SEND deficits: government avoids ‘financial cliff edge’ for councils but a comprehensive solution is now critical

Today the government has confirmed that the mechanism to keep special educational needs and disabilities (SEND) services deficits off councils’ budgets will be extended alongside a commitment to support local authorities with their spiralling debts.

Since 2019, councils have been able to keep mounting high needs deficits off their main revenue accounts using a method called the statutory override, meaning that local authorities do not have to address these deficits when balancing their yearly budgets.

But in that timeframe these deficits have grown to almost £6bn nationally and are projected to reach £3bn next March for county and unitary councils in the County Councils Network (CCN).

The CCN had warned that local authorities faced a ‘financial cliff edge’ when the statutory override was due to run out in March 2026, so its extension to March 2028 avoids an immediate catastrophe for many county and unitary councils.

As part of today’s announcement, the government has also said that it will ‘commence a phased transition process which will include working with councils to manage their SEND deficits’ – and will set out more detail later this year.

The CCN says that it is critical that this includes a comprehensive national solution to the deficits ahead of the government’s upcoming reforms to the SEND system, to be unveiled later this autumn.

With any reform likely to take time to reduce costs, councils say these debts are likely to continue to increase over the next two-and-a-half years of the override being extended, as the rising demand for SEND support continues to outstrip the funding available.

But even keeping these deficits off councils’ balance sheets may not be enough. For many, deficits are already larger than their usable reserves, meaning they may have to reduce services elsewhere. And with these deficits continuing to rise in the absence of a solution, councils will need to borrow more and more.

To pay for SEND costs, councils are not only losing investment income from their reserves but are making ever-increasing interest payments each year. Looking ahead, some councils may be unable to continue to prop up SEND services with their revenue budgets and may need to seek exceptional financial support from the government.

The CCN argues that the government should seek to write-off councils’ SEND deficits, alongside providing compensation to the councils that have gone through the ‘Safety Valve’ programme to try and curtail costs.

Councils welcome the government’s commitment to reform, but with any reform likely to take time to reduce costs, local authorities need a solid foundation to build from until the system is changed in a way to ensure that system is reset to ensure that funding matches costs.

Cllr Tim Oliver, Chair of the County Councils Network, said:

“Today’s announcement means that council leaders can 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. Despite the extension of the statutory override, many councils still face a number of issues, including rising debt outstripping reserves, mounting interest payments, and lost investment income. For some, this could mean reducing services elsewhere or running into extreme financial difficulty.

“Therefore, it is 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.”