The “end is looming for the short-term workaround” keeping councils from bankruptcy because of their spiralling SEND deficits, MPs have warned, after the government’s reforms were kicked further down the road.
The public accounts committee has again urged government to set out its plans to avoid a “financial cliff-edge for hundreds of councils” next year.
Its inquiry into the state of councils’ finances found that while their core spending power had increased in real-terms since 2015, “the amount per person fell over the same period”.
A major problem is ballooning spending on SEND, with government estimating overspending on high needs could hit almost £4 billion a year by 2028.
Since 2021, a “statutory override” has kept SEND deficits off councils’ main balance sheets. Over half of authorities say they will go bust when the override ends next March.
The PAC recommended in January that the government set out its plans for the override by March 2025. Ministers said they could not meet that deadline, setting themselves a new one of this summer.
But it was confirmed at last week’s spending review the government’s plans won’t now be fully set out until the autumn.
‘Lack of action’
The committee noted that, “despite us calling before for a solution as a matter of urgency and by March 2025, one has yet to be brought forward”.
Sir Geoffrey Clifton-Brown, chair of the committee, said: “Our inquiry heard that the government is concerned about local authority finances.
“But the lack of urgent action to come forward with a plan to address the fast-approaching cliff edge for under-pressure authorities would seem to suggest it is comfortable with the current state of affairs as normalised background noise.”
However, the committee also heard that simply writing off deficits alone would not solve the current crisis.
The committee said Iain Murray, director of public financial management at the Chartered Institute of Public Finance and Accountancy had “warned that even if these deficits were written off, local authorities would immediately start to accumulate new deficits due to high levels of demand in SEND.
The Ministry of Housing, Communities and Local Government “told us that there was huge amounts of work currently going on in central government on special educational needs funding, specifically on the statutory override”.
The committee added department had told it it “plans to publish details as part of the spending review in June and the provisional local government finance settlement in the autumn”.
‘Declining services’
The department was also “clear that any plan would have to involve reform of the SEND system, as well as a plan for local authorities to manage their deficits”, the committee said.
The inquiry also found the MHCLG did not know if the billions spent on local services resulted in better outcomes.
Only 25 per cent of local audited bodies had up-to-date external audit assurance on their 2022–23 financial statements. This led to “significant gaps in information available to local authorities, taxpayers, MHCLG and other government departments”.
There are also “signs of declining services, with only 50 per cent of education, health and care plans being issued within the 20-week statutory limit in 2023”.
Earlier this month, Derby City council paid out thousands in compensation to families for its “impractical offer” of transport for post-16 SEND learners following a Ombudsman investigation.
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