Eight in ten councils in England warn they could become insolvent within the next few years due to mounting deficits linked to the cost of supporting children and young people with special educational needs and disabilities, according to a new survey by the Local Government Association.
The findings highlight growing financial pressure on local authorities as demand for SEND support continues to rise, with councils warning that urgent reform is needed to protect services and improve outcomes for families.
The LGA says cost pressures are being driven by a sharp and sustained increase in need. As of January 2025, there were nearly 640,000 Education, Health and Care Plans in place, with numbers rising every year since the system was introduced in 2014.
Councils stress they remain committed to upholding the legal entitlements of all children and young people with SEND, but argue the current system is financially unsustainable and not consistently delivering better outcomes.
At present, councils are able to keep high needs deficits, where SEND spending exceeds the budget available, off their main balance sheets through a temporary accounting arrangement known as the statutory override.
The survey found that 95% of councils responding currently hold high needs Dedicated Schools Grant (DSG) deficits. However, the statutory override is due to end in March 2028, at which point these deficits would be transferred onto councils’ general fund accounts. With the override ending, 79% of councils surveyed said they would be unable to set a balanced general fund budget in 2028/29 if the deficits are brought onto their books.
The LGA has warned that without decisive government action, this will undermine councils’ ability to plan sustainable services and deliver meaningful improvements for children and families.
Cllr Amanda Hopgood, Chair of the Local Government Association’s Children, Young People, and Families Committee, said:
“There is a widely held consensus that the SEND system is broken and not working for children, their families and councils.
“Councils are committed to supporting every child and young person to achieve their potential and clearly what is important is that children and young people get the support they need. But under the current system, the rise in support need has left many councils buckling under the strain.
“The huge costs in providing support are threatening most councils with insolvency.
“This is why we are urging government to write off councils’ high needs deficits in the final Local Government Finance Settlement.
“However, it is important to note that the challenges within the SEND system are not just financial. The Schools White Paper must deliver brave and bold reform where more children are able to get the support they need in a mainstream school, without having to go down the route of needing a statutory plan.”
Despite record levels of investment and high rates of assessment and identification of SEND, councils say there is no clear evidence that outcomes for children and young people with SEND have improved.
This raises concerns that the system is absorbing increasing levels of funding without delivering the quality, consistency and impact families expect.
The provisional Local Government Finance Settlement published in December indicated that the Government intends to act on SEND deficits. With the final settlement expected soon, the LGA is urging ministers to write off councils’ existing high needs deficits.
However, councils also warn that simply removing the deficits without reforming the system would not solve the problem. Almost all councils responding to the survey said that overspending would continue if the system remains unchanged – meaning deficits would quickly re‑emerge.
The Government is expected to outline its plans for SEND reform in an upcoming Schools White Paper.
The scale of the challenge is highlighted by forecasts from the Office for Budget Responsibility, which estimates that councils’ cumulative high needs deficits could reach £14 billion by the end of 2027/28.
Without urgent and comprehensive reform, councils warn that financial instability will continue to grow, putting both local government finances and vital SEND services at serious risk.
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