The UK Government will assume full responsibility for special educational needs and disability (SEND) spending from local councils in April 2028, setting the stage for a major overhaul of the system but triggering warnings that the Department for Education (DfE) could face a financial crisis running into tens of billions of pounds. The Office for Budget Responsibility (OBR) said SEND costs in England are projected to rise to £6bn a year by 2028, while historical SEND deficits accumulated by councils are expected to reach £14bn by the same date.
The announcement was made during the Budget, marking one of the most significant shifts in education funding for more than a decade. The government has yet to confirm how it will cover both the long-term spending pressures and the historic deficits councils have built up since 2020. The OBR described the absence of a funding plan as a “significant fiscal risk”.
£20bn Pressure Looms
If the government absorbs the full £20bn burden into the DfE’s core schools budget, the OBR warned it could trigger a 4.9% real-terms fall in mainstream school spending per pupil in 2028–29. This would directly contradict current plans for a 0.5% real-terms rise. The DfE said the OBR projections do not include the effects of forthcoming SEND reforms and insisted deficits would be absorbed by wider government spending rather than reducing school budgets.
Chancellor Rachel Reeves said the reforms planned for next year are “not about money” but about building a more effective system. She said she wants more children integrated into mainstream schools where appropriate, leaving Education Secretary Bridget Phillipson to set out the full details early next year.
Calls for Reform Intensify
Experts say the OBR’s warning increases pressure on the government to deliver immediate structural reforms. Helen Miller of the Institute for Fiscal Studies said ministers are “running out of time” to introduce changes that could slow cost growth within this parliament. Natalie Perera, chief executive of the Education Policy Institute, cautioned that the government must not cut school funding to cover SEND costs, stressing that rising demand must be met sustainably.
Councils have repeatedly warned that SEND services are on the verge of “total collapse” without urgent reform. Demand for education, health and care plans (EHCPs) has surged dramatically, more than doubling to 639,000 over the past decade. To cope, councils have increasingly relied on expensive private special schools, some run by private equity firms, contributing to rapidly escalating costs.
Councils Warn of Bankruptcy Risk
Local government leaders welcomed the shift of SEND funding to central government but said serious concerns remain over the £14bn of accumulated deficits. These deficits have so far been held off council balance sheets using an accounting measure known as the “override”, preventing many authorities from effectively declaring bankruptcy. However, the override will expire in 2028. Without intervention, councils have warned that nine out of ten upper-tier authorities would be pushed into insolvency.
Matthew Hicks, chair of the County Councils Network, said the government must move beyond broad promises and provide “decisive action” to clear historic debts in the upcoming local government settlement. William Burns from the Chartered Institute of Public Finance and Accountancy said centralising SEND spending will ease pressure on councils but urged ministers to seize the opportunity to design a more functional system for children and families.
SEND Crisis Years in the Making
The financial crisis around SEND funding has grown steadily since major reforms were introduced in 2014, which expanded eligibility and extended support to age 25. Rising diagnoses of autism, language difficulties and mental health needs have further added to pressures. Councils argue that demand has grown faster than funding, leaving them with escalating deficits and an increasing dependence on private specialist providers. The upcoming schools white paper is expected to propose major structural changes aimed at curbing costs and stabilising the system.
