The hardest questions for SEND are still to be answered

One of the biggest issues highlighted in last week’s Budget was Special Educational Needs and Disabilities (SEND) spending in England. For the first time, the Office for Budget Responsibility (OBR) has properly taken SEND spending into account in its forecasts. The government has also announced changes in who will be responsible for SEND spending in future years. 

This is big news. SEND spending has put huge pressure on education budgets and council finances over the last few years. Real-terms council spending on SEND provision1 rose by two-thirds between 2015–16 and 2024–25. In the current financial year, the latest data suggest spending will rise by 13% in real terms. With growth rates that big, it is a relief to see these pressures brought into the open during a fiscal event. 

But the picture on SEND is complex, affecting central government, local councils, and children and their families. In this comment, we unpack what the 2025 Budget means for SEND spending, and the big questions that remain. 

What has been happening to SEND spending? 

Councils’ spending on SEND has risen by two-thirds over the past decade, from £7.8 billion in 2015–16 to £13.1 billion in 2024–25 (green line on Figure 1), with most of the rise occurring since 2018–19. This is due to a steep increase in the number of pupils with Education, Health and Care Plans (the tier of SEND support intended for those with the most severe needs, and which creates legally binding entitlements to specific forms of support). Today, over 5% of pupils have one of these plans, up from 3% in 2018. 

A significant part of the growth in spending has been driven by increased state spending on special schools, which grew in real terms by 31% (£900 million) between 2018–19 and 2023–24. The share of pupils in special schools has grown from 1.6% in 2019 to 2.2% in 2025. A lack of capacity in the state sector has meant that more than a quarter of this growth has come from more pupils in independent special schools, with fees for these places accounting for £800 million of the real-terms growth in spending between 2018–19 and 2023–24, and probably a lot more since. 

Figure 1. Changes in actual and forecast SEND spending and funding

_{Source: Funding and spending figures from OBR Economic and Fiscal Outlook, November 2025. See Latimer et al., 2025 for IFS spending forecast methodology, although note that the OBR forecast is likely to reflect more recent out-turn data. All figures in 2025–26 prices based on November 2025 GDP deflator.} 

Currently, local councils are responsible for assessing, managing and funding SEND provision (above an initial contribution of £6,000 per pupil per year, which is covered by schools). Councils receive funding from the Department for Education (DfE) through the Dedicated Schools Grant that is meant, in theory, to cover these costs. Indeed, funding for high needs has also increased substantially (as shown by the blue line on Figure 1), absorbing more than half of the increase in overall school funding since 2019. 

However, this has still not been enough to cover the costs of meeting pupils’ legal entitlements. As a result, councils have been running deficits in their high needs budgets. Last year, councils ran total SEND deficits of £1.8 billion – and, on current OBR forecasts, they will add another £2.5 billion of deficits this financial year.

What changed at the Budget?

The first thing that changed is that we now have official forecasts of future SEND spending. Before this Budget, the best public estimates came from IFS (see the purple line in Figure 1), the County Councils Network and old government forecasts quoted by the National Audit Office that aimed to predict the growth in future SEND spending. Having official forecasts from the Office for Budget Responsibility makes it much easier to grasp the scale of the challenge, and much more difficult to ignore the fiscal problem. Notably, the OBR also has access to more up-to-date data (including provisional out-turn data for 2025–26). Partly as a result, it has forecast that SEND spending will grow much more rapidly than previously estimated. 

The government also announced that, from 2028–29, central government will meet the full cost of SEND provision from departmental spending budgets. This means that central government will be taking over the risk of spending running ahead of planned funding (removing this risk from local councils). 

There is logic here: while some councils have held down costs more successfully than others, central government has more levers to reform the system as a whole. Transferring risk to central government therefore sharpens its incentives for realistic budgeting – as well as for reforms that might slow the growth in spending.

But there is a big question about what, in practice, it means for central government to ‘take full responsibility’ for funding SEND provision. In principle, this is already meant to happen. Councils get a ring-fenced grant that is meant to fully cover spending needs. It will be up to central government to set out more clearly how it will change the system from 2028 to ensure that the funding councils receive matches the spending they are doing. 

What are the options for dealing with SEND in the longer term? 

As things stand now, the OBR forecasts that SEND spending in 2028–29 will be around £6 billion higher than the £12.3 billion of total funding implied by the overall schools budget announced at the Spending Review in June. This is shown in Figure 1 as the gap between the green and blue dashed lines. That is a big spending pressure: to illustrate the scale, £6 billion is 9% of the total schools budget in 2028–29 and 11% of mainstream school spending. 

With central government assuming full responsibility for funding SEND provision, the government has two options to meet this pressure: slow the growth in spending through reform to the system and/or accommodate the pressure by spending more. In the latter case, the government could choose to meet these pressures within DfE’s existing budget – though this would imply larger cuts to per-pupil spending in one year than we experienced in the decade from 2010 onwards. Or the government could top up DfE’s budget, potentially as part of the next Spending Review in 2027. That would, as always, imply raising taxes, increasing borrowing or spending less elsewhere.

Options for – and challenges to – SEND reform

While the commentary around the Budget has inevitably focused on the (real, important) fiscal challenges of SEND spending, there would be strong arguments for reform even if it did not slow growth in spending. Long delays, drawn-out battles over entitlements, patchy provision and variable quality are all features of the current system. We have written before about the costs these impose on children, families and schools.

But reform is also difficult, and has been slow in coming. In recent years, there have been attempts to reduce deficits and slow spending growth through the ‘safety valve’ programme, which provided additional funding for some councils with particularly high deficits. To receive the funding, councils were required to agree to specific conditions which were meant to bring down the costs of provision. However, many councils in this programme were still unable to reduce spending significantly due to the legal obligations in provision they had to meet. 

The previous government put off multiple attempts to reform the system more widely. The current government first planned to announce reforms in Spring 2025, but the White Paper was initially delayed to this autumn and is now expected early in 2026. As a result, and given the rate at which demand for SEND provision is rising, the government is running out of time to produce major changes in spending trends before 2028. Any legislative changes, which would be needed to change the legal entitlements that have underpinned the rise in spending, probably would not take effect until the 2027–28 academic year. Increasing capacity in mainstream schools will also take time, and it would take even more time to deliver actual savings by providing a better alternative.

What are the options for dealing with the deficits run up before 2028?  

Even if the government does successfully reform the system going forward, there is still a big question over how to deal with the financial legacy of past policy. 

Councils are not usually allowed to borrow to fund day-to-day spending, such as the costs of SEND provision. But with spending on legally mandated SEND entitlements outpacing funding, since 2020 a ‘statutory override’ has allowed councils – if necessary – to borrow to cover SEND-related deficits. As of March this year, cumulative SEND-related deficits amounted to £4 billion. 

This accounting fudge is due to expire in March 2028, when central government takes on the risk for any ‘overspends.’ By then, the OBR forecasts that councils’ cumulative SEND deficits will have reached £14 billion. If these deficits need to be brought back into councils’ main accounts in one swoop, many (and perhaps most) councils with responsibility for SEND provision in their areas could find themselves unable to cover them. While these councils do hold some reserves – £21 billion in total, as of this March – these are highly unequally distributed. Councils in any case are not meant to fully draw down their reserves as this would leave them exposed to other financial risks. 

However, asking central government to assume or write off these cumulative deficits is not straightforward either. This is not because of the basic fiscal impacts – the deficits and associated borrowing by councils will already have been reflected in the overall budget deficit and national debt. The bigger issue is the impact that the announcement of – or the expectation of – a write-off of these SEND deficits could have on councils’ behaviour. 

In particular, knowing they will never actually face the costs, councils would no longer have a financial incentive to try to control SEND spending. If someone else is picking up the tab, why disappoint and anger parents by turning down requests for support, and negotiate down fee rates with private special needs schools? A recent acceleration in spending suggests this may already have started to happen, but the announcements at the Budget make this a material risk for the next two years (before central government assumes full responsibility). 

There is also a question of fairness between councils. There are substantial differences between councils in the size of the cumulative deficits. For example, Hampshire County Council is set to have a cumulative deficit of £300 million or more by the end of March 2026, whilst these are reported to be nearly £200 million in Norfolk and in Bournemouth, Christchurch and Poole. These three councils account for around 11% of the total forecast cumulative deficit of £6.3 billion by March 2026, but for only 4% of school pupils. Other councils have accumulated smaller deficits. It is not clear whether these differences reflect pressures outside of councils’ control or the policies put in place by councils to control spending. 

Further details on how the government plans to address these deficits are expected in the provisional Local Government Finance Settlement later this month. To avoid a breakdown in incentives for cost-control, the government could consider several approaches.

First, it could tighten up guidance and/or take a more direct role in deciding who receives support through Education, Health and Care Plans and at what level. Councils would still have little financial incentive to control spending, but rules and oversight could constrain them from being too spendthrift. These changes would need to take effect very quickly to shift councils’ behaviour over the next two years. 

Second, central government could assume responsibility for only part of the deficits councils incur. Because councils would still be on the hook for at least some of their SEND deficits, they would still have some financial incentive to control costs.

Third, central government could provide support to councils on the basis of a formula designed to predict SEND deficits rather than their actual SEND deficits. Because councils would still pay for any marginal costs of SEND provision (the support they would receive would be fixed), they would still have a financial incentive to control costs. Such an approach could also provide a more consistent level of support to similar councils (or at least councils that are similar according to the formula used to predict SEND deficits). 

Since much of the danger for councils’ balance sheets will come from recognising nine years of cumulative deficits all at once, central government could also allow councils to smooth the balance-sheet impact over several years – giving councils longer to raise revenue or cut back spending to cover the costs. 

None of these is perfect. Compensating councils partially or on the basis of a formula could still leave some with the largest deficits (and/or the lowest general financial reserves) facing financial difficulties when the ‘statutory override’ expires in 2028, for instance. But some combination of these approaches, together with targeted support to the councils facing the greatest difficulties, is better than risking a complete loss of control of expenditure. 

As with reform of the SEND provision itself, addressing its financial legacy will therefore be difficult – but crucial.