£20bn Special Educational Needs Crisis Threatens School Budgets
The UK government is confronting a potential £20bn financial timebomb after Chancellor Rachel Reeves announced that Whitehall will take full responsibility for special educational needs spending from local councils. This dramatic shift in funding responsibility, revealed during the recent budget, has triggered warnings from the Office for Budget Responsibility about significant fiscal risks facing the education system.
Growing Financial Pressure on Education Department
According to official projections, the annual costs of special educational needs and disability (Send) spending in England will reach £6bn per year by 2028. This escalating expenditure increases the urgency for a comprehensive overhaul of Send provision, expected to be outlined in a schools white paper early next year.
The government must also address historical council Send deficits, which the OBR projects will accumulate to £14bn by 2028. This substantial sum represents Send overspending incurred by English councils since 2020, creating a dual financial challenge for the incoming administration.
The Office for Budget Responsibility has explicitly warned that this situation represents a significant fiscal risk, particularly since the government hasn't detailed how it will cover both the accumulated deficits and the ongoing additional spending requirements.
Potential Impact on Mainstream School Funding
If the projected £6bn annual extra costs were to be fully funded through the Department for Education's core schools budget, the consequences for mainstream education could be severe. The OBR calculates this would imply a 4.9% real-terms fall in mainstream schools spending per pupil from 2028-29, rather than the planned 0.5% real-terms increase.
When questioned about potential cuts to schools or Send spending after 2028, Chancellor Rachel Reeves insisted the imminent reforms were not primarily about money. She stated: This is about creating a system that works for kids, their parents and for schools. I believe wherever possible we should integrate children into mainstream schools.
Education Secretary Bridget Phillipson will be responsible for outlining the specific reforms, though the government faces mounting pressure to address the financial implications.
Council Perspectives and Systemic Challenges
Local government leaders have welcomed the decision to remove what they consider an increasingly unsustainable Send spending burden. However, uncertainty remains about how the £14bn deficit will be cleared.
The deficit is currently held off council balance sheets using an accounting mechanism known as an override, which allows councils to meet legal requirements to set balanced budgets annually. This measure has prevented many local authorities from becoming insolvent.
However, with the override due to be lifted in 2028, councils warn that the accumulated Send deficits would return to balance sheets, potentially causing nine out of ten upper-tier authorities to effectively declare bankruptcy.
Helen Miller, director of the Institute for Fiscal Studies, noted that the OBR warning greatly sharpens the government's incentives to introduce reforms that might slow spending growth. She emphasised that the government is running out of time for reforms to deliver significant savings in this parliament.
Natalie Perera, chief executive of the Education Policy Institute, added: While there is a clear and imminent need to address the rising costs of Send provision, the government must not cut school funding to meet these pressures.
The surge in Send spending has been largely driven by increased demand for education and health care plans (EHCPs), which give children and young people up to age 25 legal rights to educational support for conditions including autism, speech and language difficulties, and mental health needs.
The number of EHCPs has more than doubled to 639,000 over the past decade, forcing councils to increasingly rely on expensive private special schools, some owned by private equity investors, to meet demand.
Matthew Hicks, chair of the County Councils Network, urged immediate action: With OBR red-flagging these existing deficits as an issue that could lead to council bankruptcies, the government must move beyond promises and set out decisive action to wipe historical deficits.
William Burns, social care policy adviser for the Chartered Institute of Public Finance and Accountancy, said centralising Send spending from April 2028 would ease intense financial pressure on councils, but stressed the government must grasp this opportunity to build a Send system that works for children and families while pulling councils back from the financial cliff edge.
