High-needs deficits risk reaching “absurd levels” of more than £8 billion and pushing many councils to bankruptcy, experts have warned.
A report into the special educational needs and disabilities (SEND) system by the Institute of Fiscal Studies (IFS) says reforms are needed, such as expanding capacity in state-funded special schools and catering for pupils with SEND more effectively in mainstream schools.
But such reforms would require fundamental changes to the education system and how it is funded - and would be costly in the short term - according to today’s IFS report, titled .
One of the report’s authors, IFS research economist Darcey Snape, said it was crucial that the government first sets out a clear, long-term vision for SEND reform.
Here are seven key findings from the report:
1. Rapid rise in highest needs
The report notes that the number of school pupils with an education, health and care plan (EHCP) rose by 180,000 - or 71 per cent - between 2018 and 2024. As a result, nearly 5 per cent of all school pupils now have EHCPs.
It adds that the rise has been driven by three specific types of needs: autistic spectrum disorders; social, emotional and mental health needs (including ADHD); and speech, language and communication needs.
2. Funding rises haven’t kept up with spending
The IFS says high-needs funding “has gone up massively but has still been insufficient”.
It notes that funding levels have risen by 59 per cent - or £4 billion in real terms - between 2015 and 2024. This growth accounts for about half of the total real-terms rise in school funding over the same period.
However, the think-tank adds that this has not kept pace with rises in numbers and needs, resulting in local authorities spending on high needs exceeding funding by between £200 to £800 million per year between 2018 and 2022.
3. Council deficits could rise above £8 billion
As a result, local authorities have built up large deficits in high-needs budgets that are estimated to be £3.4 billion this year.
The IFS says that “an accounting fudge” - also known as the “statutory override” - has kept these deficits off local authorities’ balance sheets and prevented many from declaring bankruptcy. This short-term fix is due to end in March 2026.
The IFS warns that continued rises in the number of pupils with EHCPs is set to result in extra spending of £2-3 billion per year and local authority deficits of more than £8 billion in three years, “pushing many to the point of bankruptcy”.
4. Large increase in independent special school placements
The IFS adds that there have been large increases in spending on fees for independent special schools. Spending by local authorities on fees for pupils in independent settings is up by more than £1 billion, or 138 per cent, since 2015 - reaching at least £1.8 billion in 2024.
The report notes that this only accounts for a small number of pupils with EHCPs - nearly 30,000 in total, or 5 per cent of pupils with EHCPs.
It adds that placements are extremely high-cost in independent special schools, at £61,500 per year on average, compared with state-funded special school costs of £24,000.
5. Schools have financial incentives to seek EHCPs
The IFS also highlights how mainstream schools can only access local authority “top-up” funding if the additional cost of SEND support is more than £6,000 - with this initial provision expected to come from core school budgets.
The IFS says accessing more funding “can only really be achieved with an EHCP”. And it warns that, as the £6,000 threshold has not been updated with inflation for more than 10 years, more pupils are part of a group “who require top-up funding and, by extension, EHCPs”.
6. Reforms will be ‘costly’ in the short term
The last government’s planned SEND reforms were predicated on improving early intervention and reducing the need for EHCPs. Labour has said that it wants more pupils with SEND educated in mainstream schools.
The IFS report says that reforming the system could involve increasing the core SEND provision available in mainstream schools and expanding the number of state-funded special school places.
It describes increasing the SEND offer in mainstream as seeming like the “most natural option” but warns that it would mean a massive change in what schools do and how they are funded.
It adds: “Schools would need to be able to offer core provision for pupils with a range of different types of SEND, and do so without affecting existing provision.”
The IFS suggests schools would need “extra staff with the required skills, teachers would need to have further good-quality training and extra physical space would be needed”.
7. EHCPs: Removing statutory duty would save cash but be politically ‘challenging’
The IFS report says another potential reform of the SEND system would be to change the function of EHCPs so that they no longer create statutory obligations.
The report adds: “Instead, schools and local authorities would need to make best endeavours to deliver such provision and ration scarce resources. This is the normal way in which public spending and resources are allocated.”
The report says this reform “would clearly be attractive from a purely financial point of view, but it could be incredibly challenging from a political perspective given parents’ lack of trust in the current system to meet their children’s needs”.
A DfE spokesperson said: “This is the latest addition to the mountain of evidence on the failings of the SEND system which we inherited.
”Work has already begun to rebuild families’ confidence. The Budget invested £1 billion in day-to-day services and last week £740 million was directed to support local authorities create more specialist places in mainstream schools.”
For the latest education news and analysis delivered every weekday morning, sign up for the Tes Daily newsletter
