Inside The Special Educational Needs Crisis Forcing Councils Into Bankruptcy

Private equity rushed to fill a vacuum created by a dramatic increase in the number of children with special educational needs and disabilities (SEND) and the state’s failure to build enough schools for them. The costs, revealed in detail for the first time here, are driving councils to bankruptcy.

The day of reckoning for local authorities arrives a year from now: next April they are obliged to balance the books after racking up a projected £5bn deficit over six years in which they were involved in a desperate scramble to fulfil their legal duties to children with SEND. Half say it could drive them into insolvency.

Restricted by central government from building their own special schools, and with mainstream provision inadequate, they have been forced to turn increasingly to the for-profit sector. Private companies have willingly obliged, building a new school every four days and doubling their share of the market in just four years, The House has learned.

Some companies, having seen the easy profits to be made from entering the broken children’s social care market, are now turning their attention to the SEND system as a new ‘cash cow’

Our survey of fees show they are charging local authorities up to £350,000 per child per year for residential and £133,000 for day school, leading to calls for the government to cap the costs, ensure money is going to children and not shareholders, and get a grip on the spiralling crisis.

Local government spend on private special schools has rocketed by 300 per cent in just eight years, to £1.8bn. Meanwhile, the scarcity and geographical spread of provision has seen transport costs double to £1.4bn in just five years, with children being driven up to four hours a day in private taxis. This figure is projected to rise further to £2.2bn in the next three years.

More than 1.7 million school children were identified as SEND in England last year. The number with education, health and care plans (EHCPs) – statements that are often hard-won by parents to guarantee their children extra council-funded support – has increased by 140 percent to 576,000 in the past decade, with the rise largely driven by increases in diagnoses of autism and attention deficit disorders and a post-Covid mental health epidemic among teenagers. Meanwhile, central high-needs funding allocations increased by 58 per cent over the same period to £10.7bn, a real terms fall of 35 per cent per child.

Even with the £1bn boost for 2025-26 announced in the autumn budget, the funding gap is continuing to grow at an alarming rate. The Institute for Fiscal Studies projects a £3.3bn shortfall this year, possibly rising to £8bn in the next three years.

Local authorities have been allowed to keep special needs debts off the funding sheets since 2020, but that override facility is due to end next spring.

Andy Smith, president of the Association of Directors of Children’s Services, said: “The number of children and young people being supported with EHCPs has grown exponentially over the last decade, and while local authorities have a duty to secure sufficient school places, under the last government we were unable to open new schools to respond to this rising need.

“The previous government’s centralisation of place-planning via the use of the free schools programme contributed to the challenges now faced, a huge increase in EHCPs plus delays in the capital programme have directly resulted in greater use of placements in the independent sector, as well as higher home to school transport costs.”

In Kent, spending on private special schools tripled to £83m for 1,687 children in the five years to 2023. An FOI request showed a single placement cost £350,000 and 10 more topped £200,000, though these are likely to be residential. Surrey’s costs increased to £86m in 2023, up from £48m in 2018, while Bury’s doubled to £19.6m in the four years to 2023.

Transport expenses are especially high in London, where the average cost per child was £10,300 per year in 2024, and rurally, where it was just under £10,000. The number of children in special education who were unable to walk to school and therefore qualified for the scheme increased by 40 per cent in just one year to 183,000.

Hampshire county council has seen the number of children going to independent special schools increase by more than 50 per cent in just two years to January 2025, while transport costs for pupils with EHCPs increased by a third in a single year to almost £49m in 2023-2024, with a further sharp increase anticipated for 2024-2025.

A source said some providers charge almost twice the average £56,000 for a comparable social, emotional and mental health (SEMH) placement.

The authority is projected to have a £82.5m high needs budget deficit this year, which it says is due to maintaining EHCPs and “the increased use of more costly independent and non-maintained settings to help us meet growing demand”. The council aims to create another 1,000 maintained places by 2030 to reduce spending on private provision and transport.

Leaked reports suggest the government is preparing an announcement of measures that will go some way to relieving the cumulative council deficit and reforming the system. But there are no details yet, which has prompted Education Committee chair Helen Hayes to ask why the Department for Education (DfE) has not made any reference to such plans in its submissions to the ongoing SEND inquiry.

Central government’s failure to tackle the issue has led to a dysfunctional marketplace, with the same companies exposed for profiteering in the children’s care sector in an investigation by this magazine last year expanding into the SEND space.

There were 728 independent special schools during the 2023-24 academic year, a 49 per cent rise since 2018-19, giving them a 40 per cent share of the market. Many more have opened since or are under construction. State-maintained schools have increased at a rate of just six per cent a year.

Healthcare business analysts LaingBuisson found a third of the 23 biggest providers – all of whom straddle care and education – were making EBITDA (earnings before interest, taxes, depreciation, and amortisation) profits of at least 20 per cent. Notably, the highest earners were those most heavily invested in SEND education, not children’s homes, and backed by private equity.

Independent providers are charging up to £133,000 per day pupil per year, research for The House has found – five times the cost of a place in a state-maintained special school, though direct comparisons are difficult. On average, fees in the private sector are around £62,000, though far more at some companies. In state special schools, where support may be less intensive or specialised, the average cost is £24,000. For a child with an EHCP in mainstream schools, it is £19,000. (It is no surprise the government is keen to encourage more to adapt their provision rather than borrowing to build new schools.)

Baroness Longfield, executive chair of the Centre for Young Lives, said: “It is worrying to see some companies, having seen the easy profits to be made from entering the broken children’s social care market, are now turning their attention to the SEND system as a new ‘cash cow’.

“The last thing we need, or can afford, is to replicate the dysfunctional care system with its ballooning costs and poor track record of improving the life chances of vulnerable children.”

A DfE spokesperson said: “We have inherited a broken system which puts a massive strain on local authority finances whilst failing children with SEND and their families. Schools should be focused on ensuring children are supported to achieve and thrive, there is absolutely no place for excessive profit-making.”

Beneficiaries of the boom include Witherslack, owned by the investment arm of Abu Dhabi’s £670bn sovereign wealth fund, which has almost doubled its portfolio of schools and tripled operating profits in the five years to 2023, to £33m, a figure that includes its children’s homes provision. 

Six of the seven biggest SEND providers by revenue are owned by global private equity and sovereign wealth funds

Witherslack has 22 Ofsted-rated schools, plus six others which are newly open or not yet open so are yet to be rated by Ofsted. Research by The House into the 22 rated schools found that, compared with the average among other providers, all their fees are higher at £105,000 at the top end of need and £77,000 at the lower end.

The company says it provides smaller class sizes, a higher provision of clinicians, and cares for children with the most complex needs.

Undoubtedly, many independent schools fill the requirement for low incidence sets of needs that demand intensive therapeutic support and high staff-to-pupil ratios, which might not otherwise be met.

One newcomer, Melrose Education, has opened 11 schools in its first two years. Its website offers “competitive fees” for introductions that lead to purchases of new sites in 18 specified locations across the country.

CEO Tracey Storey said she and her leadership are motivated by personal experience and they aim to keep fees as low as possible. “We certainly don’t have any schools that charge a figure beginning with a six,” she said. “I couldn’t sleep if I thought we were profiting from these children. We have a transparent fee system based on need and make a small profit to reinvest. I don’t know how fees could reach as much as £100,000 per child but without knowing exactly what’s being offered, it’s hard to compare.”

Six of the seven biggest SEND providers by revenue are owned by global private equity and sovereign wealth funds. Some have complex financing, with shell companies registered in tax havens. Others are servicing huge debts using revenue from publicly funded services to build substantial asset bases.

In November, the government announced measures to curb excessive earnings in children’s care as part of the wide-reaching Children’s Wellbeing and Schools Bill, currently making its way through Parliament.

Liberal Democrat education spokeswoman Munira Wilson called for the proposals to be extended to special schools, but said she was “shocked and perplexed” when it was knocked back.

“All Labour MPs voted against it and the Conservatives sat on their hands,” she said. “It’s a missed opportunity and I genuinely cannot fathom why they haven’t included them, especially when it’s largely the same providers. Private equity funds are moving into that space and milking it for all it’s worth and crippling local authority finances. I think it’s outrageous. It’s a huge scandal, yet I don’t know why we are not talking about this in the same way as we are about children’s care.”

The government has said a “more considered approach” is needed and has indicated it will continue the Conservative strategy of trying to shave the SEND bill by supporting mainstream schools to be more inclusive. A DfE spokesperson said: “Through our Plan for Change, we will engage thoroughly with the sector on how to tackle profiteering as we work on reform that is desperately needed to restore the confidence of families and improve outcomes for children with SEND, whilst ensuring the system is financially sustainable.”

Tania Tirraoro, co-director of online parent support network Special Needs Jungle, said: “This will still require significant investment, more trained staff, and a national strategy so in-school units don’t become segregated dumping grounds for children who don’t fit the mainstream mould. This may reduce reliance on independent provision if done well.

“However, we also want action to limit or prevent profit-making firms from schools for vulnerable children – the focus must always be on the child, not the shareholders.”

Claire Dorer, chief executive of the National Association of Special Schools, said: “We represent providers of all sizes. It is very difficult to compare offerings from different schools. While there is little point in trying to cap profits, as the bigger companies will find it easier to account for profits than the smaller ones, a universal template would be useful to standardise charges.

“The government needs to be willing to take time. This isn’t something they are going to fix in three years. It needs a long transition programme if they are to move towards more early intervention and places in mainstream, looking at building scaffolding, with support from other services including healthcare, to change the system and stop driving the demand for ever more special schools.

“It should not be a cost-saving exercise especially in the short term, but it does feel like that now.”

Higher costs do not always mean higher standards. While 11 per cent of state-run special schools were Ofsted-rated ‘requires improvement’ or ‘inadequate’, one in five independent schools failed to meet required standards.

“Catherine”, who asked to remain anonymous, spent more than a year home-schooling her daughter before finally finding a small, specialist charity-run place for her. However, it has now been taken over by one of the fastest-growing nationwide providers.

She said: “My daughter is autistic and has severe dyslexia. Mainstream school was so overwhelming, she would have an hour’s meltdown at the gates every day and eventually, she just couldn’t face going in at all. I was so relieved when we found this school and she was happy there from day one, she was a different child.

“But since it was taken over by a chain, it has grown considerably and takes in children with emotional and behavioural difficulties, which makes it difficult for those who were there because of their anxieties or sensory issues. It feels as though children like mine have become a commodity to make money from.” 

Additional reporting by Rachel Lindholm

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