Devon County Council able to retreat from SEND overspend cliff edge – for now

Devon has been given a reprieve after being pushed to a £170million financial cliff-edge due to overspending on special educational needs.

The pressure on special educational needs and disabilities (SEND) services means councils across the country have been spending more each year than the funding given to them from government.

That has caused many councils, including Devon County Council, to build up a significant and growing deficit that creates an ever-expanding financial cloud above county halls across the nation.

Rules set by Westminster meant councils were able to put those growing SEND deficits to one side by ring-fencing them so they didn’t hit their annual finances. 

But those rules – known as the statutory override – were due to end in March next year.

In Devon’s case, that would have meant dealing with its huge SEND deficit. The total overspend – at around £169m prior to some recent payments to reduce it – is greater than the council’s cash reserves of £99m.

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The ability to ring-fence the deficit has now been extended to March 2028, giving the council some breathing space. The government has also pledged a White Paper by the autumn exploring how to overhaul the SEND system.

Devon was given a £95m grant last year under the Safety Valve scheme to help tackle its SEND overspend, but the money is paid in batches over about nine years and comes with various conditions.

Angie Stewart, DCC director of finance, recently told its audit committee: “The point where that overspend hits our reserves has been postponed, but it was £170m at the end of last year and it will go up again.

“We will get £6m from the government this [financial] year, but that is nothing compared to the level of overspend we are seeing year on year.”

Ms Stewart said rumours were circulating that the government may let councils borrow money to reduce SEND deficits, but this had not been confirmed by Westminster.

She added that even if the council borrowed money to rid itself of its deficit, there was the “ongoing issue that we are spending [tens of millions of pounds] more than we are being funded”.

Shye said: “If the funding doesn’t go up, then we’d be back at similar deficit levels again.”

For the 2024/25 financial year, Devon was predicting it would have an in-year SEND deficit of just over £31.1m, but this ended up being £51.4m.

Besides the £5m per year Devon has to contribute to tackling the deficit as part of its Safety Valve agreement, the council also sets cost-saving targets each year to try and reduce its SEND deficit.

Last year, it targeted £15m of savings and achieved £11m. This year it is targeting £22.5m and believes it has already found roughly £16m.

Officers stressed the savings ‘are not reductions in service’ but improvements in efficiency and financial management.

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Councillor Alan Connett, chair of the audit committee, acknowledged the spending was being put to good use.

“The purpose of the spending is helping children in Devon who need educational support and so there is no finer purpose you could have for an overspend being generated,” he said.

“We talk about the ‘deficit’ and ‘overspending’ against government budgets, but ultimately thousands of children in Devon are supported by this council.

“It’s just the impact on the bottom line, which for a number of years has been affordable, but now has got to the point where the council’s financial health is at risk, albeit not imminently.

“But if we had a red, amber, green rating, this would be amber.”

He noted that the committee had ‘concerns regarding the depletion of cash balances’ and called upon fellow cabinet members and officers to ‘develop a strategy to replenish our reserves’.

The council’s chief executive, Donna Manson, added that major spending was likely needed to overcome the issue, because if mainstream schools had the space, facilities and staff to support more SEND children, then fewer would need to access more expensive private placements.

“The future solution for Devon has to be significant capital investment in our locality so children get the right support in a place-based approach,” she said.

She added that a lot of private providers offered ‘fantastic placements for young people with a level of complexity’, but that Devon’s situation would only improve ‘if we get greater sufficiency locally’.

Ms Manson said a recent investment of £10m made up of cash from the Department for Education and the council had helped create more SEND capacity for 16 to 18-year-old students in local colleges.

“But it took that capital investment to do it and that’s what we need,” she said.