Council warns of likely section 114 notice if Dedicated Schools Grant statutory override not extended
BCP Council has said it expects its Director of Finance will have to issue a section 114 notice in December 2024 if the statutory override for the Dedicated Schools Grant (DSG) is not extended after March 2026.
The DSG is a ring-fenced grant handed out by the Department for Education (DfE) for local authorities' school budgets.
Any deficit associated with the DSG is kept off councils' balance sheets thanks to the statutory override set out in The Local Authorities Capital Finance and Accounting (England) Regulations.
A report prepared ahead of a meeting of the BCP Council's Schools Forum this week said the council is not expected to be able to balance its budget if the statutory override is not extended after it expires in March 2026.
According to the report, the unitary council’s DSG overspend has increased "considerably", leaving forecasts to predict an accumulated DSG deficit of £92m by the end of the 2024-25 financial year.
It blamed the situation on an increase in the number of new Education Health and Care Plans (EHCP) and the associated cost of delivering these plans for the duration of a child's or young person's education, which can be up to the age of 25 years.
EHCP numbers have grown from 3,109 in March 2023 to 3,683 in November 2023, an increase of 18.5%, the report noted.
Due to the accumulated DSG deficit, the council is predicted to have negative reserves by March 2024 if the DSG deficit is taken into account.
The Local Authorities Capital Finance and Accounting (England) Regulations became law at the end of November 2020, and mean that the council holds the deficit in a negative unusable reserve, and it is disregarded in terms of financial sustainability.
The regulations also prohibit the council from contributing funding to reduce the deficit.
The Government extended the DSG statutory override in December 2022 for a one-off period of three years up to 31 March 2026.
"When the statutory override falls away, the accumulated DSG deficit will be greater than the council's total reserves and the council will technically be insolvent," the report said.
It continued: "If the deadline is not extended, then it is expected that the council's Director of Finance would need to issue a section 114 notice in December 2024 as it would not be possible to set a balanced budget for 2025-26."
The report later added that the DSG deficit represents a significant risk to the council's financial viability and "support from the government must now be secured".
BCP Council said it is awaiting feedback from the Department for Education and that it is planning to ask the department for capital funding.
Adam Carey
