How the special needs funding system works
Schools block funding
Notional budget for SEN
The high needs block
Overall sufficiency of funding for special provision
Local authority-level issues
- The requirement on health and social care bodies to contribute to meeting children and young people’s needs
- Effective collaboration between the health, care and education sectors
- Collaboration between local authorities
- Securing value for money for out-of-authority provision
- Transferring money from the schools block to the high needs block
School-level issues


This document sets out practical advice and guidance for members involved in discussions on the funding of special needs at school and local authority levels. The briefing:

  • explains key features of the funding system for special needs;

  • identifies the issues at school- and local authority-level that occur most commonly; and

  • describes ways in which those responsible for representing the interests of NASUWT members can engage with these issues effectively.

This document will be of interest to teachers and headteachers with a direct professional interest in special needs, including special educational needs co-ordinators (SENCOs), teachers working in special and alternative settings and teacher members of governing bodies.

This document will be of particular relevance to Local Association and Federation officers with responsibility for negotiating with local authorities and schools, especially those who are members of schools forums. NASUWT representatives will also be able to use the information to assist discussions in their schools on the resourcing of special needs

How the special needs funding system works

Funding to support pupils with special educational needs and disabilities (SEND) is derived from two principal sources:

  • funding devolved to individual schools through the schools block, and

  • the high needs block.

These blocks form part of what is called the dedicated schools grant (DSG), the funding allocated to local authorities to fund schools.

Schools block funding

Almost all funding received by schools is drawn from the schools block. The overall size of the schools block funding received by local authorities is determined by the Department for Education (DfE) and the Education and Skills Funding Agency (ESFA) with reference to the National Funding Formula (NFF). 

Money from the schools block is divided between schools according to a funding formula. While local formulae established by the local authority in consultation with their schools forum have been used to determine allocations to schools, the Government is moving to a direct national funding formula (NFF) for determining the money that individual schools will receive. Local authorities whose local formulae values do not mirror the NFF are required to move their local formula factor values closer to the NFF.

The DfE says that in 2023/24, 106 local authorities will mirror the NFF, with a further 24 authorities mirroring on most factors. The remaining twenty-one local authorities will have formulae that are substantially different from the NFF. [The national funding formula for schools and high needs 2024-25 (pdf), page 34, published July 2023]

Notional budget for SEN

Within the schools block, local authorities are required to identify a notional budget for their mainstream schools to help them comply with their duty to use their ‘best endeavours’ to meet the special educational needs (SEN) of their pupils. While local authorities use local formulae to determine the notional budget, the local formulae must be based on national funding formula factors.

Each school’s funding allocation includes funding for pupils with SEND whose additional support costs are less than £6,000. The DfE stresses that the notional budget for SEN is not intended to provide £6000 for every pupil with SEND as most needs will be met for less than this amount. High needs top-up funding is allocated for SEND support costs that are in excess of £6,000 per pupil.

Further information about the notional budget can be found on the Government's website.

The high needs block

The high needs block allocation to local authorities is set according to a nationally-determined formula. However, local authorities can also transfer additional funds from the schools block to the high needs block.

Such decisions must be undertaken after consultation with the schools forum and with local schools more generally. While the school forum can object to such an application, it cannot veto it. If a local authority wants to transfer more than 0.5% of the value of the schools block to the high needs block or the schools forum objects to a proposal to transfer funds, they must get the approval of the Secretary of State for Education.

The high needs block serves a range of functions. The most important of these include:

  • providing £10,000 basic per-pupil place funding in state-funded special and alternative settings and non-maintained special schools;

  • topping-up funding for pupils with needs that cannot be met from settings’ basic budgets;

  • meeting the cost of placements in independent specialist settings; and

  • providing specialist SEND services.

Overall sufficiency of funding for special provision

Discussions at school and local authority level about provision for pupils with SEND often focus on the extent to which funding is sufficient to meet pupils’ needs and provide appropriate support to teachers and other members of staff that work with them.

There are legitimate concerns about overall levels of funding for special needs and current levels of resourcing are inadequate. We continue to argue for resources to be increased as a matter of urgency.

A significant number of local authorities are operating budget deficits arising from overspend of their high needs budgets. The DfE has established two programmes for authorities that have the highest deficits.

The Safety Valve programme targets the 34 authorities with the highest deficits, while the Delivering Better Value programme is targeted at 55 authorities with slightly lower deficits. Both programmes are intended to support local authorities to manage their high needs systems sustainably. The DfE says that the programmes seek to support local authorities to become more efficient through timely and earlier intervention and by reducing demand for education health and care plans (EHCPs). The DfE claims that the programmes are not about cutting services.

However, we are concerned that the Safety Valve and Delivering Better Value programmes will not improve efficiency but will increase the risk that services and support are cut, that the quality of services and support will be reduced and that the pressures on schools and other parts of the education system, including specialist services, will continue to increase.

It is important to note that local authorities participating in the Safety Valve and Delivering Better Value programmes should be actively consulting stakeholders when they develop and implement their plans.

Therefore, NASUWT Associations, Federations and Representatives should play an active role in shaping plans and in identifying and challenging inappropriate decisions arising from the programmes.

We have produced advice for NASUWT Representatives on the Safety Valve and Delivering Better Value programmes.

Underinvestment in the special needs system does not remove responsibility from schools and local authorities to ensure that available funding is used as efficiently, equitably and transparently as possible.

Decision-makers must be accountable for their actions. They should be able to explain why actions have been taken and why alternative options have not been adopted. NASUWT Associations, Federations and Representatives have a critical role to play in identifying and challenging inappropriate decisions relating to special needs funding.

Local authority-level issues

i. The requirement for health and social care bodies to contribute to meeting children and young people‘s needs

The current statutory framework for special educational needs and disabilities clarifies that the notional budget and the high needs block should be used to remove the barriers to educational achievement that pupils might face. The framework also recognises that pupils may face issues related to their health and care needs. Education, Health and Care Plans (EHCPs) are intended to address needs related to health and care as well as education.

When a child or young person’s health and care needs are identified, health and care agencies are expected to make use of the public funding available to them to meet these obligations. However, health and care agencies do not always make the financial contribution expected of them. As a result, school and high needs budgets may be used to fund the provision, placing undue pressure on those budgets.
While health and social care budgets are under significant pressure, it is not acceptable to use education-related funding to supplement these budgets. Local authorities should be engaging with health and social care agencies to ensure that they fund health and social care provision. NASUWT Representatives should seek to ensure that the local authority is taking this action

ii. Effective collaboration between the health, care and education sectors

It is critical that agencies work collaboratively to ensure the effective and efficient use of resources. Schools, local authorities, health and care services are under a statutory obligation to co-operate in respect of meeting the needs of children and young people with special educational needs and disabilities (SEND). However, there is wide variation in the quality of inter-agency working and some areas may not meet minimum legal requirements.

While the DfE needs to take more action to ensure effective inter-agency collaboration in all local authority areas, local authorities must also engage pro-actively with local statutory health and care partners to establish coherent and sustainable co-operative arrangements. Local authorities should be able to demonstrate that joint working arrangements are:

  • in place across education, health and care sectors;

  • kept under review and revised where necessary;

  • working to secure efficient use of resources by identifying any duplication of provision; and

  • addressing the extent to which education, health and care budgets can be aligned and pooled to secure better use of available resources. 

Local authorities should be able to explain how they are promoting the effective use of resources through inter-agency collaboration, particularly in circumstances where funding pressures are cited to justify adverse changes in provision. While inter-agency working can be complex, it is essential that local authorities' policies and practices are scrutinised and challenged where appropriate.

NASUWT representation on local authority committees and other bodies that consider broader children and young people’s service issues may be helpful in influencing and challenging practices, as well as being a useful means of gathering intelligence about matters related to local health and care services.

iii. Collaboration between local authorities

Local authorities may make more efficient use of scarce resources for SEND and alternative provision by collaborating with other local authorities. Such collaboration could result in the establishment of shared provision across local authority boundaries and reduce reliance on relatively costly out-of-authority provision. 

When external provision needs to be commissioned, a collaborative approach may enable local authorities to negotiate more reasonable charges as a result of economies of scale and to enhance the quality of provision.

It is important to recognise that political and logistical factors can act as barriers to cross-authority collaboration. However, local authorities should be encouraged to examine the option, particularly if they have not done so previously

iv. Securing value for money for out-of-authority provision

Many local authorities are dependent on out-of-authority provision for some children and young people with SEND. Residential independent sector places can be extremely expensive. It is essential that where such provision is used, it does not place unwarranted pressure on the high needs block.

Evidence commissioned by the DfE confirms that local authorities do not always secure good value for money for the provision they commission from external providers. The report highlights that some authorities pay more than other authorities for the same type of provision. Therefore, it will be important to ask the local authority about their arrangements for negotiating and agreeing costs and the steps that they take to ensure that they secure value for money.

Local authorities should also be asked to demonstrate that:

  • they only make use of provision that provides a clear breakdown of costs and overheads; and

  • information has been obtained about the fee structure of the institutions in which pupils are placed.

It will also be important for the local authority to demonstrate that:

  • top-up funding from the high needs block is not used to cover costs that should be met through any place funding received by settings, such as utility and maintenance costs; and

  • money is not spent by settings receiving local authority funding on supporting parents’ legal costs in appealing against decisions not to send pupils to these settings.

This is particularly important where the local authority’s high needs budget is in deficit.

When considering the cost-effectiveness of provision, it may be helpful to make use of the ESFA's high needs benchmarking tool. This allows a local authority’s expenditure on critical areas of high needs funding to be compared with that of other similar local authorities.

v. Transferring money from the schools block to the high needs block

Local authorities can transfer funds from the schools block to the high needs block. Local authorities must set out a clear case for doing so and seek approval from their schools forum.  The local authority must obtain permission from the Secretary of State to make such a transfer if the schools forum does not approve the transfer, or where the transfer is for more than 0.5% of the schools block budget.

A local authority must be able to demonstrate that its high needs budget is under significant pressure. The local authority is expected to provide a full breakdown of the budget pressures that have led to the need to transfer funding between blocks. This breakdown should include information about the changing nature of demand on the high needs budget and how additional funding is necessary to meet this demand. The local authority is also expected to provide a plan for ensuring that patterns of provision are likely to be sustainable in the longer term.

When assessing whether a request is reasonable, it will be important to pay specific attention to the financial contribution made by health and care services to meeting pupils' needs, the extent of collaboration between local authorities and the costs of external specialist provision. Strategic plans that seek to reduce excessive reliance on expensive out-of-authority provision should be viewed sympathetically.

Where local authorities have set out a plausible case for transferring money to the high needs block, it will be important to examine how the corresponding reduction in the schools block is to be managed. Key to this consideration will be the state of schools’ finances. Information on school balances is available from the DfE’s Schools Financial Benchmarking website. 

When determining whether it is appropriate to transfer money to the high needs block, it will be important to consider whether a reduction in high needs funding will impact adversely on the provision of specialist local authority services to support mainstream schools to meet the needs of pupils with SEND.

School-level issues

Schools are under a legal obligation to ‘use their best endeavours’ to ensure that pupils’ special educational needs (SEN) are met. The statutory code of practice also requires schools to publish a special educational needs information report setting out the kinds of provision they make available.

If there are concerns that a school is not committing enough resources to meet pupils’ SEND-related needs, it will be important to assess whether they are using all the resources available to them. Any school that is failing to use all available resources is unlikely to be meeting its legal obligation to use its best endeavours in respect of pupils with SEND.

It will be important to scrutinise the school’s financial standing and in particular, the size of their unspent balances. Detailed information about a school’s financial circumstances can be obtained from the DfE’s Schools Financial Benchmarking website.

It will also be important to assess the extent to which a school that is failing to support pupils’ SEND is matching the level of expenditure specified in its notional budget for SEN. Schools are given an annual indication of the overall size of this budget. Any school that fails to provide this level of funding to meet the needs of pupils with SEND should be challenged, but particularly if the school has significant reserves. Investigations should seek to identify the elements of expenditure to which notional budget funding is being diverted.

The DfE expects schools to undertake regular reviews of their budgeting. As part of this process, schools that are failing to meet the needs of pupils with SEND should investigate the extent to which their budgets can be rebalanced to increase the resources available to support pupils with SEND while avoiding adverse implications for staff and pupils generally. It will be important to scrutinise expenditure on supplies, services and educational consultancy. 

Some schools will experience difficulties securing adequate provision for pupils with SEND despite using all the resources available to them in their notional budgets. If it is clear that the school’s notional budget is not adequate to meet pupils’ needs, the school should be encouraged to approach the local authority as local authorities can use funding from the high needs block to address a shortfall in funding.