Unsustainable? The Institute for Fiscal Studies Proposes Reform to the SEND System

The Institute for Fiscal Studies (‘IFS’) has published an extensive report on spending in special education. It concludes there is an urgent need for reform. The IFS reports spending has become “unsustainable” due to a high rise in needs which has created unprecedented pressure.

Without substantial reform, the IFS predicts that SEND will become unmanageable for local authorities.

The full report can be found here: https://ifs.org.uk/publications/spending-special-educational-needs-england-something-has-change

---

SKYROCKETING RISE IN NEEDS

The number of school pupils with Education, Health and Care Plans (EHCP) has risen by 71% (180,000) between 2018 and 2024. This is equivalent to 5% of pupils. This increase is primarily driven by three types of needs:

1. autistic spectrum disorder (ASD);

2. social, emotional, and mental health (including ADHD);

3. speech, language and communication.

   
   

The reason behind the skyrocketing rise in EHCPs is complex. The IFS suggests its due to a combination of the severity of needs, expanded recognition and diagnosis of needs, and stronger incentives to seek statutory recognition. The rises in ASD, ADHD, and mental health needs appears to be a global phenomenon across high-income countries.

---

FINANCIAL INCENTIVE

Mainstream schools are incentivised to seek EHCPs as it is the only way they can access funding more than £6,000 which comes from the core budget. This threshold of £6,000 has not been adjusted to account for inflation in over 10 years. This means more pupils are brought into the group who require top-up funding, and in turn, EHCPs. As school budgets are tight and demand for SEND support is only increasing, is it harder for schools to fund provision from their core budgets.

---

SPENDING

The IFS’s findings suggests that central government spending on SEND is inefficient. The government funding for high needs is nearly £11 billion and has increased by 59% between 2015-16 and 2024-25. Yet, interestingly, the growth in spending only accounts for roughly half of the total rise in school funding over this period.

Despite this large increase, funding has not kept pace with the increase in pupils with EHCPs and per-EHCP funding has fallen by around a third.  More concerningly, high needs spending by local authorities has been consistently higher than funding. Local authorities are over-spending by £200-800 million per year (between 2018-22) due to their statutory obligation to deliver the provision set out in EHCPs. This has resulted in large deficits which are estimated to be approximately £3.3 billion by the end of 2024.

However, these deficits are currently not on local authorities’ balance sheets. Credited to a short-term fix referred to as the ‘statutory override’, which is due to end March 2026, this is a ticking time bomb for local authorities.

---

POSTCODE INEQUALITY

The IFS has also found that there are large variations in identified need, funding, and deficits across local authorities. Certain areas have much higher proportions of pupils with SEND or EHCPs which they report is in part due to identification practices. The inequality in funding across areas means that some of the largest deficits are where there are the lower levels of per-EHCP funding. They suggest reform for the funding system to align needs, SEND identification, and support to avoid a postcode lottery.

---

SPECIAL SCHOOLS

A large chunk of spending comes from fees associated with specialist settings. Special schools account for almost 2/3 of the increase in spending which is equivalent to a £900 million increase in top-ups for state-funded special schools and a £900 million rise in spending on fees for pupils in independent special schools between 2016-16 and 2022-23.

The IFS reasons this is due to local authorities growing reliance on independent special schools, due to pressures on state-funded schools’ capacity and a lack of effective provision in mainstream schools.

---

SPENDING FORECASTS

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. This is more than the additional £1 billion announced in the Autumn 2024 budget. The IFS predict this could cause a local authority deficit of over £8 billion by 2027, assuming high needs is constant in real terms.

---

PROPOSED SOLUTION

To counteract this, the IFS suggest urgent reform is needed, which they say will be complex and costly. IFS proposes four legal and practical changes to the current system:

1. the expansion of core SEND provision in mainstream schools;

2. an expansion of state-funded special school places;

3. a geographic redistribution of funding;

4. reducing the statutory obligations currently attached to ECHPs. IFS suggests the delay in receiving assessments erodes parental confidence in the existing system.

---

SUGGESTED REFORM – IS IT ENOUGH?

The reforms suggested by the IFS appear necessary to avoid local authority bankruptcy, postcode inequality, and most importantly ensuring pupils with SEND receive an education in which they can thrive. The IFS’s suggestions are likely not enough to counteract the ever-increasing number of pupils with needs and EHCPs, which with time will only put greater pressure on local authorities.  

The lack of state-funded special school places needs to be seriously addressed by government if any truly effective reform is to take place, as high-cost independent school places are simply unsustainable moving forward. Moreover, underspending on state schools, in terms of the £6,000 from schools’ core budgets, means government is overspending when it comes to SEND. Ironically, by underfunding state schools the government is bolstering funding to private schools which cost far more than is necessary.

Satnam Virdi (Solicitor) and Jessica Derwent (Paralegal)

SV Law Solicitors and LASEN Ltd

05.02.25

This blog contains general information about law and legal practice. The information is not advice and should not be treated as such.