Local authorities facing large annual shortfalls due to cost of SEN provision exceeding funding provided by government: IFS

The report: ‘Support for children with disabilities and special educational needs’, found that high-needs spending by councils, which predominantly covers additional support for those with Education, Health and Care Plans (EHCPs), has increased by 66% from £7.5 billion in 2016 to at least £12 billion in 2025, after adjusting for inflation.

The thinktank said: “We forecast that spending on high needs will rise by a further £3 billion by 2029 without any reforms, taking it above total day-to-day spending by the Ministry of Justice.”

Meanwhile, the report warned that councils have “little control” over high needs spending as it is determined by the statutory provision set out in EHCPs.

The think tank observed that since the cost of provision has exceeded funding provided by central government, local authorities have faced large annual shortfalls.

“The resulting debts are forecast to reach £8 billion by 2028. This is not financially sustainable. Local authorities are not normally allowed to borrow for day-to-day spending and a ‘statutory override’ of these rules for school spending is set to expire in 2028. If left unchecked – and without top-ups to school spending plans – these spending pressures will likely imply real-terms cuts to mainstream school spending per pupil,” said the report.

It added: “Given the scale and growth of spending, and the risks that they pose, the Office for Budget Responsibility should produce and publish annual forecasts for high-needs spending and high-needs deficits”.

Looking at the current demand for EHCPs, the IFS noted that the share of pupils under 16 in England with EHCPs almost doubled from 2.7% in 2016 to 5.2% in 2025.

Over the same period, the share of children receiving child disability living allowance (CDLA) – a cash benefit for children with disabilities – more than doubled from 3.4% to 7.2%.

The thinktank warned that without reform, uptake of both forms of support will “continue to grow”.

Analysing reasons for the increased demand for EHCPs and CDLA claims, the report observed this could be explained by the number of children receiving support relating to autism and ADHD.

It said: “The number of children with EHCPs for autism spectrum disorder has almost tripled from 54,000 in 2015 to 149,000 in 2025, accounting for 40% of the total increase in EHCPs. The number of children with EHCPs for ‘social, emotional and mental health needs’, which includes ADHD, has also more than doubled, from 28,000 to 71,000.”

The report added: “A large part of this increase in recognised need is due to increased awareness of these conditions, although there may also be increases in underlying prevalence of the conditions. Past squeezes on school budgets may also have acted as an incentive for parents and schools to seek EHCPs in order to access extra resources.”

Making recommendations for reform, the IFS noted that there is a “strong case” for the government to review “all systems of support” for children with special educational needs and disabilities.

The report noted: “There is a particularly strong case for reviewing CDLA, which has remained broadly unchanged since its introduction over 30 years ago in 1992, despite large changes in the health of young people, to healthcare and to the broader benefit system.

“The government should also investigate how it can improve support for children with autism and ADHD in mainstream schooling.”

Responding to the findings by the IFS, Cllr Amanda Hopgood, Chair of the Local Government Association’s Children, Young People and Families Committee, said: “There is no doubt the current SEND system is not working and is not meeting the support needs of children and families. 

“This is why we are calling for reform of the system, and for government to work with councils to tackle these challenges, while ensuring the voices of children and their families and heard and acted upon. 

“We need an inclusive system where an EHCP is not always necessary, with a workforce that has the capacity and right skills, and investment in early intervention.”

She continued: “The Government must also address the outdated legislation that leaves councils facing rising and unsustainable costs, particularly in home-to-school transport, where demand has increased sharply but councils have little flexibility under current law. 

“We are also calling on the Government to put councils on a stable financial footing by writing off councils’ high needs deficits, which are projected to reach £5 billion next year.”

Alos responding to the report, Cllr Bill Revans, SEND Spokesperson for the County Councils Network, said: “The County Councils Network has long warned that the growing trend of local authorities spending more and more each year on special educational needs and disabilities (SEND) services is simply unsustainable and will threaten the financial sustainability of many councils in the near future. On top of this, we’ve highlighted that this dramatic increase in spend has not seen educational attainment for pupils with SEND improve over the last decade.

“Today’s report from the IFS highlights many of the concerns councils have been raising, particularly over educational outcomes and the need for a holistic review of the system. Reform should include incentivising and enabling mainstream schools to better support pupils with SEND, reducing the reliance on specialist placements, alongside a more comprehensive focus on prevention.

“With the government set to unveil reforms for SEND services this Autumn, it is vital that ministers’ plans are comprehensive, leaving no stone unturned in trying to return the system back to sustainability, and to ensure that it works better for young people.”

Lottie Winson