The new government should “explicitly” consider “whole-system” SEND reforms, the spending watchdog has urged in a devastating report that reveals the full scale of impending financial meltdown.
The National Audit Office warned today the special needs system is “financially unsustainable”, with two-fifths of councils at risk of declaring bankruptcy by March 2026 over spiralling costs on special needs.
Government interventions to tackle such pressures, such as the controversial “safety valve” bailout scheme, are not achieving savings quickly and won’t provide a sustainable system, the NAO said.
‘Urgent action required’
Government predicts high needs budget pressures will rise by another £3.9 billion in just a few years, while councils’ deficits could hit nearly £5 billion. Meanwhile, outcomes for children are not improving.
And, despite spending years formulating the SEND improvement plan, the watchdog found the Conservative government did not have a “fully developed implementation plan”.
Gareth Davies, head of the NAO, said: “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.”
The NAO made nine recommendations. They include “whole-system reform” to improve outcomes and put the system on a “financially sustainable footing” and work with Treasury to come up with a plan for councils when the accounting immunity – which keeps the deficit of the books – runs out in 2026.
It also wants government to work to “understand the root causes behind increases” in SEND and EHCP numbers, and develop a “vision and long-term plan for inclusivity across mainstream education”.
The latter should “consider opportunities to adapt funding and accountability arrangements to encourage inclusivity”.
The new Labour government has committed to make mainstream schools more inclusive, but has yet to reveal a wider plan.
More SEN units, and ‘decoupling’ calls
Bridget Phillipson, education secretary, said the report “exposes a system that has been neglected to the point of crisis” with children and families “simply being failed on every measure”.
She vowed there will be no more “sticking plaster politics and short-termism”, but warned reform “will take time”.
Alluding to her plans, Phillipson said at the moment “far too few are being given that chance in a system that is too skewed towards specialist provision and over-reliant on EHC plans – often only to the benefit of families who have the resources to fight for support”.
The DfE said it will strengthen accountability on mainstream settings to be inclusive through Ofsted and support these schools’ workforce to increase their SEND expertise.
It will also encourage mainstream schools to set up resourced provision or SEN units to increase capacity.
But Paul Whiteman, general secretary at NAHT school leaders’ union, said the “warning lights are flashing red – without proper investment, things will get even worse, and the system may face complete collapse.
“High-needs deficits must be written off, and urgent, targeted investment is needed to stop children in different parts of the country from being left behind.”
Tom Rees, chief executive of Ormiston Academies Trust, added Phillipson was right to think about whole system reform, “not tweaks around the edges or to a handful of specific areas”.
But for a mainstream school system to cater for most children, he said “we will need to decouple the process of specialist school admissions from the practice of mainstream inclusion – enabling schools to deliver what young people need through expert and evidence-informed practice”.
Dame Rachel de Souza, children’s commissioner, said now is the time for “bold leadership with a focus on joining up education, health and care services”.
But Anna Bird, chair of the Disabled Children’s Partnership, warned that if reform does take place “it must be done in consultation with parents and it is imperative children don’t lose important legal rights”.
SEND crisis: How Schools Week led the way
We’ve been reporting on the SEND crisis for years, journalism that has won awards and delivered change for the sector.
Here are just some of our key investigations across the years:
Trauma, expense and delays: Symptoms of a SEND system in ‘complete crisis’
SEND costs leave councils on brink of bankruptcy
DfE lets councils skirt minimum funding rules to prop up SEND
Rules changed after Schools Week’s SEND robbery investigation
Council SEND deficit bailouts hit £1bn as 20 more issued
How inclusive are mainstream schools?
‘Enough is enough’: Special schools’ devastating budgets revealed
How investors are making millions from the ‘bankrupt’ SEND system
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