Council’s finances will be in tatters if £130m shortfall goes back on the books

A huge £130million special needs deficit could wipe out Devon County Council’s finances if it is put ‘back on the books’ and anxious councillors are still waiting on a decision from the Government.

The council’s audit committee heard the authority would struggle to begin setting its own budget until it knew what was happening over the £130m shortfall, which is greater than the council’s own cash reserves.

 Many councils across the country, including Devon, were hoping for clarity from the government about what it will do about roughly £6billion of special educational needs and disabilities (SEND) deficits nationwide.

The previous government allowed councils to place these deficits separately outside their annual accounts, but that permission – officially called the statutory override – ends in March unless it is extended or an alternative solution created.

Chancellor Rachel Reeves did not mention SEND deficits in her spending review speech, but documents released later pledged clarification in the autumn, which many fear will be too late.

Addressing the audit committee, finance director Angie Stewart said if no government action is taken it would put its finances at risk.

She said: “This is not unique to Devon, but we have to deal with our own issues. We must be mindful of what the government is going to do with the end of the statutory override approaching.”

Chief executive Donna Manson said the lack of any clarity is worrying.

She added: “I have concerns about the ability of the council to set a budget for next year, as there are question marks on whether the SEND deficit will be moved or not and that has a significant impact on what we look at as an organisation.

“I consider this a matter of urgency as we did not hear what we expected to in the spending review.”

Committee chair Councillor Alan Connett said the deficit ‘entirely wipes out our reserves’.

He said: “It is the single-biggest risk to this council that has no mitigation as the government has done nothing to say whether the current arrangement carries on or what they expect us to do.

“The Safety Valve agreement does nothing to limit the demand that has to be met by the council.”

Devon secured £95m from the Safety Valve rescue scheme run by the previous government, with funding paid over nine years.

But the current government halted new applications for such grants, meaning the future of existing agreements is unclear.

Cllr Connett agreed to hold an extraordinary in July to discuss the issue in more detail, after worries from some councillors that it would be too long to wait until the next scheduled meeting in September.

Deputy chair Cllr Paul Hayward said: “I feel a little bit ill at ease given the chief executive’s point, because if the audit committee considers this in September, we will be well into budget preparations [for the 26/27 financial year] and waiting until then could cause problems.

“The item is so significant to this authority that I would be happier with an extraordinary meeting when the government provides clarity.”