The Government must urgently reform a failing system of support for children with special educational needs as spiralling costs have not led to better outcomes for pupils, councils have warned.
Authorities said they are facing a financial “cliff edge” driven by a sharp increase in demand for pupil support since the introduction of landmark special education needs reforms in 2014.
A major study, commissioned by the cross-party Local Government Association (LGA) and the County Councils Network (CCN), concluded that current arrangements are not working for pupils, families or authorities.
Councils are projected to spend £12 billion on support by 2026, three times more than a decade ago, but will still face a £5 billion “funding black hole” due to expected demand that year.
Sector leaders said it is becoming “increasingly clear” that special educational needs support represents an “existential threat to the financial sustainability of local government” and called on the new Government to set out plans to make schools more inclusive, as promised in the Labour manifesto.
The Children and Families Act 2014 introduced education, health and care (EHC) plans as part of reforms aimed at improving outcomes for children in need of support.
But performance across key education milestones has since flatlined, or declined, among these children, the report by Isos Partnership said.
In 2022-23, just 8% of children with EHC plans achieved the expected level of literacy and mathematics at Key Stage 2 (Year 6 in schools in England).
This shows no improvement since 2016-17 while the gap in performance between those with EHC plans and their peers “has remained stubbornly large”, the report said.
Meanwhile, only 30% of pupils with EHCs achieved Level 2 qualifications equating to five GCSEs with A* to C grades by the age of 19, compared with nearly 37% who achieved that level in 2014-15.
The 2014 reforms aimed to ensure that education, health and social care services worked together to provide support.
However, many local systems struggled to adapt as the number of children with EHC plans more than doubled from 240,000 in 2015 to 575,973 in 2023-24.
A further 1.2 million children have been identified as requiring support below the level of a statutory support plan – an increase from 990,000 in 2015.
The supply of specialist school placements has also vastly outstripped the number of families whose child has been assessed as needing one, the report said.
This has led to councils paying higher fees to fulfil their statutory duties, often after a tribunal has upheld a family’s challenge to the support being provided.
As a result, the previous government allowed councils to keep growing deficits driven by support spending off their balance sheets, despite authorities being legally required to balance their books annually.
The report said this arrangement, known as a “statutory override”, is being applied to £3.2 billion that has already been spent by councils.
The current support system creates “perverse incentives” for public bodies to shift responsibility elsewhere, creating “adversarial relationships” between councils and parents, it added.
The report identified a system “weighted down by legal disputes through tribunals and an over-reliance on special schools due to a loss of parental confidence that mainstream schools can meet their children’s needs”.
Overall, 185,000 pupils with an EHC plan were in state-funded or independent special schools in 2024, an increase from 109,000 in 2015.
These placements cost between £25,000 and £58,000 a year, compared to an annual cost of £8,200 in a mainstream school.
The report argues that reform should focus on ensuring more children have their needs met in mainstream education, but added such settings often lack the “capacity, resources and, in some cases, expertise” required.
Tim Oliver, CCN’s Conservative chairman, said: “As this landmark report shows, the case for reform is unquestionable.
“With a new government in place and elected on a ‘change’ platform, it is vital that reform happens over the next 18 months.
“The Government should build on this report’s clear recommendations and work with local government to create a system that is sustainable for councils and schools and works better for parents and pupils.”
Louise Gittins, Labour chair of the LGA, said: “What parents and children need and deserve is a properly reformed and funded Send (special educational needs and disabilities) system that meets the care and support requirements of every child and young person with special needs.
“For too long, the current system has failed children with Send and left parents struggling to ensure their child gets the support they desperately need.
“As set out in our Local Government White Paper, we are calling for action which builds new capacity and creates inclusion in mainstream settings, supported by adequate and sustainable long-term funding, and the writing off of councils’ high needs deficits.”
Just over a third of councils are likely to face severe financial difficulties this year which will have a significant impact on the delivery of essential services, other research has found.
A survey of members by the Chartered Institute of Internal Auditors suggested financial challenges were exacerbated by a spike in demand for services due to the cost of living crisis.
Responding to the special educational needs research, Education Secretary Bridget Phillipson said: “This diagnosis is damning: educational outcomes for children with Send are flatlining after years when councils and parents have been pitted against each other.
“This Government will take a different approach, whether it’s transforming the early years to intervene earlier and deliver better outcomes for children, or launching our curriculum and assessment review to put high and rising standards and inclusion together at the heart of every school.
“We will restore parents’ trust that their child will get the support they need in mainstream school, if that is the right place for them. And that there will always be a place in special schools for children with the most complex needs.
“We have a broken system in desperate need of long-term renewal. I won’t make false promises, change won’t feel as quick as parents – or I – would like. I will make sure our approach is fully planned and delivered in concert with parents, schools, councils, and everyone who works with children.”
