Dorset Council Facing ‘Technical Bankruptcy’ over £148 Million Schools Funding Gap

Dorset Council could be pushed into technical bankruptcy within the next year unless ministers find a lasting fix for the spiralling cost of special-needs education, officials have warned.

The council’s Dedicated Schools Grant (DSG) deficit — already at £95.6 million — is forecast to climb to £148.6 million by March 2026. Though the Government currently allows councils to keep this debt off their day-to-day books, the shortfall still leaves Dorset with £148 million less cash in hand — money that could otherwise earn around £5 million a year in interest to support frontline services.

Finance manager Lee House told councillors this week:

As the deficit grows, there will come a point at which it exceeds council reserves and the council would be technically insolvent.

The Government extended its special accounting rule for two years in June 2025 and has promised a white paper on SEND reform later this autumn — a move intended to ease the immediate risk.

Much of the pressure comes from an explosion in the number of children entitled to Education, Health and Care Plans (EHCPs), which guarantee tailored support and often costly specialist placements.

Dorset’s EHCP caseload has soared from around 1,400 children in 2013 to over 4,400 this year — a three-fold increase.

The council now funds more than 300 special-school placements, each costing an average £66,300 a year.

Transport bills for pupils with additional needs, often using taxis, have also risen sharply.

Officials say the combination of growing demand, higher placement fees, and transport costs is driving the ballooning deficit despite efficiency efforts.

Dorset has joined 40 other local authorities in signing a joint letter to the Education Secretary urging “brave and bold decision-making” to resolve the SEND funding crisis. The councils warn that every day without reform “threatens the financial stability of many councils”.

Right-leaning commentators say the figures expose years of central-government policy drift — granting open-ended entitlements without matching resources. “This is what happens when Whitehall writes cheques it doesn’t fund,” said one Conservative back-bencher. “Councils can’t simply print money.”

Without a new deal, Dorset and other counties fear that once the temporary accounting shield ends in 2028, the hidden debts will come crashing back onto the books — forcing tax rises, service cuts, or Section 114 “bankruptcy” notices.