Somerset Council has warned it is running out of time to avoid having to declare effective bankruptcy by 2028, as spiralling special educational needs spending pushes its schools budget deep into deficit. The warning was raised at a council meeting in Taunton on Thursday, 29 January, with implications for schools across the Shepton Mallet area.

All Somerset schools that are not academies are funded through the dedicated schools grant (DSG), which the council receives each year from the Department for Education. The grant covers mainstream schools, early years provision and support for children with special educational needs and disabilities (SEND).

Demand for SEND support has outstripped government funding for years. Somerset's DSG deficit is expected to exceed £100m by the end of the current financial year, with council officers warning it could rise to £250m by March 2028.

A statutory accounting override introduced by Boris Johnson's government in 2020 has allowed councils to keep these deficits off their balance sheets. But the current Labour government confirmed in June 2025 that the override will end on 31 March 2028.

While chancellor Rachel Reeves has said the government will absorb any DSG debts incurred after that date, any deficit built up before then would appear on the council's books overnight — potentially triggering a Section 114 notice, effectively declaring insolvency.

Councillor Mike Hewitson, who chairs Somerset Council's audit committee, said councillors remained "extremely concerned" about the risk. He warned that once the override ends, the higher-needs deficit would exceed the council's reserves and could lead directly to a Section 114 notice. "This is priority one for the council," he said.

Councillor Heather Shearer, portfolio holder for children, families and education, said the council remained committed to its deficit reduction plan but admitted pressures had intensified. She said delays to national education reforms had driven a sharp rise in education, health and care plan requests, with the number of EHCP cases rising from around 5,000 to 6,000 in the past year — an increase of about 20 per cent.

The council's interim chief financial officer, Clive Heaphy, said Somerset was not alone, describing the SEND funding crisis as a national problem affecting much of southern England. Councillor Gwilym Wren suggested the only realistic solution may be a long-term, low-interest Treasury loan to spread the cost over decades.

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Further details of Somerset Council's deficit management plan are expected to be considered by the council's executive committee in the coming months.

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Reporting by Daniel Mumby/LDRS