Councils warn SEND deficits could push local government to breaking point

England’s councils are warning of a "ticking time bomb" in the special educational needs and disabilities (SEND) system, with new data showing deficits that could bankrupt local authorities within three years. 

A survey by the Association of Local Authority Treasurers’ Societies (ALATS) in conjunction with the Society of County Treasurers (SCT) is included in a new County Councils Network (CCN) report. It reveals a rapidly worsening financial picture - with high-needs spending continuing to exceed the funding councils receive under the Dedicated Schools Grant (DSG), leaving an unsustainable gap between need and resources. 

The national high-needs block deficit now stands at £6.6 billion in 2025/26. Without reform, this deficit is projected to soar to £13.4 billion by March 2028, when the statutory override is due to end. 

Even under the temporary override, councils face severe cash-flow pressures and additional cost pressures. Lost interest, borrowing and other costs are estimated at more than £400 million this year, rising to almost £1 billion by 2028/29. 

One in three councils say they could be forced to issue a Section 114 notice - effectively declaring bankruptcy – before the override ends. That rises to nearly nine in ten once the override is lifted. 

If left unresolved, the national SEND deficit will exceed total usable reserves by 2026/27. By 2028/29 it will surpass all usable and ring-fenced reserves. 

Without urgent government intervention, finance leaders warn that deficits hidden within council accounts will soon eclipse all available reserves, triggering the most significant threat to local government stability in decades. 

CIPFA CEO Owen Mapley, said: “CIPFA has long warned that the broken SEND funding system threatens councils’ financial stability. The latest ALATS data confirms the situation is now critical. Even with the statutory override, some authorities could face effective bankruptcy unless the government sets out how these deficits will be resolved and the system reformed.” 

President of the Association of Local Authority Treasurers (ALATS), Lorna Baxter, said: “The ALATS survey has clearly demonstrated the scale of the financial crisis in SEND. We often hear of the black hole in public finances but SEND deficits totalling billions of pounds are being hidden in local authority accounts. Without prompt government intervention, we risk an unprecedented local authority financial crisis.” 

CIPFA and ALATS now urge ministers to provide clarity on how SEND deficits will be funded and to commit to a long-term settlement that protects councils’ financial sustainability.