A financial ‘cliff edge’ facing Bristol City Council due to rising special educational needs costs is rapidly approaching. The government has given councils special permission to spend more money on schools than they have, but this is due to end in March next year.
Bristol’s council leader warned of a “very serious situation” as the costs of providing support to children with special educational needs are growing, without the extra funding to match. The authority is still waiting to hear from the government about plans to tackle the national crisis.
Without government action, Bristol and many other councils face the much greater risk of going bust. An update on the schools budget was given to the strategy and resources policy committee on Monday (Feb 3), ahead of its approval by the full council later this month.
Next year’s total schools budget, known as the dedicated schools grant (DSG), is a £548 million. Of this, £98 million will be spent on the high needs block, which covers special needs education and pupil referral units. While the government announced an extra £1 billion for special needs education last year, this won’t cover the predicted growth in demand or deficit.
Hannah Woodhouse, executive director of children and education, said: “The high needs block received an increase in funding of seven per cent, and remains under considerable pressure. The level of demand, which we see across Bristol and nationally, indicates that the increased allocation will not provide sufficient funding for growth in additional needs or historic shortfalls.”
The deficit is expected to hit £53 million this March, and £58 million by March 2026. The special permission, known as a “statutory override”, has let the council carry over this shortfall without paying it off each year. But the permission is due to end in March next year, when the council will have to pay it off — and it will likely struggle to do so.
Green councillor Tony Dyer, leader of the council, said: “That’s getting closer and closer. At the moment, if the statutory override isn’t continued, the DSG and the council will be in a very serious situation, as will many other councils.”
Ms Woodhouse added: “Informally, obviously the [Department for Education] is very conscious that it’s an issue for many local authorities who are contingent on the statutory override remaining in place. But we haven’t had anything formally.”
Adding to the pressures on the schools budget is the upcoming verdict of a judge, on whether the council broke the law when signing up to the Safety Valve deal. The deal, reached early last year, involves the government paying the council tens of millions of pounds in instalments, to write off some of the deficit.
A judicial review in the High Court last week heard barristers claim that the council legally should have consulted parents about the effect of the bailout on their children, as the deal came with strings attached, including to support more pupils in mainstream schools rather than costly specialist ones. The council refuted the claim, and a decision is expected in a few weeks.
If the judge does decide the council acted unlawfully, then the Department for Education would “actively consider” recouping the bailout money it’s already given the council, estimated at around £27 million. That would then make the massive financial black hole even harder to fill in March next year, if and when the statutory override ends.
Cllr Dyer said: “The Safety Valve proposals came forward under the previous government. Whether the new government will take a different approach, that’s what we’re waiting to hear.”
Despite the Safety Valve deal, the council is still at risk from the statutory override ending next year. But the bailout cash could help the council avoid running out of money and being forced to effectively declare bankruptcy, as some other councils in England have also recently done. Elsewhere this has caused massive council tax increases combined with heavy budget cuts.
In the meantime, the council is rapidly trying to expand the number of specialist places within Bristol, to avoid sending further children to expensive independent schools, which are often outside of the city. This year, an extra 95 places are due to be created, with more planned next year.
Last December, the Local Government Association called for urgent clarity about whether the statutory override will be extended or not. The government had been due to set out its plans for councils “on the brink of collapse over SEND deficits”, according to Schools Week, but didn’t.
According to the National Audit Office, two out of five councils in England could go bust in March next year, if the special permission expires then. Their analysis found that 43 per cent of local authorities will have deficits either exceeding or close to their financial reserves, meaning the special educational needs system is “financially unsustainable and in urgent need of reform”.
The crisis stems from a change in the law just over a decade ago, when councils were given new legal requirements to support children with special educational needs and disabilities. However, councils weren’t given the additional cash to match these new demands, and since then the number of children needing support has risen rapidly.
Cllr Dyer added: “The extra provisions that were brought in, in 2013 and 2014, were absolutely the right things to be brought in. Children needed them, and their parents and carers did as well. But we didn’t get the additional funding to allow us to deliver on those additional requirements.
“I’m conscious of making sure that we lobby hard when any additional burdens come down the line, for example in housing, to ensure that they come with appropriate powers and funding as well. The DSG has demonstrated what happens when you ask councils to do extra, but you don’t provide them with the funding or resources to do it.”