The news that central government will provide a grant to fund 90% the cumulative special educational needs and disabilities (SEND) deficit will have been welcomed by Section 151 Officers, as welcome relief from a financial pressure that there was no way to control at a local level.
SEND is a statutory duty, meaning that councils have no choice but to deliver it in the local area. The way that these duties are intended to work is that the council delivers the service at a local level in the way most appropriate for the local level. The funding for this is provided by central government.
However, in recent years demand for SEND services have increased significantly, by a third in ten years. This has placed councils into a material overspend position on SEND services.
As a temporary stop gap, central government put in place an accounting override, which allowed councils to take SEND overspends to an unusable reserve rather than recognise it as a cost in full each year. Over time this reserve has continued to grow, and for many councils it has led to a higher borrowing requirement and the interest costs associated with higher debt.
This is because although councils have not been required to recognise the loss and therefore have avoided increasing council tax even more, the money has actually been spent. With no extra money from either grant or taxation there’s only one place to get the cash to fund the negative reserve; borrowing.
This has had a knock-on impact on council borrowing projections and liability benchmarks. In most cases a council’s borrowing requirement is lower than its unfinanced capital expenditure (its CFR), however with SEND deficits increasing some councils were potentially looking at a liability benchmark (borrowing requirement) greater than the CFR.
Therefore, this grant is good news for council treasury managers. Officers should identify the SEND deficit in the liability benchmark, and model how this new settlement will reduce it. For some councils this will be a significant figure, and is likely to mean that borrowing in the second half of the 2026/27 financial year will be significantly lower than has been modelled in recent treasury strategies.
Councils need to ensure that they model this quickly, so as not to make borrowing decisions which lead to an overborrowed position in the future.
Councils which have responsibility for high needs children will be anxiously wating for more information on how future costs will be met. It is positive that the government has partly resolved historic costs, but it will mean little if councils end up in the same position in three years’ time.
If you’d like to discuss an appropriate approach for SEND borrowing between now and the Autumn grant, how to include the SEND grant in your liability benchmark or the appropriate accounting approach for recognising the grant, contact skitching@arlingclose.com.
11/02/2025
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