Special Educational Needs system is financially ‘unsustainable’- NAO

England's special educational needs (SEN) system is not delivering better outcomes for children and young people; is financially unsustainable and in urgent need of reform, according to a new National Audit Office report.

There has been soaring demand for support for children with SEN. Between 2015 and 2024 there was a 140% increase (to 576,000) in children with an Education, Health and Care (EHC) plan¹ alone. Most of this increase related to autistic spectrum disorders; speech, language and communication needs; and social, emotional and mental health needs.

Long waiting times for an EHC plan was one example of families' declining confidence in the system, as only half of EHC plans were issued within the statutory 20-week target in 2023.

Over the past decade, high-needs funding has risen by more than half (58%), to £10.7 billion for 2024-25. However, in the independent public spending watchdog's latest report – Support for children and young people with special educational needs – it found that despite this, local authority dedicated schools grant deficits could reach £4.6 billion by March 2026.

This date (March 2026) is when accounting arrangements – termed ‘statutory override' – stopping these deficits impacting local authorities' financial position will end. This leaves two-fifths (43%) of local authorities at risk of issuing a section 114 notice, effectively declaring bankruptcy.

The NAO recommends, as a matter of urgency, government shares plans with local authorities so that each can achieve a sustainable financial position once the statutory override ends, including how deficits will be treated and any wider financial impact on services managed.

DfE has taken steps to tackle local authorities' immediate financial pressure with the Safety Valve and Delivering Better Value programmes², but these are not working to achieve savings quickly.

Longer term, local authorities face a worsening financial situation. Looking ahead, for 2027-28 there is an estimated mismatch of between £2.9 billion and £3.9 billion when comparing current funding, maintained in real terms, against forecast costs.

Other factors creating challenges in building an effective system include misaligned priorities and incentives. For DfE, supporting those with SEN is a strategic priority, for the NHS it comprises two of its 32 priorities (2024-25).

Also, schools could be incentivised to exclude pupils with SEN, which conflicts with local authorities' duties to find children school places and ensure value for money.

While DfE has realistic estimates of the number of children with SEN it can support in state special schools, it does not know how many spaces are available in mainstream schools or other settings.

DfE committed to improving the system, in the Improvement Plan 2023 created by the previous government. This introduced a range of initiatives but there is no evidence these will fully address challenges facing the system. None of the 60 stakeholders the NAO engaged with believed current plans would sufficiently address the problems they saw³.

The NAO report concludes with nine recommendations for DfE and wider government, given the challenges facing the SEN system, including:

• explicitly consider whole system reform, to improve outcomes for children with SEN and put SEN provision on a financially sustainable footing. 
• develop a shared understanding of how identifying and supporting SEN should be prioritised, including within the health system.
• develop a vision and long-term plan for inclusivity across mainstream education.

Gareth Davies, head of the NAO, said:  

“Although DfE has increased high-needs funding, the SEN system is still not delivering for children and their families, and DfE's current actions are unlikely to resolve the challenges.

“The government has not yet identified a solution to manage local authority deficits arising from SEN costs, which ongoing savings programmes will not address.  

“Given that the current system costs over £10 billion a year, and that demand for SEN provision is forecast to increase further, government needs to think urgently about how its current investment can be better spent, including through more inclusive education, and developing a cohesive whole system approach.”

ENDS 

Notes for Editors 

Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website. 

In this press notice, aligning with the report, we use ‘SEN' as standard to refer to all children and young people with special educational needs, including those whose needs arise because of a disability. Use of the term ‘child' includes young people.

1. EHC plans set out children's legally enforceable entitlements to specific support.
2. In 2021, DfE introduced its Safety Valve programme to support local authorities with the highest deficits. In May 2024, it assessed that 22 out of 33 participating local authorities were on track to realise expected savings. However, this programme will not achieve savings quickly. Twenty-eight agreements set target dates to eliminate deficits after March 2026, when the statutory override ends. In 2022, DfE launched the Delivering Better Value programme, for local authorities without a Safety Valve agreement but with substantial deficits. The programme exceeded savings targets in 2022-23. Nevertheless, local authorities participating in the Safety Valve and Delivery Better Value programmes still forecast cumulative deficits totalling £9.1 billion in 2028-29. DfE has proposed a qualitative review to assess how the Safety Valve programme changes will impact outcomes for children (paragraphs 2.32 to 2.34 and Figures 12 and 13). 
3. The 60 stakeholders, including nine local authorities, the NAO engaged with overwhelmingly said that DfE's steps would not be sufficient to address the root cause of problems even if fully implemented, with aspects such as workforce, inclusivity and early intervention missing. This resonated with a report commissioned by the Local Government Association and County Councils Network, published in July 2024, that SEN reforms were essential. Full list of stakeholders – Appendix 1.