Dec 10, 2024, IFS: Spending on special educational needs in England: something has to change
Spending on special educational needs (SEND) is becoming unsustainable due to the rise in high needs. Reform to SEND funding and provision is needed.
Executive summary:
The special educational needs and disabilities (SEND) system in England has faced unprecedented pressure over the past decade, and without substantial reform it will likely become unmanageable for local authorities over the coming years.
Fundamentally, this is due to the rocketing number of children and young people with education, health and care plans (EHCPs). Children with EHCPs are those with the highest needs and local authorities are statutorily obligated to cover the costs of provision set out in EHCPs.
The reasons behind this rise in EHCPs are complex, but potential explanations include increased severity of needs, expanded recognition and diagnosis of needs, and stronger incentives to seek statutory provision.
1. The number of school pupils with EHCPs has risen by 180,000 or 71% between 2018 and 2024. As a result, nearly 5% of pupils now have EHCPs. This rise in pupils with EHCPs has been driven by three specific types of needs: autistic spectrum disorder (ASD); social, emotional and mental health needs (including ADHD); and speech, language and communication needs. The rises in ASD, ADHD and mental health needs appear to be global phenomena across high-income countries.
2. Central government funding for high needs currently totals nearly £11 billion [$11b] and has increased substantially, with a 59% or £4 billion real-terms rise between 2015–16 and 2024–25. This growth can account for about half of the total real-terms rise in school funding over the same period. However, even with this substantial rise, funding has not kept pace with the increase in pupils with EHCPs. As a result, per-EHCP funding has fallen by around a third in real terms over this period.
3. High needs spending has been consistently higher than funding by £200–800 million [$255M—$1B] per year between 2018 and 2022, mainly because local authorities have a statutory obligation to deliver the provision set out in EHCPs. As a result, local authorities have accumulated large deficits in their high-needs budgets, estimated to be at least £3.3 billion in total by this year. An accounting fudge known as the ‘statutory override’ has kept these deficits off local authorities’ balance sheets and prevented many from having to declare bankruptcy. This short-term fix is currently due to end in March 2026.
4. There are large variations in identified need, funding and deficits across local authorities. Some areas see much higher proportions of pupils with SEND or EHCPs which seem partly due to differences in identification practices. High-needs funding also varies significantly across areas, with some of the largest deficits seen in places with lower levels of per-EHCP funding. This emphasises the need for reform of the funding system to better align with current need, as well as a more uniform approach to SEND identification and support to avoid a ‘postcode lottery’ in provision.
5. Nearly two-thirds of the increase in spending has been driven by increased spending on pupils in special schools, with a £900 million increase in top-ups for state-funded special schools and a £900 million[$1.1B] rise in spending on fees for pupils in independent special schools between 2015–16 and 2022–23. The latter accounts for very few pupils (30,000 in total), but placements are extremely high-cost in independent special schools (£61,500 [$78K] per year) compared with the state-funded sector (£23,900) [$30K]. Local authorities have probably had to rely on such provision due to capacity constraints in state-funded special schools and a lack of effective provision in mainstream schools.
6. There are financial incentives for schools to seek EHCPs. Mainstream schools can only access local authority ‘top-up’ funding if the additional cost of SEND support is over £6,000 (the first £6,000 must be covered from core school budgets). This can only really be achieved with an EHCP. This £6,000 threshold has not been updated with inflation for over 10 years, eroding its value in real terms and therefore bringing more pupils into the group who require top-up funding and, by extension, EHCPs. A tight picture on core school spending and rising demand for SEND support have also made it harder for schools to fund provision from core budgets.
7. The government’s own forecasts suggest annual spending on high needs will rise by at least £2–3 billion between 2024–25 and 2027–28, which largely reflects projected increases in EHCPs and need over the next few years. Even with the additional £1 billion [$1.3B] announced in the 2024 Autumn Budget, these increases in spending would imply cumulative local authority deficits of over £8 billion [$10B] by 2027 assuming high-needs funding is held constant in real terms. Given the statutory obligations attached to EHCPs, this should be the default assumption for the public finances.
8. Meaningful reform will be complex and costly. It is likely to require a significant expansion of the core SEND provision available in mainstream schools, an expansion of state-funded special school places, a geographic redistribution of funding, and maybe reducing the statutory obligations currently attached to EHCPs. At the moment, there are huge delays in getting assessments, forcing many parents to get private assessments or go to legal tribunals. Building parental confidence in a new system will therefore be challenging. Any transition to a new system would also be costly as it would likely entail some double funding to cover current obligations. Although difficult, substantial reform is necessary to create a financially sustainable and equitable SEND system. The default is spending an extra £2–3 billion [$2.5B—$4B] per year on an unreformed system by 2027–28.
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