School leaders rebel over raid on reserves amid ‘shameful’ bail-out ultimatum

SEND children should 'not used as a bargaining chip'

A council set for a multi-million pound government bailout to bring its soaring SEND deficit under control will claw back “surplus” reserves held by schools to plug the shortfall.

Mainstream schools, already struggling under shrinking budgets as councils try to cover high needs shortfalls, face a raid on their reserves as a condition of the “safety valve” deals Town Halls have struck with government. 

Now school leaders have started to rebel, with one school threatening legal action over the budget transfer until it was warned that “targeted support” would end.

The findings expose the impact of the Westminster intervention to help councils get a grip on SEND funding deficits estimated at more than £2 billion.

Government said the bailouts – totalling £377 million for 14 councils – were “not a cost cutting exercise” but were about “improving the performance of local high needs systems.”

Another 31 areas are lining up such deals.

Shadow schools minister Stephen Morgan said it was “truly shameful that ministers have given desperate local authorities an ultimatum over whether to support special schools or go bankrupt.

“Children with SEND should be given the best support possible, not used as a bargaining chip.”

We analysed council and school forum meeting minutes to reveal the problems the scheme is causing on the ground. All but two councils featured in our article declined requests for comment.

Deficit progress stalls

Councils with safety valve deals have pledged to bring down their deficits in exchange for DfE cash but are still struggling to do so. 

Bury council, which clinched a £20 million bailout in the first wave of deals struck in 2020- 21, has made £2.9 million of savings this financial year but is below its £3.3 million target.

Kingston, which pledged to eliminate its deficit by 2025-26 in return for £27 million, is projecting high needs overspend of £5.3m this year. Bailout payments are normally made over a five-year period.

The pressure to save costs is causing tension between councils and schools, which are scrapping to receive their share of top-up funds amid rising SEND demand.

In Hillingdon, given £11 million, school leaders voiced “frustration” over “inaccuracies” in top-up payments over the last 17 months.

Schools reported “significant underpayments” due to problems with information sharing.

Leaders even warned there was a risk the council “did not know where children were placed”, although Hillingdon officers denied this.

Transfer tensions

Safety valve councils agree to transfer 0.5 to 1.5 per cent of funding from their schools funding to their high needs blocks. Normally, transfers are only made with school forum agreement.

Oxfordshire school leaders expressed “deep dissatisfaction” over a proposed transfer “when schools are already hugely underfunded”.

The schools forum for Kirklees council, given a £33.5 million bailout, noted “difficulty” in transferring the £2.1 million agreed for 2023-24. This led to a £423,000 shortfall, with schools sharing the burden. The council is expected to transfer a further £2.6 million in 2024-25 but school leaders have warned of a “very serious funding problem”.

In North Tyneside, which is planning a safety valve deal, one school leader suggested a High Court injunction against the transfer. 

Hillingdon schools forum heads wanted to consult with local schools before making a decision, but did not get the chance to do so.

Hammersmith and Fulham Council is eyeing a one per cent transfer for 2023-24, worth £1.2 million. Council officers invited headteachers to attend meetings with DfE to discuss the “impact of these decisions”.

DfEs safety valve negotiator Tony McArdle

Councils commence clawbacks

Government guidance states councils can claw back excess surpluses from schools. This applies where primaries and special schools have a year-end revenue balance greater than 8 per cent of their annual budget, or secondaries 5 per cent.

Councils until now have been reluctant to do so but North Somerset, set to sign a safety valve deal this year, has decided to claw back balances of over 6 per cent, or £70,000, from April onwards, unless they are required “for a specific purpose”.

The council said with “the pressures on the DSG” [dedicated schools grant, funding that includes high needs] it is “incumbent on the council to review schools’ balances, particularly those of our maintained special schools”.

The forum only voted in favour of transferring £1.5 million after the council warned “targeted support” for schools would otherwise “end”.

One school leader suggested DfE was “putting pressure” on the council to make the transfer. 

A North Somerset Council spokesperson pointed out that the transfer includes the “continuation of targeted support, which is part of our schools’ commitment to providing additional support to local schools where there is a high level of demand”. “We’re delighted that education leaders at both a national and local level are working together to make sustainable funding available for [SEND] children,” they said.

Salford, which has a £6.6 million safety valve deal, is proposing a clawback, citing “very high levels of surplus balances” at some schools, including one with “savings of £1.5 million, way more than the guidance”.

Challenges reducing EHCPs

The DfE told bailed-out councils it expects a “stabilisation” in the number of EHCPs issued. The department said there is “no evidential basis for the indefinite increase”.

But three years after the first five deals were struck, none have yet managed to stem EHCP growth.

An initial rise in EHCPs was factored into the safety valve deals, giving councils time to put measures in place to bring them down.

But the continued rise has been blamed partly on developmental delays in young children arising from the pandemic.

Bury council predicts a 23 per cent rise in EHCP plans by 2025, the final year of its deal. The council is now set to miss its own budget plans by £2.4 million this year.

But this is still masking the real rise in demand for SEND services.

For instance, Bury approved eight per cent more EHCPs last year, but requests increased by 23 per cent. The council told Schools Week this has “outstripped” safety valve forecasts.

Hammersmith and Fulham, given a £20 million bailout, saw a 25 per cent increase in EHCP applications in the 18 months to November 2022.

This was “not reflected in additional funding from the government”, the council said. This sparked a “significant impact on the high needs block” – with a budget gap of £800,000 in 2024-25 and £200,000 in 2025-26.

The rises are also contributing to children waiting longer for support they are legally entitled to.

Of the 198 EHCP applications Stoke-on-Trent council reviewed in the second quarter of 2022-23, only 30 per cent were completed on time – compared to a national average of 58 per cent.

However other councils seem to be bringing EHCP numbers in line.

Richmond received 322 EHC requests in 2022 – a 30 per cent increase on 2021. But its number of EHCPs, 1,706, is lower than the 1,812 forecast in its safety valve agreement.

Kingston is also keeping to safety valve EHCP forecasts, despite a 23 per cent rise in requests for assessments. 

The council warned it will “not be possible” to bring spending in line if growth “continues at current rates”.

Matt Keer of Special Needs Jungle

Councils start funding shake-up

The SEND review proposed a new national framework of banding and price tariffs for funding. This would be matched to levels of need and types of education provision.

The DfE said a national framework would give clarity on how much funding children should get. It would also help “control high costs attributed to expensive provision”.

Ministers still have not published their implementation plan. But some councils are starting to realign their banding policies, with higher levels of funding being cut back.

Bury council is trying scrap the top band of top-funding it provides special schools for pupils with EHCPs, replacing it with a “process or requests for exceptional funding”. They hoped this would save up to £1 million.

But the council is now bringing in “external moderation” as “internal moderation did not achieve the re-balancing of bands…as hoped”.

Bury is now trying to claw back the £1 million from what it calls excess balances at its maintained special schools and a pupil referral unit.

Stoke-on-Trent is also reviewing banding, incorporating a “matrices of need approach based on defined criteria”, along with an audit review of all existing and future EHCPs.

Matt Keer, SEND funding expert for parent network Special Needs Jungle, said he “won’t be crying in his sleep” if private equity-run special schools are not able to “charge what they want” for provision.

But he is concerned independent schools for children with “low incidence types of disability”, who are not generally catered-for by councils, might not be able to continue to provide support.

Another potential issue, flagged in a report for Kingston-upon- Thames council, is that explicitly stating the level of funding on offer for specific needs can lead to “perverse incentives” for parents.

Keer sees evidence from parents that it is “becoming harder” to get EHCPs and believes councils are “under a lot of pressure from the centre to cease plans”.

The DfE’s chief safety valve negotiator Tony McArdle recently told Schools Week how EHCP support for many children should “diminish each year”.

But Keer accused him of being “fixated with the idea” that support for children with permanent disabilities “works like temporary medicine – you put it down the patient, the patient gets better”.

The DfE did not respond to a request for comment.

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