Increased funding for children with special educational needs and disabilities (Send) in England has not been sufficient to cover rising levels of need, a group of economic experts has said.

The Institute for Fiscal Studies (IFS) said local authorities’ high-needs deficits could reach more than £8 billion by 2027, and there could be “widespread bankruptcies” without reform to the Send funding system.

Understanding why the number of pupils with education, health and care plans (EHCPs) has risen significantly in recent years is crucial to understanding how to respond to the “high-needs funding crisis”, the IFS said.

The number of pupils with EHCPs – which set out the provision of Send support a young person needs – has risen by 71% between 2018 and 2024.

Nearly 5% of pupils now have EHCPs, according to the think tank.

The special educational needs system in England clearly requires urgent, radical change

In a briefing note published on Tuesday, the IFS said annual spending on high needs is forecast to rise by at least £2–3 billion between now and 2027.

It said governments have increased high-needs funding in recent years, but the rises “have not always been sufficient” to close in-year deficits.

The Government has earmarked £740 million of funding to create more specialist places in mainstream schools in England for children with Send.

Last week, the Department for Education (DfE) said the funding, which forms part of the £6.7 billion of education spending announced in the Budget, can be used to adapt classrooms to be more accessible for children with Send, and to create specialist facilities within mainstream schools to deliver more support.

But the latest IFS report said expanding core provision to accommodate rising need is “likely to require much more than this” and could be “challenging”.

It said central government funding for high needs rose by 59% or £4 billion in real terms between 2015–16 and 2024–25, but funding has “not kept pace” with the increase in children and young people with EHCPs.

The report said high needs spending has been consistently higher than funding by £200–800 million per year between 2018 and 2022, and local authorities have accumulated large deficits in their high-needs budgets – estimated to be at least £3.3 billion in total by this year.

On the plans to deliver more support within mainstream schools, the IFS said: “It would be a massive change in what schools do and how they are funded.

“Schools would need to be able to offer core provision for pupils with a range of different types of Send, and do so without affecting existing provision.

“Many pupils with Send can present with challenging behaviour, which can be disruptive and take up staff time.

“Schools would need extra staff with the required skills, teachers would need to have further good-quality training, and extra physical space would be needed.”

This report reflects our view that the special educational needs system is on the brink of collapse

Darcey Snape, IFS research economist and an author of the report, said: “The special educational needs system in England clearly requires urgent, radical change.

“Without reform, rises in need will push up annual spending up by at least £2–3 billion in the next three years.

“The government has a clear preference for expanding core provision for special educational needs in mainstream schools.

“This would represent a massive change to the school system, necessitating major reform of the funding system, increased staffing and training, and much else.

“Any transition could also entail significant costs in the short run and the public finances are very tight.

“The crucial first step for the government is to set out a clear long-term vision. The transition path to a better system may run slowly, but it is necessary to take it given the present path of financial unsustainability.”

Julia Harnden, funding specialist at the Association of School and College Leaders (ASCL), said: “This report reflects our view that the special educational needs system is on the brink of collapse.

“Schools and colleges are trying their best to support children, often without adequate funding or specialist provision being available.

“There are long delays in securing education, health and care plans for children with the most complex needs, parents are being let down and teachers are being left in an impossible situation.

“There is no avoiding the scale and urgency of the challenge.”

Paul Whiteman, general secretary of school leaders’ union NAHT, said: “While the extra funding announced by the new Government is positive, with demand continuing to rise, much more investment is vital as well as systemic reform to ensure children with additional needs get the right provision, at the right time, and in the right educational setting.

“It is important that the Government not only understands what is driving the current crisis, but also sets out a clear vision for a fully reformed system.”

A Department for Education spokesperson said: “This is the latest addition to the mountain of evidence on the failings of the SEND system which we inherited.

“Work has already begun to rebuild families’ confidence. The Budget invested £1 billion in day-to-day services and last week £740 million was directed to support local authorities create more specialist places in mainstream schools.”