Counties warn of “financial catastrophe” in 12 months’ time, with “unmanageable” SEND deficits risking bankruptcy for half of England’s largest councils

The County Councils Network (CCN) has today (21 March) claimed that there are just 12 months to avoid a “financial catastrophe” for English local authorities, with almost £6bn in special educational needs and disabilities (SEND) deficits set to be placed on their balance sheets in March 2026.

The organisation warned that unless government takes action, a “wave” of bankruptcies could be triggered.

Due to soaring demand for SEND services, since 2020 councils have been allowed to keep high needs deficits, where the cost of providing support outstrips the SEND budgets available, off their main revenue accounts.

However, this temporary accounting measure, called the “statutory override”, is due to expire in March next year.

A survey carried out by the CCN found that if the override ends in March 2026 with the deficit placed onto budget books, 18 county and unitary councils would be insolvent “overnight”, and a further six would follow in 2027, bringing the total to 24 councils.

Last month, the Local Government Association warned of a lack of clarity over what will happen when the override expires, and called on the Government to write off councils’ high needs deficits.

It highlighted how, since reforms in the Children and Families Act 2014, the number of children and young people with Education, Health and Care plans (EHCPs) had risen by 140% from 240,183 in 2014/15 to 575,973 in 2023/24.

It added that while the £1 billion funding for SEND announced in the Budget was positive, this money was likely to be consumed by partially plugging existing deficits.

With less than 12 months until the override expires, CCN warned it is “urgent” that government provides “immediate clarity” and a “national solution” on how the Treasury intends to manage councils’ high needs deficits.

It added: “Removing or limiting councils’ exposure to high-needs deficits is only one part of the solution. In tandem with action on the statutory override, the forthcoming white paper must set out ‘root and branch’ reform of the SEND system which does not work for parents, young people and councils alike and must address spiralling demand and costs.”

Cllr Kate Foale, Special Educational Needs and Disabilities Spokesperson for the County Councils Network, said: “The clock is ticking to March 2026 and we are now just twelve months away from what would be a financial catastrophe for local councils if these unmanageable SEND deficits are placed onto local authority’ budget books.

“If that happens, half of England’s largest county and unitary councils will be insolvent overnight and virtually every upper-tier council across the rest of England will tell you that the prospect of having to address and pay down these deficits would risk their financial sustainability.

“We know that the government has committed to reforming the SEND system, which is a vital step in the right direction, but the future of the statutory override is not a can that can be kicked down the road. We need urgent clarity on how the government intends to manage these deficits, including a national solution to the issue. We also would like to know how addressing these deficits will fit into the government’s reform agenda, bearing in mind that solving this financial crisis will only ever be one part of the solution to the wider SEND crisis”.

The Department for Education has been approached for comment.

Lottie Winson