Title

CHILDREN'S SERVICES

NAO: Councils face bankruptcy due to SEND deficits

Two-fifths of local authorities will face the threat of bankruptcy if more is not done to tackle the £4.6bn special educational needs (SEN) deficit, watchdog warns.

© Iryna Inshyna / Shutterstock.com

© Iryna Inshyna / Shutterstock.com

Two-fifths of local authorities will face the threat of bankruptcy if more is not done to tackle the £4.6bn special educational needs (SEN) deficit, watchdog warns.

A new report by the National Audit Office (NAO) has looked at the financial impact of what it describes as the ‘soaring demand' for support for children with SEN.

The NAO found that between 2015 and 2024 there was a 140% increase in children with an Education, Health and Care (EHC) plan alone.

According to the auditor's report, high-needs funding has risen by more than half (58%), to £10.7bn for 2024-25, to address the increase in demand.

However, the NAO estimates that due to the dramatic rise in EHC plans the real-terms funding per plan has fallen by 35%.

It warned that the local government SEN deficit could hit £4.6bn by March 2026.

March 2026 is when special accounting arrangements known as ‘statutory override' – which prevent deficits affecting councils' financial position – will end.

The end of the statutory override could leave two-fifths (43%) of councils at risk of having to issue a section 114 notice, according to the NAO.

The Chartered Institute of Public Finance and Accountancy (CIPFA) and the Association of Local Authority Treasurers (ALATS) has also warned that the special educational need and disability system is ‘fundamentally broken'.

A survey from ALATS revealed a SEND deficit currently exceeding £3bn across English councils and is projected to rise to £8bn in 2026/27.

President of ALATS, Lorna Baxter, commented: ‘The issue has been "hidden in plain sight" through the statutory override which has masked the scale of the problem and allowed the deficits to accumulate to a position which is untenable.

‘Without prompt government intervention, we risk the financial stability of many councils and the essential services they provide.'

The MJ/NAO Round Table: Putting the children first

CHILDREN'S SERVICES

Lib Dems call for SEND profits cap

By William Eichler | 01 August 2025

The Lib Dems have called on the Government to cap the ‘exorbitant’ profits of private providers of special educational needs and disabilities (SEND) schooling.

CHILDREN'S SERVICES

'Serious issues' over fair funding formula

By Martin Ford | 01 August 2025

A key part of the proposed Fair Funding formula must be removed due to ‘serious issues’, London Councils has demanded.

CHILDREN'S SERVICES

Action and aspiration

By Jess McGregor | 30 July 2025

The Association of Directors of Adult Social Services’ Spring Survey has highlighted the need for a long-term funding strategy that ensures councils can cont...

CHILDREN'S SERVICES

Triangulating data

By Kari Gerstheimer | 30 July 2025

A collaboration between a charity that supports people to access their legal rights to social care and Gloucestershire CC is highlighting systemic issues and...

Popular articles by William Eichler