The UK central government has announced it will cover up to 90% of Somerset Council’s special educational needs and disabilities (SEND) deficit, significantly lowering the authority’s risk of imminent financial insolvency.
Somerset Council’s non-academy schools are funded through the dedicated schools grant (DSG), an annual allocation from the Department for Education (DfE). This grant funds mainstream primary and secondary schools, early years provisions such as nurseries, and SEND services. However, demand for SEND support has outpaced funding for years, with Somerset’s DSG deficit projected to hit £116 million by the end of this financial year.
In response, the DfE has agreed to take on approximately £104.4 million of this deficit, provided that Somerset Council presents a clear plan to manage future spending by early summer. This intervention follows a system introduced in 2020, the DSG statutory override, which allowed local authorities to exclude DSG deficits from their official accounts and avoid triggering a Section 114 notice – a formal declaration of effective bankruptcy.
READ MORE: Matt Weston’s Unforgettable Winter Olympics Run Comes with a Beer Tab
READ MORE: Brave Street Warden Tackles Knife Suspect in Weston-super-Mare
While the Conservative government introduced the override, the current Labour government announced in June 2025 that it will end on March 31, 2028. Chancellor Rachel Reeves confirmed in her November 2025 budget that any DSG deficits accrued after this date will be absorbed centrally by the DfE.
Under the latest local government funding settlement released on February 9, Somerset will have the bulk of its deficit covered by central government, leaving around £11.6 million still off the books until the override concludes in 2028. After that point, this remaining debt will have to appear on Somerset’s balance sheet, possibly pushing the council toward insolvency.
Somerset Council has introduced a deficit reduction plan, but some council audit members remain concerned it may not be sufficient to prevent a Section 114 notice. Deputy leader Liz Leyshon addressed the council’s executive committee, stating: “The government will cover 90% of the SEND accumulated deficit up to March 2026. The deficit is forecast at about £116 million by year-end. We are working to manage the remaining 10% under the statutory override and plan to address deficits in the coming years, though how the government will respond is uncertain.”
The government’s financial support, known as the high needs stability grant, is contingent on Somerset submitting a SEND reform plan outlining an inclusive, partnership-based approach involving education and health services. All UK local authorities will be eligible for this grant in the 2025/26 financial year, though payments won’t be made until autumn 2026.
Clive Heaphy, Somerset’s interim chief financial officer, expects similar government write-offs to continue nationally in future years, stating, “This will likely be an ongoing arrangement linked closely to SEND reform and deficit recovery plans. The DfE financial advisor will monitor our progress closely to ensure SEND cases are managed effectively.”
This government commitment offers Somerset Council a crucial lifeline to stabilize SEND funding while pushing for systemic reforms to better support children with special educational needs.