Almost half of London’s boroughs are facing a serious risk of bankruptcy due to growing financial pressure from underfunded special educational needs and disabilities (SEND) services,

according to London Councils.

The cross-party organisation, which represents all 33 London local authorities, says government grants for supporting children and young people with SEND have failed to keep up with rising demand. As a result, councils are now dealing with major budget shortfalls.

London Councils projects that by the end of the 2026–27 financial year, boroughs will collectively face a £500 million deficit in funding for SEND provision. This could destabilise local government finances and severely impact investment in schools and pupil support services.

As the government prepares to release its Spending Review next week, boroughs are urgently calling for increased funding to both reduce the current shortfall and better support children and young people with SEND across London.

Key findings from London Councils:

The government has extended the ‘statutory override’ until March 2026, which allows councils to carry SEND-related deficits without them affecting their overall budgets. If this override is removed, councils will be expected to absorb the full deficit—something up to 16 boroughs may not be able to do. This could lead to them needing Exceptional Financial Support from the government or being forced to issue a Section 114 notice, effectively declaring bankruptcy.

There has been a sharp rise in the number of children and young people with SEND. Government data shows a 9% increase in London pupils with Education, Health and Care Plans (EHCPs) in just one year, from 85,601 in 2023 to 93,487 in 2024.

Cllr Ian Edwards, London Councils’ Executive Member for Children and Young People, said:

“Boroughs are determined to provide high-quality support for all young Londoners with SEND, but we’re extremely concerned by the unsustainable finance pressures we face.

“The sums don’t add up. Government funding has failed to keep pace with rising levels of SEND support need in the capital, leading to major deficits.

“The Spending Review needs to recognise these pressures and help us restore stability to the system. We are calling for funding that reduces the deficit and reflects London’s fast-growing SEND numbers, enabling us to boost inclusion in schools and continue meeting the needs of all children in the capital.”