Alex Thompson, CEC director of finance (1)

Cheshire East Council’s ballooning special needs budget deficit is so serious it “threatens the very existence of the council”, a councillor said.

The DSG (dedicated school grant) deficit currently stands at about £90 million.

Cllr Sue Adams (Disley, Con) told yesterday’s meeting of the council’s audit and governance committee that deficit “threatens the very existence of our council, it’s so serious”.

She continued: “I’ve not heard or read anything that gives me confidence that we’re getting on top of this.

“To me, I look at the numbers and it says, out of control.”

The DSG is a ring-fenced grant handed out by the Department for Education (DfE) for school budgets.

The high needs funding block of the DSG is used to pay for SEND (special educational needs and disabilities) provision.

But, for many councils, the cost of SEND provision has outstripped government funding by tens of millions of pounds.

To stop local authorities going bust, any deficit associated with the DSG is kept off their books thanks to a statutory override.

This means Cheshire East, like other councils, is holding this deficit in a “negative reserve”.

But with the SEND demand spiralling, the overspend is forecast to get far worse.

On top of this, the interest on this negative reserve is £3 million this year and likely to rise to £6 million next year.

Cheshire East’s director of finance Alex Thompson (pictured) said: “The current grant doesn’t match the current expenditure, that’s recognised nationally by government department as well as local authorities.”

He said the council had done everything it could to rein in spending – working with DfE assessors who had “looked at what we were spending in our forecasts and they agreed with them”.

“There’s no solution on the table for any local authority at the moment in terms of a long-term plan to mitigate expenditure on high needs,” said Mr Thompson.

“I think we’ve done, as a council, what we can at this point in time.”

He said Cheshire East had participated in various government schemes.

“None of these have come up with a solution to the money, which is an eye-watering amount of money,” said Mr Thompson.

“We’ve probably done as much as we possibly can at this stage, but of course there’s a lot more activity to try and bring that deficit down, as well as there might have to be further decisions from government in how they manage it.

“You’ve made the point it could end the council, essentially this override that sits on our accounts… protects the council from that issue at the moment.

“But that is a government imposed override and that exists until March 31, 2026.

“If that override was to be removed, at that point then there would be a serious financial consideration for the council as to how we would fund that deficit and government is aware of that and that is why the override has continued to be extended, because they are not prepared with an answer to that question yet and neither are we.”

The committee agreed to seek a report from the council’s children and families department on the progress it was making with on reducing the deficit.

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