School leaders have welcomed ministers鈥 pledge to wipe nearly all historic SEND deficits, but funding experts warned the bailout could 鈥渞educe the incentives鈥 for councils to 鈥渃ontain costs鈥. In a significant step towards reform, the government will write off 90 per cent of existing black holes racked up by councils on their dedicated schools grant as of 2025-26, worth an estimated 拢5 billion. But ministers will have to sign off new 鈥渓ocal SEND reform plans鈥 by each council before they can receive a 鈥渉igh needs stability grant鈥 funded by the Treasury and distributed by the Department for Education (DfE) from the autumn. Councils will have to plug the approximately 拢500 million remaining gap. Councils will rack up more deficits The government announced in December that SEND cost pressures will sit on its own books from 2028. Deficits have been kept off councils鈥 main books by a statutory override for many years. The budgeting mechanism effectively prevents councils from going bust. The override is due to end in 2028, at which point councils will have to meet the cost of any leftover deficits not covered by the government write-off. But the Office for Budgetary Responsibility has also predicted that councils will accrue further deficits of 拢8.6 billion between this April and 2028. Luke Sibieta For these years, the Ministry for Housing, Communities and Local Government said councils can expect the government to take 鈥渁n appropriate and proportionate approach鈥, but help will not be 鈥渦nlimited鈥. Luke Sibieta, from the , said the intervention 鈥渕ay now reduce the incentives faced by councils to contain costs, in anticipation that the government may feel compelled to step in again鈥. Pepe Di鈥橧asio, general secretary at the Association of School and College Leaders, said it was 鈥渋mportant to remember that these deficits were accrued in the first place because there is not currently enough money in the system to meet the level of need. 鈥淭his must fundamentally change if the reforms are to be successful.鈥 The Local Government Association added that councils 鈥渨ork hard to use their finite resources, but 鈥渓ack the levers to influence schools and health鈥, which makes 鈥渋t difficult to control spending鈥. Safety valve to end More details about SEND reform are expected in the schools white paper later this month. But Schools Week revealed last week how the government quietly asked councils to begin working up new SEND reform plans last year, ahead of the delayed white paper. At the same time, ministers have announced that the controversial safety valve programme will end in March. The government had previously said it would make no new agreements, which involved 38 cash-strapped councils making sweeping SEND reforms in exchange for extra government funding. These councils will receive at least the same amount of grant they would have got through the scheme. Ministers are yet to reveal what councils will have to include in their new plans, or whether they will be measured on specific targets. But some leaders are already concerned. Josh Greaves, deputy chief executive officer at Wellspring Academy Trust, said if the plans required 鈥渢o trigger these write-offs are simply a national scaling of the safety valve programme, we are in trouble鈥. He said the scheme was 鈥渁 fiscal tourniquet鈥 that 鈥渄idn鈥檛 heal the system鈥. Councils free up cash Andre Imich, a former government SEND adviser, said the improvements made by the safety valve 鈥渨ere not huge鈥 and helped 鈥渦s learn that it wasn鈥檛 necessarily council actions that were responsible for the challenges in the local system鈥. But safety valve plans 鈥渨eren鈥檛 able to influence other key levers for change, such as the accountability, responsibility and engagement of all parties鈥. In Bracknell Forest, which predicted a cumulative deficit of 拢34.5 million by March, Stuart McKellar, executive director, said it expected a large chunk of the 拢23 million reserve it had to set up as part of its safety valve agreement could be used for other purposes now. But more information was needed for them 鈥渢o accurately determine the impact on the council鈥檚 financial position鈥 before 2028. The DfE said 鈥渁ny local contributions already made will count as part of the 10 per cent remaining deficit that will fall to local authorities to cover, meaning no safety valve local authority will be expected to contribute more鈥. Call for schools to sign plan It is not yet known which organisations will have to sign off councils鈥 plans before they are submitted to the government. But the DfE will 鈥渃ommission local area partnerships to develop these plans鈥. Imich predicted councils and local integrated care boards would be signatories but called for schools to have this important role. Paul Whiteman, general secretary at school leaders鈥 union NAHT, said it was 鈥渧ital that schools are involved in local plans鈥, and their success would depend on adequate funding.