Somerset Council is on the brink of a severe financial crisis, with warnings that it may face effective bankruptcy by 2028 due to escalating spending on special education needs.
Currently, funding for most non-academy schools in Somerset is provided through the Dedicated Schools Grant (DSG), an annual sum from the Department for Education (DfE). This grant covers mainstream schools, early years provision, and services for children with special educational needs and disabilities (SEND).
However, demand for SEND support has long outpaced government funding, resulting in Somerset projecting a DSG deficit of over £100 million by the close of the current financial year. This shortfall is a critical factor threatening the council’s financial health.
READ MORE: Sale Sharks vs Bath Rugby: TV Guide and Full Team Line-Ups
READ MORE: HMRC to Update Tax Codes as State Pension Payments Rise
In 2020, the Conservative government introduced a DSG statutory override, allowing local authorities to exclude these deficits from their official balance sheets temporarily, preventing the declaration of effective bankruptcy under a Section 114 notice. Yet, the Labour government has confirmed that this override will end on March 31, 2028. From April 1, 2028, any unresolved DSG deficits will be recorded on Somerset Council’s books, potentially triggering immediate insolvency.
The council has implemented a deficit reduction plan aimed at curbing the rising debt, but there are growing concerns this will not be enough to avert financial collapse. Councillor Mike Hewitson, chair of the audit committee, expressed serious worries at a recent meeting in Taunton, stressing that without strong deficit management, the council faces an inevitable Section 114 notice.
“I remain extremely concerned about the trajectory of the higher needs block,” Hewitson said. “Once the statutory override ends, the deficit will be the council’s responsibility, surpassing reserves and forcing insolvency. This must be priority one.”
Heather Shearer, portfolio holder for children, families, and education, acknowledged the challenges but stressed the council’s commitment to managing the situation. She noted increased demand due to delays in education policy reforms and a 20% rise in Education, Health and Care Plan (EHCP) requests—from 5,000 in January 2025 to around 6,000 now—adding pressure on resources.
“We are working through multiple business plans to slow spending growth, but time is running out,” Shearer warned. “This is truly an existential crisis.”
Interim Chief Financial Officer Clive Heaphy highlighted that the DSG deficit could soar to £250 million by 2028 and emphasized that Somerset’s struggle is part of a wider regional and national issue, particularly acute across southern England.
Some councillors suggest that government support in the form of long-term, low-interest Treasury loans could be the only viable way to address the deficit without compromising essential council services. Councillor Gwilym Wren pointed to historical precedent, recalling how local authorities managed large debts through extended borrowing arrangements.
“The government will need to devise a concrete action plan,” Wren said. “Letting local authorities collapse under this debt makes no sense economically or socially.”
Further updates on the deficit management strategy and its governance will be presented to Somerset Council’s executive committee in the coming months.