The UK central government has pledged to cover up to 90 percent of Somerset Council’s escalating deficit related to special educational needs and disabilities (SEND), substantially lowering the threat of imminent insolvency for the local authority.
Somerset Council funds all non-academy local schools through the Dedicated Schools Grant (DSG), allocated annually by the Department for Education (DfE). This funding supports mainstream primary and secondary education, early years provision, and SEND services.
However, demand for SEND support has far exceeded available resources for years, with Somerset’s DSG deficit forecasted to hit £116 million by the end of the current financial year. In response, the DfE announced it would absorb the majority of the existing deficit, contingent on the council producing a robust plan to control future SEND spending by early summer.
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In 2020, the Conservative government introduced a DSG statutory override, permitting councils to keep SEND deficits off their balance sheets to avoid bankruptcy declarations, known as Section 114 notices. The Labour government later confirmed this override will expire on March 31, 2028. Chancellor Rachel Reeves MP stated in the November 2025 budget that any new DSG debts incurred post-override will be handled by the DfE.
The February 2026 local government funding settlement confirmed that up to 90 percent of Somerset’s current £116 million deficit—approximately £104.4 million—will be covered by central government. The remaining £11.6 million will stay off the council’s books until the override ends in 2028, when it will register on Somerset’s balance sheet and could risk pushing the authority into insolvency.
Although Somerset Council has enacted a deficit reduction plan, members of its audit committee expressed concerns in January that these measures might not fully prevent a Section 114 notice.
Deputy Leader Liz Leyshon explained at a recent executive committee meeting in Taunton: “We now know the government will cover 90 percent of the SEND accumulated deficit up to March 2026. The higher needs block deficit is projected to reach around £116 million by year’s end. We are addressing the remaining 10 percent under the statutory override and tackling deficits accruing over the next two years, though government support beyond this is uncertain.
“This stability grant will be conditional on our submitting a local SEND reform plan. The government will not simply provide funds without a clear strategy.”
All UK local authorities are eligible for the SEND Stability Grant during the 2025/26 fiscal year, but the funding will not be disbursed until autumn 2026.
To access this grant, Somerset must submit its SEND reform plan by summer 2026, outlining a clear, integrated approach to SEND provision involving education and health partners.
Interim Chief Financial Officer Clive Heaphy anticipates that similar deficit write-offs may be necessary nationally in coming years, stating: “I expect this will become an annual intervention over the next two years. It will closely link to the SEND reform and deficit recovery plans. The DfE’s financial advisors will continue monitoring our progress, so we must demonstrate effective management of SEND cases.”
This significant government intervention offers Somerset Council needed relief as it seeks to stabilize SEND funding and secure sustainable support for vulnerable children.