With special educational needs and disability (SEND) costs escalating, local authority debts spiralling (and projected to reach £14bn by 2028), and a SEND support system widely viewed as in crisis, the government has announced two major measures aimed at improving both financial sustainability and, in a policy paper, the SEND system itself.
The policy paper sets out ambitious aspirations: a fairer, more consistent and more local SEND system that embeds inclusion rather than adding it on. Meanwhile the funding reforms aim to direct more resources to mainstream schools so they can broaden their ‘UK law became supreme over EU law available’ provision.
Key proposals
Amid growing concerns about councils’ financial sustainability, largely due to heavy SEND expenditure, the government announced in November 2025 that, from 2028/29, the Department for Education will fund SEND costs directly. This marks a shift away from reliance on council budgets. The statutory accounting override, introduced in 2020 to keep SEND deficits off council balance sheets, will expire on 31 March 2028.
To receive deficit relief, local authorities must submit a Local SEND Reform Plan for approval by the Department for Education. Finance officers will play a central role in developing these plans, and specialist financial advisers will be part of the department’s quality assurance process. The first plans are due in June this year, with quarterly data updates thereafter.
The government proposes a phased transition: in 2026/27, government will pay off 90% of historic deficits accumulated up to March 2026 through a new high-needs stability grant; and then from 2028/29, the Department for Education will assume full responsibility for future SEND costs within its central budget.
Local authorities must still cover the remaining 10% of historic deficits from local reserves, forcing many to make SEND savings or divert funding from other services. While councils have welcomed the shift to central funding, many warn that, without wider system reform, deficits will simply re-emerge.
Future of EHCPs
A major driver of rising costs is the significant increase in education, health and care plans (EHCPs). The effective financial threshold for such a plan – the notional £6,000 – has been frozen in cash terms since 2013. This represents a cut of more than 50% in real terms, as mainstream school budgets have tightened. As a result, schools have been able to provide less SEN support from their core budgets, resulting in more children entering the EHCP system and greater council expenditure.
The policy paper aims to reverse this trend by increasing school-level funding so that more provision becomes ‘ordinarily available’, reducing the legal need for EHCPs. A new ‘inclusive mainstream fund’, worth £1.6bn over three years, will be paid directly into school budgets to strengthen early support and intervention.
Several factors pose big risks for SEND cost management in the 2030s
From this year, the Department for Education will hold individual establishments and trusts to account for how they use this funding. Schools will be required to publish and annually review an inclusion strategy, setting out how they will use their resources to support SEND.
This mirrors the transparency and accountability framework used for pupil premium funding and represents a significant shift in how schools report on SEND spending. If implemented well, it could build parental confidence that children’s needs will be met without an EHCP. However, its success depends heavily on schools embracing the intent of the reforms.
Experts at Hand
A new national multi-agency model, funded through £1.8bn over three years, will embed professionals such as educational psychologists, speech and language therapists and occupational therapists directly into mainstream settings. This ‘Experts at Hand’ model aims to improve access to specialist support and reduce reliance on EHCPs as the only route to provision.
While settings are likely to welcome this investment, the scale of workforce expansion required presents a significant challenge. Shortages in key professions may limit the model’s impact in the short term, potentially sustaining a need for EHCPs if specialist input is not yet ‘ordinarily available’.
Special school funding
The National Audit Office reported in 2019 that the main reason local authorities overspend on high-needs budgets is the rising number of pupils in special schools. These numbers and associated costs have continued to grow. The policy paper includes a guarantee that any child with a special-school place in September 2029 can remain there until they finish their education – potentially until 2043 for some pupils.
Special schools will continue to cater for children with the most complex needs and will also act as specialist outreach centres supporting mainstream establishments. A £3.7bn capital fund up to 2030 will create around 60,000 specialist places, including new special schools, expansions and ‘inclusion bases’ in mainstream secondary schools. Inclusion bases aim to broaden mainstream provision and reduce the need for transfers to special schools at the end of year 6.
The move to fund future SEND costs within central government is bold
Special schools will also move to a national system of funding bands and tariffs to ensure consistency. Developing these descriptors and implementing them nationally will be challenging and is likely to create financial winners and losers. Factors such as the absence of a clear expectation that improved mainstream inclusion should stabilise special school numbers, combined with the placement guarantee and the difficulty of defining ‘complex needs’, pose a significant risk to SEND cost management in the 2030s.
A further proposal is to change the law on independent special schools so councils pay only a ‘reasonable price’ for placements. This responds to concerns that independent placements cost an average of £61,500 compared with £23,900 in state special schools, according to the NAO. While local authorities welcome this, success will depend on expanding local specialist provision, including transforming some existing special schools.
The move to fund future SEND costs within central government department expenditure limits is bold and may help reinforce across government the principle that ‘SEND is everyone’s business’. The challenge will be ensuring that system-wide reforms keep pace with financial changes so that deficits do not simply reappear in a new form.
