Somerset Council is confronting a critical financial challenge, warning it may face effective bankruptcy by 2028 due to escalating spending on special educational needs and disabilities (SEND). The council’s rising deficit in the Dedicated Schools Grant (DSG), which funds mainstream schools and SEND services, has become an urgent concern.
Currently, all Somerset’s non-academy schools are funded through the DSG, allocated annually by the Department for Education. This grant supports budgets for primary and secondary schools, early years provision, and SEND support. However, demand for SEND services has far outpaced government funding for years, resulting in a predicted DSG deficit exceeding £100 million by the end of the current financial year.
In 2020, the Conservative government introduced the DSG statutory override, allowing councils to keep these deficits off their balance sheets and avoid declaring effective bankruptcy under Section 114 of the Local Government Finance Act 1988. This measure provided temporary relief, but the current Labour government confirmed in June 2025 that the override will expire on March 31, 2028. Post this date, any existing DSG debts will appear on council books, risking immediate insolvency.
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Somerset Council has implemented a deficit reduction plan, but there are concerns it may not suffice to prevent a Section 114 notice. Councillor Mike Hewitson, chair of the council’s audit committee, emphasized the severity of the situation, stating, “Once the statutory override goes, the higher needs deficit will sit with this council. The remaining deficit will exceed our reserves and will lead to a Section 114 notice. This is priority one for the council.”
Portfolio holder for children, families, and education, Councillor Heather Shearer, highlighted that the situation has intensified due to increased Education, Health and Care Plan (EHCP) requests following delays in policy reforms. The number of EHCPs processed by the council has surged by about 20%, from 5,000 in January 2025 to nearly 6,000 now.
Shearer added, “We are actively pursuing several business plans and transformation programs to slow spending growth. However, time is running out. This is an existential problem.”
Interim Chief Financial Officer Clive Heaphy noted that the DSG deficit could balloon to £250 million by 2028, identifying Somerset’s struggle as part of a broader regional issue. “The south west is one of the most affected regions,” Heaphy commented, stressing that this is a national challenge.
Councillor Gwilym Wren proposed that a long-term, low-interest Treasury loan might be the only viable solution, drawing parallels with previous council housing debt repayments structured over decades. “It is clearly in no one’s interest for this council to collapse under debt. The government must devise an action plan, potentially involving affordable borrowing arrangements,” Wren said.
Further details on the deficit management plan and its governance will be discussed in upcoming council meetings, as Somerset seeks ways to navigate this financial crisis without compromising essential services.