Issue details

Proposed decision

To enter into the “Safety Valve” agreement with the Department for Education (DfE), enabling Kent County Council (KCC) to receive funding over a 5 year period to substantially fund the accumulated deficit on the Dedicated Schools Grant (DSG) High Needs Block (HNB). The agreement will require commitment to areas of review and improvement identified by Department for Education (DfE) to bring in year spend in line with the in-year budget by 2027/28. A financial contribution from the Council will also be expected.

Reason for Decision

Funding for pupils with special educational needs and disabilities (SEND) and associated support services comes from the Department for Education’s (DfE) Dedicated Schools Grant (DSG) High Needs Block (HNB).  The Council has been spending significantly more on this area than it receives in grant.  The cumulative HNB revenue deficit is predicted to be £147m by the end of this financial year and will continue to grow beyond then if the current trajectory continues.  

The Council cannot subsidise activity funded from the DSG High Needs Funding stream without the explicit permission of the Secretary of State. Therefore, there is a pressing need to ensure that spend is brought within the grant funding made available.

The Safety Valve programme is voluntary and involves DfE providing funding to partly extinguish the cumulative debt arising from existing and forecast overspends on High Needs Funding. This involves the Council reviewing its local High Needs systems so that it is on a more sustainable footing and better placed to respond to pupils’ needs.  This requires ensuring that in-year spend is in line with in-year grant funding within a five year period.

The DfE invited the Council to be part of the Safety Valve programme which is directed at local authorities with large DSG deficits. The Safety Valve arrangements involve substantial funding from DfE, in return for improvements in local systems providing support for children and young people with SEND, that also ensure that spend comes into balance with grant. A financial contribution from the Council will also be expected.

The DfE intend to share a draft Safety Valve agreement with the Council in February and require the agreement to be formally approved in very early March. It is expected that the proposal will identify the sum the DfE is willing to offer towards the cumulative deficit, alongside local service areas that DfE expect to see reviewed. 

An exempt Cabinet report on 1 December 2022 provided more detail and there was a briefing on the current position at Scrutiny committee on 25 January 2023. DfE has communicated that, in principle, the Secretary of State is content to enter into a Safety Valve agreement with the Council.  However, a draft agreement document that contains the financial offer and the service areas that DfE expect to see reviewed is still awaited.

Other options considered

KCC could reject the opportunity to receive Safety Valve funding but this would place the Council at significant financial risk.  This would require substantial service review activity to manage the funding situation to eliminate the deficit, without additional Government assistance, with the potential for negative impact on all areas of children’s service delivery.

How the proposed decision supports the Framing Kent's Future - Our Council Strategy 2022-2026

The proposed decision would primarily support Priority 4: New Models of Care and Support, around the commitment to making rapid and sustained improvements in the support provided to children with Special Educational Needs and Disabilities (SEND) and their families.

Financial Implications

The formal offer of funding from DfE to partly extinguish the cumulative debt is not yet known, but it is expected to be included in the draft agreement. The current cumulative debt is forecast to be £147m by the end of the 2022/23 financial year and will continue to grow beyond then without intervention, so any offer of funding will need to be substantial. The Council will also need to make a significant contribution over the next 5 years which will most likely be funded from general fund reserves. The Council has below average reserves and will therefore need to identify how it will ensure the Council’s Safety Valve agreement contribution does not weaken the Council’s financial resilience. If the Council chose not to accept the Safety Valve proposal, or failed to make an agreement with DfE, it would still need to fund the whole of the cumulative High Needs spending deficit at some point in time. As the cumulative deficit is substantial, any failure to reach agreement would most likely lead to a Section 114 notice being issued. Under the Local Government Finance Act 1988, this is where the Chief Finance Officer makes a report where expenditure in a financial year is likely to exceed the resources available, leading to no new expenditure being permitted, with the exception of that funding statutory services.

Data Protection implications

DPIA not relevant at present – service review requirements as part of the Agreement may prompt further review.