The special educational needs system is not delivering better outcomes for young people or preventing local authorities from facing “significant financial risks”, Whitehall’s spending watchdog has warned.

Families and children lack confidence in the special educational needs (SEN) system in England which is “financially unsustainable” and in urgent need of reform, according to the National Audit Office (NAO).

In its report published on Thursday, the NAO said “insufficient capacity” within schools and longer waiting times to support children with SEN have contributed to low parental confidence in the system.

The Education Secretary said she is “determined” to rebuild families’ confidence in the SEN system, but the reform needed “will take time”.

Only half of the education, health and care (EHC) plans – which set out the provision of SEN support a child or young person needs – were issued within the statutory 20-week time limit in 2023.

Demand for EHC plans increased by 140% between 2015 and 2024 – from 240,000 to 576,000 – and most of the increase related to autistic spectrum disorders, speech, language and communication needs, and social, emotional and mental health needs, the NAO said.

More than half (55%) of pupils in England with an EHC plan were attending state mainstream schools in January 2024, compared to 48% in January 2019.

Over the past decade, the Department for Education (DfE) has increased its high-needs funding allocations by 58% to £10.7 billion.

But the NAO has warned that local authority dedicated schools grant deficits could still reach an estimated £4.6 billion by March 2026.

The report from the spending watchdog said the SEN system is “still not delivering better outcomes for children and young people or preventing local authorities from facing significant financial risks”.

It added: “DfE estimates that some 43% of local authorities will have deficits exceeding or close to their reserves in March 2026.

“This contributes to a cumulative deficit of between £4.3 billion and £4.9 billion when accounting arrangements that stop these deficits impacting local authority reserves are due to end. As such, the current system is not achieving value for money and is unsustainable.”

The NAO is calling on the Government to consider “whole-system reform” to improve outcomes for children with SEN and put SEN provision on a “financially sustainable footing”.

It adds that the DfE should develop a “long-term plan for inclusivity” across mainstream education.

The recommendation comes after stakeholders warned that targets based on academic attainment can “disincentivise schools” from being inclusive and some could be incentivised to exclude pupils with SEN.

Bridget Phillipson in green coat
Education Secretary Bridget Phillipson vowed there will be ‘no more sticking plaster politics and short-termism’ when tackling the issue (PA)

Gareth Davies, the head of the NAO, said: “Although DfE has increased high-needs funding, the SEN system is still not delivering for children and their families, and DfE’s current actions are unlikely to resolve the challenges.

“The Government has not yet identified a solution to manage local authority deficits arising from SEN costs, which ongoing savings programmes will not address.”

Earlier this week, the County Councils Network (CCN) warned nearly three-quarters of England’s largest councils could declare bankruptcy by 2027 due to Send service deficits.

Kate Foale, Send spokeswoman for the CCN, said: “With councils continuing to accrue spiralling deficits and demand reaching record levels each year, reform is urgent.

“The Government must set out root and branch change to the system within the next 18 months, designing a new way forward with strong input from local authorities, parents and young people.”

Paul Whiteman, general secretary of school leaders’ union NAHT, said: “The warning lights are flashing red – without proper investment, things will get even worse, and the system may face complete collapse.

“High-needs deficits must be written off and urgent, targeted investment is needed to stop children in different parts of the country from being left behind.”

Education Secretary Bridget Phillipson said: “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.”