Special educational needs (SEN) funding shortfall: why local authorities are under pressure
Special Educational Needs (SEN) funding shortfall is currently placing unprecedented strain on local authorities (LAs) across the United Kingdom in 2025.
This fiscal crisis threatens the legal right of vulnerable children to receive the tailored education and support they desperately need. The disparity between demand and resource is widening dramatically.
This mounting financial pressure means councils are struggling to fulfill their statutory duties under the 2014 Children and Families Act.
Without sufficient resources, the promise of inclusive and individualized education becomes hollow rhetoric rather than lived reality for thousands of families.
Why Has Demand for SEN Support Increased So Dramatically?
The most significant factor driving the Special Educational Needs (SEN) funding shortfall is the exponential rise in the number of children identified with complex needs.
This increase has far outpaced central government funding allocations.
Better diagnostic capabilities, increased parental awareness, and rising mental health needs post-pandemic have all contributed to a surge in Education, Health and Care (EHC) plans.
What is Driving the Surge in EHC Plans?
Since 2015, the number of pupils with EHC plans has risen by over 80% nationwide, according to Department for Education (DfE) data. These plans mandate specific, often high-cost, provisions.
This increase reflects a growing recognition of conditions like Autism Spectrum Disorder (ASD) and Severe Learning Difficulties (SLD). However, the money hasn’t followed the need.
Also read: What the state of UK education in 2025 reveals: key stats every teacher and parent should know
How Does Early Diagnosis Impact Demand?
Earlier and more accurate diagnosis means children are entering the system needing specialist support sooner. This extends the period over which LAs must fund their provision, adding to long-term costs.
The complexity of needs is also increasing, often requiring one-to-one support or placements in expensive specialist schools, further exacerbating the funding gap.
Read more: Why financial literacy will be compulsory in English schools from 2028: what parents should know
The Autism Diagnosis Rate
A decade ago, an ASD diagnosis might have come later, sometimes post-school entry. Today, with improved clinical pathways, many children arrive in Reception classes already requiring full-time teaching assistant support.
This immediate and sustained need requires substantial annual financial commitment from the local authority’s dedicated schools grant (DSG), compounding the budget deficit.
How Does the High Needs Block Mechanism Cause Strain?
Local authorities fund SEN provision primarily through the High Needs Block (HNB) of the Dedicated Schools Grant (DSG), but this mechanism is structurally flawed. The HNB increase has failed to match inflationary costs or demand.
When the HNB is exhausted, LAs must cover the statutory costs of EHC plans using their general council budgets. This diverts money from other crucial local services.
Why is the Cost of Specialist Placements So High?
Independent and non-maintained special schools (INMSS) often provide the highly specialised environment and therapy required for children with the most complex needs. These placements come at a premium.
A single out-of-borough placement can cost an LA anywhere from £40,000 to over £100,000 per year. These costs are non-negotiable legal obligations that the LAs must meet.
What is the “Safety Valve” Programme?
The government has implemented a “Safety Valve” programme, offering financial deals to the LAs with the largest deficits, in exchange for major restructuring and cost-cutting measures in their SEN provision.
While aiming to stabilize finances, this puts pressure on LAs to limit new EHC plans or reduce current provisions, often creating legal battles with parents who are fighting for their children’s rights.
The Leaking Bucket
The High Needs Block is like a bucket designed to catch rainwater (funding). The demands for SEN support are like rapidly pouring water into it.
The bucket is not only too small, but it has a massive leak (statutory costs).
LAs are forced to use general council funds to patch the leak, draining money from other essential services like social care and highways.
What Financial Data Reveals the Severity of the Shortfall?
The growing financial hole in SEN funding is evidenced by council accounts nationwide, with the collective deficit rapidly accelerating and becoming a systemic threat to local governance. This is not isolated to a few poorly managed councils.
The financial liabilities related to the Special Educational Needs (SEN) funding shortfall are now so large that they risk tipping some LAs into effective bankruptcy.
What is the Current Size of the National DSG Deficit?
According to a 2024 report by the County Councils Network (CCN), the accumulated Dedicated Schools Grant (DSG) deficit across English local authorities is projected to exceed £3.6 billion by 2025/26.
This figure represents an astronomical, unsustainable financial liability.
This deficit is often held ‘off-balance sheet,’ but it legally remains a liability for LAs. It represents money spent on statutory duties that the government grant failed to cover.
How Does Litigation Compound the Problem?
When parents disagree with an LA’s decision regarding EHC plans, they often appeal to the First-tier Tribunal (SEND Tribunal). The tribunal finds in favour of families in over 90% of cases.
These tribunal decisions often mandate expensive provisions, further ballooning LA costs. The legal process itself also incurs significant legal and administrative fees for the council.
The Budget Diverted from Social Care
A mid-sized metropolitan council in the North West reported that it was forced to allocate an additional £15 million from its non-education budget to cover the HNB deficit last year.
This directly impacted adult social care services and library opening hours.
This constant internal shifting of funds creates a zero-sum game, pitting the needs of vulnerable children against the needs of elderly or disabled residents.
Why Is Early Intervention a Key to Solving the Crisis?
A failure to invest adequately in early intervention services often leads to significantly higher costs later in a child’s life. Prevention is always cheaper than cure in the educational context.
Providing effective support at primary school level can prevent the escalation of needs that ultimately necessitate high-cost special school placements in secondary education.
How Does Inadequate Mainstream Support Affect EHC Plans?
Many mainstream schools, facing their own budget cuts, cannot provide the quality of early-stage support required for pupils with emerging needs. This pushes parents to seek the security of an EHC plan.
The lack of funding for quality teaching assistants and specialized training in mainstream settings drives the demand for the statutory protection of an EHC plan, creating a vicious cycle.
What is the Role of Local Area Inclusion Funds?
Some LAs have successfully piloted local inclusion funds, which provide mainstream schools with flexible cash to deliver tailored support before the need for an expensive EHC plan arises. This is a crucial preventative step.
Such investment requires an initial outlay but is projected to save money long-term by reducing the number of children entering the most expensive tier of the SEN system.
This demonstrates a potential way to mitigate the Special Educational Needs (SEN) funding shortfall.
| Factor Contributing to Deficit | Description of Impact | Financial Consequence | Statutory Obligation? |
| Increased EHC Plans | 80%+ rise in complex cases since 2015 | Unfunded mandated provision (Average £10k/pupil) | YES |
| High Cost of Special Placements | Reliance on expensive independent special schools | Single placements cost up to £100k+ annually | YES |
| SEND Tribunal Success Rate | Over 90% of family appeals overturn LA decisions | Mandates higher, unplanned expenditures | YES |
| Lack of Early Intervention | Mainstream schools cannot cope; needs escalate | Leads to higher-tier, more costly EHC plans | NO (Budgetary cut) |
Conclusion: Securing the Future for Vulnerable Pupils
The Special Educational Needs (SEN) funding shortfall is more than a budgetary issue; it is a profound moral and systemic crisis that compromises the life chances of thousands of vulnerable children in the UK.
Local authorities are caught between legally mandated duties and crippling financial constraints.
Addressing this requires not just temporary bailouts but a fundamental, long-term review of the HNB funding formula to ensure it genuinely matches demand and inflationary costs.
The stability of our local councils and the quality of our education system depend on solving this debt crisis.
Shouldn’t every child, regardless of need, be guaranteed the educational support enshrined in law? Share your thoughts on how the UK government should reform SEN funding in the comments below.
Frequently Asked Questions
What is an EHC plan?
An Education, Health and Care (EHC) plan is a legal document outlining a child’s special educational, health, and social care needs, and the support required to meet them.
How is the SEN funding deficit created?
The deficit is created because the Dedicated Schools Grant (DSG) provided by central government to LAs is insufficient to cover the statutory costs of all the EHC plans mandated by law and the SEND Tribunal.
What is the Dedicated Schools Grant (DSG)?
The DSG is a ring-fenced grant from the DfE given to LAs to fund schools and high-needs provision. The High Needs Block (HNB) is the specific section covering SEN.
What is the High Needs Block (HNB)?
The HNB is the specific portion of the DSG intended to fund provision for children and young people with the most complex SEN, including EHC plans and special school placements.
Why do LAs often lose at the SEND Tribunal?
LAs often lose because the Tribunal prioritizes the child’s needs as defined by their statutory rights, whereas the LA’s decision is often driven by budgetary constraints and policy, which the Tribunal disregards.
