English Councils Face Insolvency Due to Special Educational Needs Overspending

Nearly 20 councils warn they could become insolvent amid surging costs related to special educational needs support.

Nearly 20 councils across England have publicly expressed that they are at risk of insolvency due to substantial debts resulting from years of overspending on special educational needs and disability (SEND) support.

This escalating financial crisis has been exacerbated by a projected increase of nearly £2 billion in SEND-related expenditures over the next year, as highlighted by a recent investigation.

Currently, the combined SEND deficits for councils stand at approximately £3.4 billion, with forecasts estimating this figure could rise to £5.2 billion within a year.

Eighteen councils have explicitly indicated that their financial pressures from these debts put them at risk of insolvency, with some estimates suggesting that the number of councils facing similar financial dilemmas could increase significantly.

The average SEND deficit among councils is expected to rise by 54%, with reports indicating some councils could see their debts growing by millions monthly, driven by increasing demands for services.

William Burns, a social care policy adviser for the Chartered Institute of Public Finance and Accountancy (Cipfa), noted that this situation is pushing councils across England to the brink of financial disaster.

He further commented on the uncertainty surrounding the future of various local services due to escalating deficits.

Cipfa has warned that widespread defaults on SEND deficits could lead to significant disruptions and fiscal chaos within local services, as councils declaring effective bankruptcy would need to severely curtail spending in all sectors, not limited to education.

The organization has estimated that as many as 75 councils may be at risk of such financial breakdowns.

These debt issues were previously obscured from council financial statements by a government accounting measure known as a "statutory override," which is set to expire on March 31, 2026. Consequently, the outstanding debts will revert to council balance sheets, sparking urgent decisions from ministers on whether to clear these debts or extend the override until the financial situation stabilizes.

The SEND deficit has markedly increased in recent years, particularly under the last government, driven by rising costs associated with educational and health care plans (EHCPs).

These plans legally entitle children and young people up to the age of 25 to receive school support from local authorities for conditions such as autism and communication difficulties.

According to statistics from the Department for Education (DfE), the number of EHCPs in place has grown from 240,000 in 2015 to 576,000 in 2024.

The rising costs are attributed to insufficient special needs capacity in state schools and the high costs of placing children in private specialist institutions.

A review of council spending revealed that at least 101 councils—over two-thirds of the total in England—exceeded their allocated SEND budget over the past year, with 18 councils overspending by more than £30 million each.

In terms of future projections, nearly 90% of responding upper-tier councils anticipate accumulating deficits in their high needs budgets by the end of the next financial year.

One in four responding councils expects to reach or exceed a deficit of £50 million, with 15 councils predicting debts of over £100 million.

Notably, Leeds City Council has forecasted that its SEND deficit could escalate from £17.5 million to £50 million, while Hampshire County Council's deficit could rise to £312 million, representing England's largest forecast deficit.

Middlesbrough Council, which serves one of England's most economically disadvantaged areas, expects its SEND deficit to increase from £20 million to £26 million over the next year, which officials describe as a critical risk to the council's financial viability.

Overall, the average anticipated SEND deficit among the impacted councils is projected to reach £40 million by March 2026, with 112 councils forecasting that their high needs deficits will worsen over the next 12 months.

The Department for Education has acknowledged the systemic issues within the SEND framework, noting that many children have been inadequately supported, causing parents to struggle for necessary resources.

As part of ongoing reforms, a spokesperson emphasized the importance of evaluating and improving the SEND system to better serve families across the country.