Section 4 explored the variation in demand, and specifically, in special educational needs and disabilities (SEND). As the analysis showed, the potential variation in SEND demand resulting from disaggregation is particularly acute. However, it is not just future SEND demand that creates additional risk in any disaggregation scenario, but how historic High Needs Block (HNB) deficits will be managed. Analysis for this work has explored how historical SEND deficits might be distributed across proposed new unitary authorities, and the potential impact of these deficits on the newly formed authorities.
To examine this, district-level data on SEND and EHCP demand and costs over the past three years was used to estimate each proposed unitary council’s contribution to historical spend against the High Needs Block. This provided a proxy for the proportion of each upper tier authority’s High Needs Block deficit (where this exists) with each proposed unitary being allocated a portion of the county-wide historical deficit based on its share of this historical spend. There is significant variation in this deficit apportionment, depending on if and how disaggregation is carried out. Perhaps more pertinently, this analysis then looked at the relationship between that estimated deficit for a new unitary which may be carried over, and the future estimate of SEND spend against the High Needs Block, which could be a proxy for future High Needs Block apportionment. This analysis attempts to assess the potential financial risk for each new authority, by looking at the relationship between inherited debt and the potential revenue budget. Where the ratio of the potential revenue budget to the inherited debt is lower - that is, the potential deficit equates to a greater proportion of the potential annual revenue budget - this indicates a higher potential level of financial risk to the authority. Savings of a much greater proportion would be required to pay back any inherited debt.
9.1 Impact of High Needs Block deficit distribution
HNB deficits held by local authorities, as a result of overspends and the statutory override, are arguably the single biggest financial risk facing CCN member councils. These deficits are currently estimated to reach £2.7bn across CCN member councils by March 2026. Previous research indicates that without the statutory override, 18 county and unitary councils would be insolvent overnight, equating to half of all CCN member councils. Therefore, how the proportion of these deficits currently held by county councils may be distributed as a result of LGR is a fundamental question for the financial sustainability of the newly formed authorities, particularly where disaggregation takes place. 16
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