(UK) Somerset: Govt to pay off 90% of $158M SPED debt to avoid bankruptcy
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Feb 13, 2026, Somerset Co Gazette: Somerset's special needs deficit to be slashed by government
Central government will pay off up to 90 per cent of Somerset Council's special needs deficit, reducing its risk of effective bankruptcy in the near-future.
All Somerset schools which are not academies are currently funded through the dedicated schools grant (DSG), which is provided annually to Somerset Council by the Department for Education (DfE).
The DSG grant covers the budgets for individual mainstream primary and secondary schools, along for early years provision (i.e. nursery places) and for children with special education needs and disabilities (SEND).
Demand for SEND resources has vastly outstripped government funding for years, with Somerset's DSG deficit predicted to reach £116m [$158M] by the end of the current financial year.
But the DfE has now come to the council's aid, stating it will pay off the vast majority of this deficit - provided that a plan to control future spending can be put in place by the early-summer.
Boris Johnson's Conservative government introduced a DSG statutory override in 2020, allowing local authorities to keep these deficits off their balance sheet and ward off the threat of effective bankruptcy (known as a Section 114 notice).
The current Labour government confirmed in June 2025 that this override would end in March 31, 2028 - with chancellor of the exchequer Rachel Reeves MP subsequently stating in her November 2025 budget that any DSG debts incurred after this date would be absorbed by the DfE.
As part of the final local government funding settlement published on Monday (February 9), the DfE indicated that up to 90 per cent of the current deficit would be borne by central government - around £104.4m.
The remaining deficit of around £11.6m will remain 'off the books' until the override ends on March 31, 2028 - after which it will immediately appear on the council's books, and potentially tip the authority into immediate insolvency.
The council has put a deficit reduction plan in place to bring down this debt - but members of its audit committee stated in late-January that this may not be enough to prevent a Section 114 notice from being issued.
Deputy leader Liz Leyshon addressed the issue when the council's executive committee met in Taunton on Wednesday morning (February 11).
She said: "We now know that the government will cover 90 per cent of the SEND accumulated deficit up to the end of March 2026.
"The higher needs block deficit is forecast to be approximately £116m [$158m] by the end of this year.
"We are taking steps to cover the remaining ten per cent, which will stay under the statutory override, and then also address deficits accumulating in the next two financial years. We do not yet know how the government will respond to that.
"The high needs stability grant (writing off the 90 per cent) will be on the basis that we have a local SEND reform plan. There is no way the government will just hand grants over."
Every UK local authority will be eligible for this high needs stability grant in the 2025/26 financial year - but the grant will not be provided until the autumn of 2026.
To secure the grant, the council must submit its SEND reform plan by the summer, which will "set a clear pathway for an inclusive SEND system" involving both education and health partners.
Clive Heaphy, the council's interim chief financial officer, speculates that the DfE would have to employ a similar write-off in future financial years in light of the national scale of the problem.
He said: "I suspect that this will be an annual thing over the next two years.
"It will roll on at a similar level, but it will be very much linked to the SEND reform plan and the deficit recovery plan.
"The financial advisor from DfE will continue to monitor our progress, so we need to demonstrate that we've got a handle on SEND cases - that we're managing them in the best possible way."
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