SEN system is financially ‘unsustainable’, finds report

England’s special educational needs (SEN) system is not delivering better outcomes for children and young people and is financially unsustainable, a new National Audit Office report has said.

The report states that between 2015 and 2024 there was a 140% increase (to 576,000) in children with an Education, Health and Care (EHC) plan alone, and most of this increase relates to autistic spectrum disorders; speech, language and communication needs; and social, emotional and mental health needs.

Long waiting times for an EHC plan was one example of families’ declining confidence in the system, as only half of EHC plans were issued within the statutory 20-week target in 2023.

Over the past decade, high-needs funding has risen by more than half (58%), to £10.7 billion for 2024-25. However, in the independent public spending watchdog’s latest report shows that local authority dedicated schools grant deficits could reach £4.6 billion by March 2026.

This date is when accounting arrangements – termed ‘statutory override’ – stopping these deficits impacting local authorities’ financial position will end.

This leaves two-fifths (43%) of local authorities at risk of issuing a section 114 notice, effectively declaring bankruptcy.

The NAO recommends, as a matter of urgency, government shares plans with local authorities so that each can achieve a sustainable financial position once the statutory override ends, including how deficits will be treated and any wider financial impact on services managed.

DfE committed to improving the system, in the Improvement Plan 2023 created by the previous government. This introduced a range of initiatives but there is no evidence these will fully address challenges facing the system. However, none of the 60 stakeholders the NAO engaged with believed current plans would sufficiently address the problems they saw.

The NAO report concludes with nine recommendations for DfE and wider government. This includes explicitly considering whole system reform, to improve outcomes for children with SEN and put SEN provision on a financially sustainable footing.

It also recommends developing a shared understanding of how identifying and supporting SEN should be prioritised, including within the health system, and developing a vision and long-term plan for inclusivity across mainstream education.

Gareth Davies, the head of the NAO, said: “Although DfE has increased high-needs funding, the SEN system is still not delivering for children and their families, and DfE’s current actions are unlikely to resolve the challenges.

“The government has not yet identified a solution to manage local authority deficits arising from SEN costs, which ongoing savings programmes will not address.

“Given that the current system costs over £10 billion a year, and that demand for SEN provision is forecast to increase further, government needs to think urgently about how its current investment can be better spent, including through more inclusive education, and developing a cohesive whole system approach.”