND deficit “statutory override” – which was due to end next March – has been extended until the end of 2027-28.
The override means high needs spending deficits are not part of councils’ general balance sheets.
Today’s move follows warnings that around half of councils faced going bust if the mechanism was lifted next spring. Estimates suggest the deficits could soon amount to £5 billion.
The government said today it was reforming services for children and young people with special educational needs and disabilities, “including ensuring councils are properly funded to help support and protect the most vulnerable children”.
“While these reforms are underway, the dedicated schools grant statutory override, which helps councils manage SEND costs, will stay in place until the end of 2027-28 and in addition we will introduce a bespoke formula to recognise home to school transport costs.”
Kicking the can down the road
Today’s decision effectively kicks the can of a permanent solution two years down the road.
The government has not said how it will reform SEND or council funding, recently confirming that it would release a white paper on its planned reforms in the autumn.
But a key focus will be on education more pupils with additional needs in mainstream schools. A government adviser has also said they are considering limiting education, health and care plans to children in special schools.
It comes after the National Audit Office warned last year that the current SEND system is “financially unsustainable”. The current intervention programmes are inadequate to resolve the issues and urgent reform is required, with councils’ deficits due to hit £5 billion.
Education committee chair Helen Hayes said the announcement would “bring certainty to local authorities across the country in the short term, for whom SEND has become one of the biggest financial pressures and who will be already planning for the coming financial year.
But she said ministers “will know that this is only a temporary fix until the government brings forward desperately needed, long-term reforms to the SEND system.
“The Government should not delay a permanent resolution to local authorities’ long term SEND deficits beyond 2028 and it must work to devise a solution that helps councils to achieve long term financial sustainability and does not damage their finances further.”
‘A sigh of relief’
Tim Oliver, chair of the County Councils Network, also welcomed the news. He said leaders could “breathe a sigh of relief knowing they no longer face a financial cliff edge in nine months’ time.
“We now need to ensure that the government’s commitment to support councils to manage their SEND deficits rings true.”
He said it was “critical government sets out a comprehensive solution later this year.
“This should include writing off deficits and compensating councils who went through the pain of ‘safety valve’ agreements, ensuring that the slate is wiped clean so local authorities can begin driving through badly-needed reforms to ensure the SEND system works for young people, families, and councils alike.”
The announcement forms part of a package of measures the government said would “overhaul…the outdated and complex council system” to bring “fairer funding, more stability and improve lives of people across the county”.
The local government funding system “will be reformed to get councils back on stable footing, improve the lives for people across the country and deliver essential funding for better public services”.
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