Central government’s takeover of SEND deficits raises the stakes for SEND reform

In the words of the Education Committee, the special educational needs and disabilities (SEND) system is “broken”. ²⁷ House of Commons Education Committee, Solving the SEND Crisis (HC 492), The Stationery Office, 18 September 2025, https://committees.parliament.uk/publications/49536/documents/265373/default  It was not designed to cope with anything like today’s levels of demand. Spending is unsustainably high – and growing – while outcomes are deteriorating and confidence in the system has collapsed.

For the past five years, governments have used a ‘statutory override’ to temporarily keep SEND deficits off councils’ books – an accounting manoeuvre that is the only thing preventing almost half of local authorities from declaring effective bankruptcy. ²⁸ Comptroller and Auditor General, Support for Children and Young People with Special Educational Needs, Session 2024–25, HC 299, National Audit Office, 24 October 2024, www.nao.org.uk/reports/support-for-children-andyoung-people-with-special-educational-needs  The override will expire in March 2028, at which point the Office for Budget Responsibility (OBR) forecasts that cumulative deficits will have reached £14bn. ²⁹ Office for Budget Responsibility, Economic and Fiscal Outlook – November 2025, CP 1439, The Stationery Office, November 2025, https://obr.uk/docs/dlm_uploads/OBR_Economic_and_fiscal_outlook_November_2025.pdf

With the last government doing little more than watch, Labour – to its credit – is creaking into action. It is expected (after several delays) to set out reform plans in early 2026.  

The announcement in last week’s budget that the government would centralise SEND costs ³⁰ HM Treasury, Budget 2025 (HC 1492), The Stationery Office, November 2025, https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html  has provided councils with greater certainty over their finances in the medium term, critical if they are to plan strategically. It is also a clear sign that the government is taking charge: from 2028/29, all future deficits – estimated to reach £6bn in the first year alone ³¹ Ibid.  – will fall to central government. The OBR has already identified this as a major pressure on departmental spending, coming as close as it can to suggesting the government may overspend. ³² Ibid.  So this  sharpens the government’s incentives to deliver substantial savings – and quickly. If it doesn’t, other budgets will face deep cuts, or further tax rises will be necessary.  

But taking over SEND funding is more than a signal the government is taking the issue seriously. The move opens up risks and opportunities for its reform programme – how the government manages them will determine its success.

Centralising costs adds another player to an already complex system

As it stands, the SEND system is plagued by fragmented governance. Schools deliver and partially fund SEND services; local authorities also fund services and are held to account for provision; health partners play a critical delivery role with ambiguous accountability. The National Audit Office has written that “misaligned priorities and incentives” between these bodies are undermining a whole-system approach, ³³ Comptroller and Auditor General, Support for Children and Young People with Special Educational Needs, Session 2024–25, HC 299, National Audit Office, 24 October 2024, p.12, www.nao.org.uk/reports/support-for-children-andyoung-people-with-special-educational-needs  contributing to poor outcomes, limited accountability and low trust. ³⁴ House of Commons Education Committee, Solving the SEND Crisis (HC 492), The Stationery Office, 18 September 2025, https://committees.parliament.uk/publications/49536/documents/265373/default

By bringing another party – itself – into the mix, the government must avoid making matters worse. It must carefully consider how its new role will fit with delivery responsibilities, agency priorities and accountability mechanisms. But alongside those risks lie genuine opportunities. Councils have limited levers to influence how schools or health services operate; central government does not. With funding held at the centre, it has a chance to draw these disparate bodies more fully into the reform effort, whether through redesigned funding structures, new incentives or changes to service delivery.

The government risks working against local delivery partners

The new funding arrangements risk more than complicating governance structures – they could delay the long-term investment the system needs. Quick reform depends on early action: local areas must, among other things, invest in systems of early intervention and build capacity in the workforce in the next few years, because these initiatives take time to deliver results.  

But under the proposed model, councils – responsible for all SEND costs incurred before 2028/29 – would shoulder the upfront costs while any future savings would flow to the government, potentially deterring early investment. Local areas already face many barriers to taking a long-term approach: the government should take care not to add another.

Incentives may also be distorted once SEND funding is centralised. Devolution is a cornerstone of the government’s own public service reform agenda, ³⁶ HM Treasury, Spending Review 2025, CP 1336, The Stationery Office, June 2025, www.gov.uk/government/ publications/spending-review-2025-document/spending-review-2025-html  in recognition of the fact that local areas need flexibility to innovate and tailor services to local needs. However, by taking control of the purse strings, the government could end up stifling precisely the flexibility it wants to promote.

This announcement may further erode trust  

Rebuilding trust in the SEND system, especially among children, young people and their families, is key to resolving the crisis. Yet the budget announcement was the latest in a series of opaque and disjointed government interventions on SEND – from locking in major funding decisions at the spending review before having a reform plan, to extending the statutory override before deciding what would happen once it expired.  

Now the government has pledged to absorb future SEND deficits without explaining how it will fund them. It is therefore easy for families, after years in an adversarial system, to suspect that this is really about cutting costs rather than improving outcomes. That may not reflect ministers’ intentions, but unless those intentions are clearly articulated, the mistrust will persist. Ultimately, by communicating poorly, the government risks making a rod for its own back: if it is to play a bigger role in the SEND system, building families’ trust in its intentions becomes even more critical.