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Third of ‘safety-valve’ councils face bankruptcy

More than a third of councils with “safety-valve” deals to plug high-needs deficits face bankruptcy, despite being set to receive more than £1 billion in government bailouts before the end of the decade.

Since 2021, 38 councils with eye-watering SEND deficits have had to strike deals that give them annual cash injections in return for savings plans – with strings attached.

In 2020 the government overrode standard accounting rules, letting councils keep dedicated schools grant (DSG) deficits off their general revenue books, which enabled them to set overall balanced budgets.

That override is set to end in 2026, after which it was hoped councils would have eradicated these deficits.

But more than a third (38 per cent) of the 28 safety-valve councils that responded to a freedom of information request admitted they were at risk of issuing a section 114 notice – meaning they could not balance their budgets – in the next three years.

This was partly driven by the escalating cost of SEND provision.

Section 114s restrict council spending to the statutory minimum, forcing more curbs to SEND services.

‘Not on track’

Stoke-on-Trent said it was facing “a risk of section 114 due to pressures and demands across all of children’s services”. It was “not on track” to balance its DSG deficit by 2025, as agreed in its safety-valve deal, with its officers in “constant dialogue with the DfE”.

North Tyneside’s risk of a section 114 is currently flagged as an “A1 risk” with “very high likelihood”.

Bath and North East Somerset is one of five councils whose safety-valve deals are currently “subject to review” after it failed to hit spending targets.

The authority joined the programme in 2022-23, securing a deal for £19.2 million – but after overspending in its high-needs block by £9.3 million in 2023-24, “grant payments have been suspended”, council papers said.

Scott Gardner, senior SEND accountant for Achieving for Children, which runs Richmond’s children’s services, said it had been “highlighted by the DfE as a success of the [safety valve] programme”.

“However if the funding ceases there is a high risk that within five years the borough will be in the same financial position it was before [it] was introduced.”

Dorset is “making progress”, but this has “not yet translated into financial savings or efficiencies”.

The council expected to end the 2022-23 financial year with a £10.4 million high-needs deficit, but it almost doubled to £19.7 million. In March 2024 its £24 million deficit was more than triple a predicted £7 million.

Council officers recently met with DfE colleagues to “find a way forward”.

‘We’ll be effectively bankrupt’

Bristol’s DSG deficit rose to £58.6 million at the end of 2023-24. It received only £21.5 million in safety-valve funding from the DfE to offset this, leaving it carrying over a £37.1 million deficit into this year.

Steven Peacock, its chief executive, warned recently of the SEND bailout: “If we get this wrong, we’ll be effectively bankrupt.”

Councils are also missing their targets to reduce EHCPs under the agreements, as demand for SEND support soars. 

More families are also objecting to council decisions. In 2022-23 the number of SEN appeal outcomes rose by a third to 12,000, of which 8,000 were decided by tribunal. Ninety-eight per cent of tribunals found in favour of families, up two percentage points on the year before.

A third of the responding safety-valve councils said the risk of them not being able to deliver their statutory duties for SEND children had risen in the previous year, with a quarter saying it had remained unchanged.

Moore

All but one of Bath and North East Somerset’s three special schools and six resource bases are “full or oversubscribed”. It has “struggled to meet its statutory duties” and “had to rely on expensive out of area placements”.

A new SEND advice service the council is launching in September will aim to reduce EHCPs” and to “focus on data”.

Councils are also being hampered by disorganised commissioning of SEND services.

In the 32 Ofsted area SEND inspections since January 2023, almost a third were graded 3 (with systematic failings), another third 1 (typically positive), while almost half were 2 (inconsistent).

Catriona Moore, policy manager at the Independent Provider of Special Education Advice, warned recently that safety-valve councils’ targets, which include reducing EHC needs assessments, risk councils “exposing themselves to more legal challenges than ever”.

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