Councils are facing renewed pressure from the Department for Education (DfE) to make cuts to bring their massive special educational needs deficits into line.
It comes after at least 89 local authorities recorded an overall deficit balance on their dedicated schools grant (DSG) accounts at the end of March 2020, with the total deficit balance across England a staggering £480m.
The department is understood to be recruiting a team of former local government finance officers to carry out a deep dive into the councils facing the greatest difficulties, which are not routinely informed they could face intervention.
It is expected to talk to 20 or 30 councils about the scale of their deficits, starting by directly approaching half a dozen local authorities among the deepest in the red.
Local government sources have described the peer review visits as ‘intensive’ but if councils can come up with a five-year recovery plan and demonstrate they are trying their best to balance their books the department has indicated it would be supportive and look favourably upon a request to write off their historic deficit.
However, it is understood the current suggestion is that strings will still be attached.
Some treasurers have warned any deficit write off could be viewed as rewarding financial mismanagement.
Based on financial data at the end of 2018-19, the department demanded that 32 councils submit a plan outlining how they would recover their special educational needs and disabilities deficits within three years, but for 2019-20 the DfE has refused to confirm the number or identities of the councils it planned to visit.
A spokesperson for the Society of London Treasurers, whose members are reporting an accumulated high needs deficit of more than £350m, said: ‘It is good that the DfE is talking to councils about the huge deficits many of them face.
'However, we have been here before and a sustainable answer has still not emerged that will address the challenges in the medium to long term.
'Short-term solutions – one-off in their nature – may buy time but little else.
‘The department needs to act quickly and decisively on a much wider scale to sort out the financial crisis facing special needs services.’
A DfE spokesperson said: ‘We are supporting councils with deficit funding arrangements and will update on this in due course.’
Councils in the worst financial position on SEND at the end of March 2020
Barking & Dagenham LBC
(in-year DSG overspend £1.5m; remaining DSG reserves £1.7m)
Derby City Council
(in-year DSG overspend £2.6m; remaining DSG reserves £0)
Derbyshire CC
(in-year DSG overspend £4.43m; remaining DSG reserves £0.19m)
Herefordshire Council
(in-year DSG overspend £1.1m; remaining DSG reserves £0.6m)
Lancashire CC
(in-year DSG overspend £1.59m; remaining DSG reserves £11.15m)
Leicester City Council
(in-year DSG overspend £2.8m; remaining DSG reserves £5.4m)
Luton BC
(in-year DSG overspend £1.17m; remaining DSG reserves £2.61m)
St Helens MBC
(in-year DSG overspend £2.73m; remaining DSG reserves £0.18m)
Staffordshire CC
(in-year DSG overspend £3.8m; remaining DSG reserves £0.4m)
Waltham Forest LBC
(in-year DSG overspend £1.39m; remaining DSG reserves £0.57m)