Councils warn special educational needs deficits mean they could go bankrupt 'overnight'

The County Councils Network says the situation is now "unmanageable", ITV News Deputy Political Editor Anushka Asthana reports

A decision to let English councils build up "hidden deficits" to cover the surging cost of special educational needs and disabilities (SEND) now risks bankrupting almost three-quarters of the largest local authorities, it has been warned.

Research shared exclusively with ITV News and the FT reveals that councils - which have been allowed to use an accounting fudge to keep the losses off their balance sheets - have already amassed SEND deficits of £4 billion nationwide.

The data - from the County Councils Network (CCN), Society of County Treasurers and Association of Local Authority Treasurers - suggests the figure will balloon to £5.9 billion next year, and then £8 bn after that.

Large and often rural councils represented by the CCN have the largest deficits. This year £2 billion - or half of the total deficit - falls on the shoulders of its 38 members who say the situation is now "unmanageable". Their deficits are expected to rise to £2.7 billion in 2025/26, and then £3.8 billion.

The councils have only been able to carry the deficits because the government introduced an accounting method known as a 'statutory override' that keeps the money off the books, but it is due to expire in March 2026.

A separate survey of its members by the CCN reveals that 26 councils believe they will have to trigger a section 114 and effectively declare bankruptcy by the end of 2027 if the funding crisis is not fixed. Wiltshire Council is one of 18 councils warning it would go insolvent immediately if the override is withdrawn.

Its leader, Councillor Richard Clewer, said Wiltshire was in a stable position overall but added: "If the statutory override wasn’t in place this would dramatically change the picture. With our special educational needs deficit already outstripping all available reserves, we would be technically bankrupt overnight."

He said the situation was "unsustainable" and needed urgent reform.

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Mr Clewer and the CCN warned that extending the accountancy trick would not fix the fundamental problem - which is the spiralling costs of care.

The number of children with an EHCP (Education Health and Care Plan) that carries statutory support has risen from 240,183 to 575,973 since 2014. Another 1.2 million children fall below that threshold but still qualify for extra care. Many more children are now schooled in special schools, including private options paid for by local authorities.

Councillor Kate Foale, the SEND CCN spokeswoman, said: "With the clock ticking to March 2026 when these deficits are placed back onto councils’ budget books, the government must provide immediate clarity on a national solution to eliminating or managing councils’ deficits. But this is only one part of the solution. We also need root and branch reform of the SEND system to address the key issues driving demand and cost, including flipping the system to make mainstream schools more inclusive for SEND pupils."

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