William Eichler 24 October 2024

NAO: Councils face bankruptcy due to SEND deficits

NAO: Councils face bankruptcy due to SEND deficits image
Image: 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.’

SIGN UP
For your free daily news bulletin
Highways jobs

Regeneration Manager

West Northamptonshire Council
£65,098 - £71,353
The Major Projects and Regeneration Team, part of our Place, Economy and Environment directorate, is at the heart of delivering this vision. Working with government, private sector partners and our local communities, we are driving forward projects funded One Angel Square 4 Angel Street Northampton
Recuriter: West Northamptonshire Council

Director of Streetscene

Fareham Borough Council
£92,027 - £105,394 (Director Grade) Pay award pending
We continue to have big ambitions for our borough Fareham, Hampshire
Recuriter: Fareham Borough Council

Shared Lives Social Worker

Oxfordshire County Council
£37,035 - £43,693
About the Role Your role will be working with Shared Lives Carers and people who use the service to ensure that there is a good outcome for everyone. Assessing people for their suitability to become carers, presenting assessment reports to the Shared Live Abingdon with some agile working/working from home
Recuriter: Oxfordshire County Council

Lawyer Employment

Durham County Council
£45,718 to £49,764 p.a. (Grade 13) pay award pending
An opportunity for an Employment Lawyer has become available to work at Durham County Council as part of the Legal and Democratic Services Team. Durh Durham
Recuriter: Durham County Council

Support Assistant

Durham County Council
£24,027 pro rata
Support Assistant Grade 1 £24,027 pro rata Temporary – required from 1st October 2025 until 31st October 2026  20 hours per week Mon – Fri, 10am -2pm, Consett
Recuriter: Durham County Council
Linkedin Banner