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Kent County Council is facing the threat of legal action by a special school over claims the authority failed to fund children placed there.
Frewen College in Northiam, East Sussex, specialises in helping children aged seven to 19 with dyslexia, dyspraxia and other special needs.
Around half of its 120 pupils are placed at the school by the county council, commonly as a result of securing Education Health and Care Plans.
These plans require the council to find a suitable place for students and are mandatory. The council is supposed to meet all the relevant costs.
The college says at one stage, it was owed £300,000 by KCC but in recent weeks has received much of the money. However, the school says it is still owed £46,000 and is prepared to go to court.
John Stevenson, the chairman of governors, said the college had been forced to contact parents, alerting them to the situation.
He said: “We have told them that while we will try to ensure complete continuity of education, clearly this situation cannot be sustained indefinitely.
"We are a small independent charity and it is not our role – nor are we able – indefinitely to subsidise a large public body like KCC.”
He added it was “desperately wrong of KCC to place them under this kind of pressure and distress.”
In a statement, Matt Dunkley, KCC’s education chief, “There will be occasions when Kent County Council offers a child or young person a school place in an independent special school if a suitable place cannot be found within one of Kent’s maintained schools.
"When this occurs, KCC will fund the pupil’s education by paying an agreed fee to the independent provider. KCC sets an inflation rise for independent school providers annually.
"If a school can evidence an increase above this rise is crucial, the local authority will work with the school to negotiate a revised fee structure. We are unable to comment in detail on a specific case while legal proceedings are ongoing.”