England's local authorities are facing a financial time bomb as soaring costs for supporting children with special educational needs and disabilities (SEND) push many councils towards effective bankruptcy within the next few years.
The Mounting Financial Pressure
The County Councils Network has issued a stark warning that numerous local authorities are struggling to cope with increased demand for SEND provision. The money councils receive from central government through the Dedicated Schools Grant is no longer sufficient to cover these escalating costs.
The national high-needs block deficit is projected to reach £6.6 billion in 2025/26, according to the latest report. Without urgent government intervention, this deficit is expected to more than double to £13.4 billion by March 2028.
This crisis coincides with the scheduled end of the statutory override that currently protects councils' balance sheets from these deficits. Once this protection is lifted, the situation becomes dramatically worse.
Bankruptcy Warnings Escalate
Current projections paint a devastating picture for local government finances. One in three councils report they could be forced to effectively declare bankruptcy even before the statutory override ends due to mounting SEND costs.
This figure rises to nearly nine in ten councils once the override is lifted in March 2028, creating what experts describe as an impending implosion of local authority services.
Kevin McDonnell, headteacher at Stormont House School in Hackney, London, emphasised the systemic problems. "If we truly want a high-quality, inclusive education system we will need to resource it properly," he said. "The current system is adversarial and often unhelpful."
Mr McDonnell added that the statutory override is merely hiding the scale of the problem, warning that "in March 2028 we risk an implosion of local authority services through bankruptcy."
Financial Strain Already Biting
Even with the current protection measures in place, councils are experiencing severe financial pressures. Lost interest, borrowing requirements and other associated costs are expected to total £400 million this year alone, rising to nearly £1 billion by 2028/29.
Finance officers confirm these costs are already eroding day-to-day budgets at a time when councils are struggling to maintain essential core services for their communities.
By 2026/27, the national SEND deficit is forecast to exceed all local authorities' usable reserves. Just two years later, it will surpass both usable and ring-fenced reserves combined, leaving councils without any financial capacity to absorb the losses.
Owen Mapley, chief executive of CIPFA (The Chartered Institute of Public Finance and Accountancy), stated: "CIPFA has long warned that the broken SEND funding system threatens councils' financial stability. The latest ALATS data confirms the situation is now critical."
Lorna Baxter, President of the Association of Local Authority Treasurers' Societies, echoed these concerns: "The ALATS survey has clearly demonstrated the scale of the financial crisis in SEND. Without prompt government intervention, we risk an unprecedented local authority financial crisis."
Rachel Filmer, Campaigns Manager for Special Needs Jungle, highlighted the human cost of the crisis: "Due to a complete failure to invest in the infrastructure and early intervention needed by children and young people with SEND, councils are now paying out billions a year to private schools and transport companies. This is not the fault of disabled children or their families, who need and are legally entitled to an accessible education."
Professional bodies are now urgently calling for ministers to outline how existing SEND deficits will be funded and to develop a sustainable long-term settlement that protects both vulnerable children and the future stability of council finances across England.
