SEND deficits to stay off local authority balance sheets

The government has announced a wide-ranging overhaul of the local government funding system, with implications for education and Special Educational Needs and Disabilities (SEND) services among the key measures.

The reforms, set out in an eight-week consultation launched today, aim to deliver a fairer and more stable funding model for councils across England. Among the proposals is the retention of the Dedicated Schools Grant Statutory Override until 2027/28. This will continue to keep SEND deficits off council balance sheets while wider reforms to children’s social care and SEND funding are developed.

A new formula will also be introduced to account for Home to School transport costs. These changes are intended to help councils manage increasing pressures on SEND services, which have seen steep rises in demand and expenditure in recent years.

The government said the current system is outdated, reliant on decade-old data, and no longer reflects the cost of delivering frontline services. The new framework promises to direct funding to areas of greatest need, prioritise prevention, and simplify over 300 grant streams into a more efficient system.

Local government minister Jim McMahon said the reforms would provide “stable footing” for councils, address regional inequalities and ensure services such as social care, including SEND, are properly resourced.

While no funding allocations have yet been announced, multi-year settlements are due to begin from 2026/27, with transitional arrangements in place to allow councils time to adapt.

The changes follow concerns raised by sector leaders over the financial instability caused by short-term funding cycles and competitive bidding. Council representatives have broadly welcomed the move as a step toward long-term certainty and improved public service delivery.