Rachel Reeves Confronted Over £6bn Send Costs in Public Finances
Chancellor Rachel Reeves is under mounting pressure to provide reassurances to MPs regarding the state of the UK's public finances, as escalating costs for special educational needs and disabilities (Send) threaten to create a significant gap in the government's financial cushion. Meg Hillier, chair of the all-party House of Commons Treasury committee, has called for clarity on the long-term handling of the £6bn annual Send bill, with uncertainty looming over its accounting by the end of the decade.
Committee Scrutiny and Market Concerns
Reeves, scheduled to appear before the committee next month, indicated in a letter to MPs that a decision on the Send costs will be postponed until next year. City analysts have expressed alarm, warning that financial market investors could grow uneasy if part or all of the £6bn Send expense is deducted from the budget surplus. This surplus was more than doubled to £22bn in last November's budget to shield the UK from volatile government bond markets.
The dispute between MPs and the Treasury follows a report from the Office for Budget Responsibility (OBR), which highlighted that the £6bn Send bill was unaccounted for in the budget. The OBR cautioned that anticipated increases in Send costs over the next decade pose a substantial risk to public finances.
Government Response and Historical Debts
This week, the government announced it would cover up to 90% of historical debts linked to spending by English councils on Send services. Ministers plan to clear approximately £5bn of debt up to 31 March this year, contingent on councils agreeing to revise their Send service delivery under proposals expected in an upcoming white paper.
However, it remains unclear how billions of pounds in projected Send overspends between April 2026 and April 2028 will be managed. Ministers have stated they will adopt an "appropriate and proportionate approach", though they emphasized it will not be unlimited.
Rising Costs and Financial Maneuvers
English councils have experienced surging costs in providing Send services, driven by an increase in pupils qualifying for extra support and higher charges from mainly private providers. These excess costs have been deferred with Treasury approval as off-balance-sheet debts to safeguard other service spending. Since 2014, successive chancellors have postponed allocating these costs through a "statutory override" mechanism.
In the November budget, Reeves declared that from 2028-29, the cost of Send services would be assumed by Whitehall, but she did not specify which department would account for the expenditure.
Expert Warnings and Future Options
Meg Hillier stressed the importance of transparency, noting, "It's extremely important that we can trust that the Treasury is being transparent on its spending plans. As the OBR has identified, this is an obvious risk to the headroom the chancellor created for herself at the budget." The OBR estimates that the backlog of historical Send spending, largely funded by local authority borrowing, will reach £18bn by 2028-29.
Luke Sibieta, a research fellow at the Institute for Fiscal Studies, outlined three primary options to address the £6bn gap:
- Slow Send spending growth through system reforms.
- Increase the overall schools budget by reallocating funds from other government areas.
- Reduce mainstream school funding to cover high needs expenses, with £6bn equating to about 9% of the total schools budget in 2028-29.
A fourth alternative would involve increased borrowing, which would diminish the government's financial buffer.
Economic Implications and Market Reactions
Ruth Gregory, deputy chief UK economist at Capital Economics, identified the Send budget as a "clear risk to the projections for public spending", citing heavy commitments across Whitehall departments that could erode financial headroom, including pledges for defence spending hikes. Philip Shaw, a senior analyst at Investec, remarked, "I don't think the markets would panic if a large proportion of the £6bn could not be saved and is added to borrowing. But investors would be very concerned."
The Treasury has declined to comment further on the matter, leaving uncertainties as Reeves prepares for her committee appearance next month.
