DEVON has been given a reprieve on a £170 million financial cliff-edge it faced linked to its persistent special needs overspending.
The pressure on special educational needs and disabilities (SEND) services means councils across the country have been spending more each year than the specific funding given to them from government.
That has caused many councils, including Devon, to build up a significant and growing deficit.
However, rules set by Westminster mean councils have been able to put their growing SEND deficits to one side by ringfencing them so the overspend doesn’t impact 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 it faced its SEND deficit having to be dealt with.
This could have been challenging as the cumulative overspend – at around £169 million prior to some recent payments to reduce it – is greater than its cash reserves of just £99 million.
The ability to ringfence the deficit has now been extended to March 2028, giving the council some breathing space.
Furthermore, the government has pledged a White Paper by the autumn exploring how to overhaul the SEND system.
Devon was given a £95 million grant last year under the Safety Valve scheme to help tackle its SEND overspend, but the money is paid in tranches over about nine years and comes with various conditions.
‘The point where that overspend hits our reserves has been postponed, but it was £170 million at the end of last year and it will go up again,’ Angie Stewart, Devon County Council’s director of finance told its audit committee.
‘We will get £6 million 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 abound that the government may let councils borrow money to reduce their SEND deficits, but that this had not been confirmed by Westminster.
However, she added 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’.
‘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 £31.1 million, but this ended up being £51.4 million.
Besides the £5 million 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 £15 million of savings and achieved £11 million.
This year it is targeting £22.5 million and believes it has already found roughly £16 million.
Officers stressed the savings’“are not reductions in service’ but improvements in efficiency and financial management.
Councillor Alan Connett (Liberal Democrat, Exminster and Haldon), chair of the audit committee, acknowledged the spending was being put to good use.
He said: ‘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.’
'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.
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