June is the time of year when local authority Directors of Finance start thinking about the budget for the following April. HM Treasury is doing the same thing for the government but, with a Spending Review just announced, their task this summer should be much easier than usual as Ministers have already negotiated with the Chancellor. Directors of Finance have no such protection and are bound to produce a balanced budget for councillors to approve or face the prospect of having to issue a s114 notice and default, as some councils have already had to do in recent years.

It was very surprising not to see an announcement in the recent Spending Review about the statutory override many upper tier councils are carrying on their balance sheets,

The statutory override on council balance sheets is a result of overspends on council’s High Needs Block spending that finances the pupils and young adults with special educational needs in their local area. (SEND)

There are suggestions that a significant number of upper tier authorities with be unable to present a balanced budget for 2026/27 to councillors next February for approval unless something is done about the present statutory override that currently ends in March 2026. If nothing else is put in place, some councils will not be able to present a balanced budget and hence will default.

The simple answer would be to extend the override until March 2027 to see what the White Paper on SEND, now promised for the autumn, will bring. That move just buys time for a longer-term solution.

I wonder whether the DfE thought local government re-organisation might be a way of dealing with the deficit when new councils were being formed. After the results of May’s elections, I cannot see the present government wanting to push ahead with reorganising councils and creating new elected Mayors if such a move were to hand more victories to their opponents, and notably to the Reform Party. If reorganisation grinds to a halt that route out is no longer available for solving the issue of the override.

Another alternative is to switch the 2% precept on Council Tax from adult social services to SEND and let the NHS take the strain on funding for the mostly elderly residents currently being paid for out of the local government funding 2% precept. Such a move would not be popular but could be possible. As it wasn’t in the Spending Review it seems unlikely.

The DfE could rearrange their spending and transfer the consequences of falling pupil numbers from the Schools Block to increase the High Needs Block and do the same for the Early Years funding to keep it constant on a per child basis but recognise fewer children means less total spending. Such a move would affect funding for schools and early years setting with falling rolls.

Do nothing and councillors in Parties running councils will return from their summer breaks to be confronted with a list of serious reductions in services and personnel that might be needed in 2026. Such reductions won’t be efficiency gains, but unacceptable cuts on the level of a fire sale.

Solving the problem of the statutory override between now and the parliamentary recess for the summer should be the number one priority for all involved with education and local government. Not to do so would have consequences that are unthinkable.

The situation regarding the statutory override should not have reached the present position. In my view, it would be a gigantic failure of political will if it is not solved now.