A council has sought legal advice and written to ministers after flagging concerns that it will miss out on extra cash to plug a looming SEND deficit. The government is writing off 90 per cent of councils’ dedicated schools grant (DSG) deficits up to April, expected to cost around £5 billion. In exchange, councils have to submit – and have approved by ministers – a local SEND reform plan detailing how they will deliver the government’s system overhaul. The plans are due by today (Friday). While most councils have a DSG deficit, around a dozen are expected to post a surplus. Lambeth council had a cumulative underspend of £10.7 million in 2024-25. It dropped to £2.2 million by April. This would mean it would receive no high needs stability grant from the government. Concerns The council originally said in schools forum documents that it had “submitted a legal challenge” to the Department for Education (DfE) on the grant’s calculation. But it then clarified that it took legal advice on the issue and wrote to the DfE, and that no legal action was now planned. It refused to provide the letter. Documents reveal that, while the council has surpluses on the schools and early years blocks of the DSG, its high needs block – which funds dedicated SEND provision – was £5.5 million in deficit. This was driven by an increase in top-up funding for pupils with SEND and rising costs for independent special schools placements. But the DfE will only cover the deficit on the whole DSG, not just individual blocks. Lambeth schools forum documents show a surplus of £3.4 million on its schools block, but this relates to funding handed to the councils to support schools with temporary drops in pupil numbers. Schools can only receive the funding if they expect their roll to start increasing again within a few years. Drop in demand for places The council’s capacity forecast shows a 19 per cent drop in demand for primary places and 8 per cent in secondary from 2025-26 to 2029-30. The area is one of many facing sustained falling rolls due to lower birth rates and other factors, such as the cost of living in the capital. The fund is held outside the normal budget share distributed to schools, so has created a cumulative surplus on the schools block. On early years, the council said the £435,000 underspend is linked to the council’s “declining pupil numbers, with termly headcount-based funding lagging behind actual attendance levels”. It had a cumulative £4 million surplus on this block by April. Lambeth predicts its cumulative deficit on the high needs block could rise to £18 million by April next year. In the documents, Lambeth said the DfE’s “general approach is that accounts up to 2024-25 have already been scrutinised and accepted and further scrutiny ahead of payment of high needs stability grants will focus primarily on 2025-26”. “For Lambeth council therefore, it would mean the stability grant relief would be calculated using the total net £2.2 million surplus as at 31 March 2026 (and hence no grant).” The council was also in “discussions with neighbouring councils regarding their approach”. ‘Right that grant targets deficit councils’ The DfE’s grant guidance states that a council “cannot carry forward positive balances on the other non-high needs DSG blocks if the whole DSG account is in deficit at the end of the year”. It added: “The naming of the grant is in recognition of the fact that the vast majority of local authority deficits result from spending on high needs. However, there is not a separate ‘high needs deficit’ in accounting terms.” But the government is yet to say exactly what help it will give councils with deficits between now and when the government absorbs the costs in 2028-29. Future support will take into account councils’ successful delivery of their approved plans, including appropriate use of investment funding to establish the new “experts at hand” offer. The DfE said it was working closely with Lambeth on their reform plan. A spokesperson added: “We’re committed to supporting local authorities as we transition to a reformed SEND system – that’s why we announced grants to pay off 90 per cent of council deficits. “It’s right that the high needs stability grant is targeted at councils carrying deficits, so we can end the postcode lottery families are facing. “All councils will benefit through our £4 billion investment in our once in a generation SEND reforms.”