SEND: ‘Whole-system reform needed’, says NAO

The new government should “explicitly” consider “whole-system” SEND reforms, the spending watchdog has urged in a devastating report that reveals the full scale of impending financial meltdown.

The National Audit Office (NAO) has warned the special needs system is “financially unsustainable”, with two-fifths of councils at risk of declaring bankruptcy by March 2026 over spiralling costs on special needs education.

Government interventions to tackle financial pressures, such as the controversial “safety valve” bailout scheme, are not achieving savings quickly and won’t provide a sustainable system, the NAO said.

Urgent action required

Government predicts high needs budget pressures will rise by £3.9 billion in just a few years, while councils’ deficits could hit nearly £5 billion. Meanwhile, outcomes for young people are not improving.

Only 69 per cent of young people with SEND needs progress to further education, employment or apprenticeship after leaving 16-18 study, compared to 85 per cent of those without.

The NAO points out that disparity in destinations has not changed since 2018/19.

However, 43 per cent of young people with SEND achieved English and maths GCSEs by age 19 in 2022/23, up from 34 per cent in 2018/19.

Yet, despite spending years formulating the SEND improvement plan, the watchdog found the Conservative government did not have a “fully developed implementation plan”.

Gareth Davies, head of the NAO, said: “Given that the current system costs over £10 billion a year, and that demand for SEN provision is forecast to increase further, government needs to think urgently about how its current investment can be better spent, including through more inclusive education, and developing a cohesive whole system approach.”

The NAO made nine recommendations. They include whole-system reform to improve outcomes and put the system “on a financially sustainable footing” and work with Treasury to come up with a plan for councils when the accounting immunity – which keeps deficits off the books – runs out in 2026.

It also wants government to work to “understand the root causes behind increases” in SEND and EHCP numbers, and develop a “vision and long-term plan for inclusivity across mainstream education”.

DfE should make better use of its data, which is weak for 16-25 learners, to understand demand for spaces across different settings in local areas and the knock-on requirements for other services, such as home-to-college transport.

16+ spending

Bridget Phillipson, education secretary, said the report “exposes a system that has been neglected to the point of crisis” with children and families “simply being failed on every measure”. 

She vowed there will be no more “sticking plaster politics and short-termism”, but warned reform “will take time”. 

Clare Howard, chief executive of Natspec, the representative body for specialist colleges, welcomed the NAO’s call for reform but said their analysis failed to address “disproportionately low levels of spending in further education.”

“There is an urgent need to address the issues faced by colleges which are being asked to work with increasing numbers of students with complex needs, at a lower rate per student.

“The report references a 35 per cent real-terms drop in funding per EHCP, and its analysis of local authority spending shows that those aged 16+ who are not in school sixth forms are allocated only 13 per cent of the mainstream budget and less than 10 per cent of the high needs budget.”

Incentives and accountabilities

Next to funding, “misaligned incentives, accountabilities and priorities across the system” are preventing young people with SEND from accessing the right support at the right time, which is driving up costs.

Local authorities told the NAO that some young people with severe needs are being kept in education to age 25 because adult social care services were not available.

Shortages in local health provision had “led to responsibilities and costs for healthcare being shifted onto schools, colleges and local authorities,” the NAO said.

Progress towards DfE’s own 136 “aspirations and actions” for the SEND system was not being consistently monitored, the NAO found. “As such, DfE cannot say how much progress it has made in implementing specific published commitments,” it said.

For example, as at May 2024, the NAO found 15 of the 32 local authorities developing local inclusion plans had drafted them and local and national data dashboards have not yet been published.

David Holloway, senior policy manager for SEND at the Association of Colleges, said the government should be across “better transitions to adult social care” and “a clearer status for specialist colleges” as part of its longer term reforms.

He added: “In the short term, the government must also reform disadvantage funding to support long term capacity and growth, including a specific block for students who have SEND but do not have high needs.

“In the medium term, the government should introduce accountabilities to improve local authority place commissioning for students with EHCPs, ensuring timely and informed decisions leading to better transitions.”