National Audit Office report - Special Educational Needs system is financially ‘unsustainable’

The NAO report, published on Thursday 24th October, identifies that there has been soaring demand for support for children with SEN. Acknowledging an increase in SEND needs overall, the report draws from Education Health and Care (EHC) plan data to illustrate the increase. Between 2015 and 2024 there was a 140% increase (to 576,000) in children with an Education, Health and Care (EHC) plan alone. Most of this increase related to autistic spectrum disorders; speech, language and communication needs; and social, emotional and mental health needs.

Key findings of the report include:

• Long waiting times for an EHC plan was one example of families’ declining confidence in the system, as only half of EHC plans were issued within the statutory 20-week target in 2023.
• Over the past decade, high-needs funding has risen by more than half (58%), to £10.7 billion for 2024-25. However, in the NAO report – ‘Support for children and young people with special educational needs’, – it found that despite this, local authority dedicated schools grant deficits could reach £4.6 billion by March 2026.
• There is declining confidence in the system – supporting 1.9m children – not meeting children’s or families’ expectations
• The numbers of local authorities facing the equivalent of bankruptcy is at an unprecedented all-time-high. Two-fifths of local authorities face risk of issuing a section 114 notice by March 2026, which the NAO attributes in part to SEN costs 
• The NAO points out that government not yet identified solution to manage estimated £4.6bn deficit

The NAO recommends, as a matter of urgency, government shares plans with local authorities so that each can achieve a sustainable financial position once the statutory override ends, including how deficits will be treated and any wider financial impact on services managed.

Longer term, local authorities face a worsening financial situation. Looking ahead, for 2027-28 there is an estimated mismatch of between £2.9 billion and £3.9 billion when comparing current funding, maintained in real terms, against forecast costs.

Other factors creating challenges in building an effective system include misaligned priorities and incentives. For DfE, supporting those with SEN is a strategic priority, for the NHS it comprises two of its 32 priorities (2024-25).

Also, the NAO comments on a consequence of the current position, noting schools could be incentivised to exclude pupils with SEN, which conflicts with local authorities’ duties to find children school places and ensure value for money.

While DfE has realistic estimates of the number of children with SEN it can support in state special schools, it does not know how many spaces are available in mainstream schools or other settings.

DfE committed to improving the system, in the Improvement Plan 2023 created by the previous government. This introduced a range of initiatives but there is no evidence these will fully address challenges facing the system. None of the 60 stakeholders the NAO engaged with believed current plans would sufficiently address the problems they saw.

The NAO report concludes with nine recommendations for DfE and wider government, given the challenges facing the SEN system, including:

• explicitly consider whole system reform, to improve outcomes for children with SEN and put SEN provision on a financially sustainable footing
• develop a shared understanding of how identifying and supporting SEN should be prioritised, including within the health system
• develop a vision and long-term plan for inclusivity across mainstream education

The Secretary of State for Education, Bridget Phillipson issued the following response to the report:
"The NAO’s report exposes a system that has been neglected to the point of crisis, with children and families with SEND quite simply being failed on every measure.
 
Every child and young person deserves the best life chances and the opportunity to achieve and thrive. But at the moment far too few are being given that chance in a system that is too skewed towards specialist provision and over-reliant on EHC plans – often only to the benefit of families who have the resources to fight for support.

I am determined to rebuild families’ confidence in a system so many rely on – so, there will be no more sticking plaster politics and short-termism when it comes to the life chances of some of our most vulnerable children.  The reform families are crying out for will take time, but with a greater focus on mainstream provision and more early intervention, we will deliver the change that is so desperately needed.”
 
Background

• The Department for Education intends to strengthen accountability on mainstream settings to be inclusive including through Ofsted, support the mainstream workforce to increase their SEND expertise, and encourage schools to set up Resourced Provision or SEN units to increase capacity in mainstream schools.
• Work has already started with increased training for early years providers to identify and support children with SEND earlier. In July 2024, Government announced that funded support for the 11,100 schools registered for the Nuffield Early Language Intervention (NELI) programme would continue for 2024-25 to help pupils who need extra support with their speech and language development find their voice.
• The Curriculum and Assessment Review will look at the barriers which hold children and young people back from the best life chances – including those with SEND.
• To ensure that improving inclusion in mainstream schools is the heart of plans to improve opportunity for those children with SEND, the Secretary of State has restructured the Department for Education so that SEND and Alternative Provision policy comes under the responsibility of the Schools Group.
• The Department for Education has publicly committed to continuing to work with the sector as essential and valued partners to ensure their approach is fully planned and delivered in concert with parents, schools, councils, and other people who work with children.
• DfE have  also published an independently commissioned insights report from the Delivering Better Value programme which provides dedicated support and funding to over 50 local authorities –  based on those facing particular financial challenges. Alongside the report, DfE published a toolkit to help other local areas to learn from the experience of those on the DBV programme.

Links:
National Audit Office report
Delivering Better Value insights report
Delivering Better Value Toolkit
Curriculum and Assessment Review