To report the recommendations of the Budget Working Group to Schools Forum regarding the Dedicated Schools Grant (DSG) 2024/25 Outturn, Special Education Needs (SEN) Protection scheme future options, and Dedicated Schools Grant Deficit Management plan strategies.

Th Senior Finance Business Partner (SFBP) presented the report. The following principal points were noted;

• The final outturn position for 2024/25 was a deficit of £13.9 million made up of;

o   High needs block outturn  - £13.7 million higher than funding with the main drivers being £6 million independent schools, £1.9 million top ups and £6 million budget deficit built into 2024/25 budget.

o   Early Years block outturn is £240k higher than funding driven by a late Easter date (20th April 2025) resulting in higher payments; this will offset in 2025/26 funding.

o   Central block outturn £35k less than funding driven by favourability in staff in the admissions cost centre (due to vacancy/delay in hiring).

This increased the council’s cumulative DSG deficit to £20million at 31 March 2025.

The cumulative DSG deficit is accounted for as an unusable reserve on the council’s Balance Sheet, as permitted via statutory instrument, and will remain in place until 31 March 2028 having been extended by two years on 20^th June by Government.

Measures to contain the deficit and mitigate future cost and demand pressures will be managed by the Service through the DSG Deficit Management Plan. It was noted that this issue is a major concern amongst local authorities nationally.

SEN Protection Scheme

• The scheme was originally put in place to reward the most inclusive of schools, but this no longer happened.  Due to affordability issues in both the schools block and high needs block, compromises were going to have to be made. The scheme would continue for 25/26 with a phased approach to end SEN Protection scheme in 2026/27.
• The Budget working group had been consulted and had recommended a more phased approach for the discontinuation of the SEN Protection scheme with further excel modelling required. This was shared with the forum.
• There would be no transfer from the Schools Block to the High Needs Block in 2026/27 and whilst schools would not get the SEN protection scheme, they would see an increase in their budgets.
• The block transfer process would be reviewed at budget setting in 2027/28.

DSG Management Plan - 

The Service Director, Education, Skills and Learning and Head of Additional Needs presented to the forum. The following principal points were noted;

·       Herefordshire is feeling acute pressure on their High Needs Budget, despite increases in specialist provision having been commissioned over the past few years. More children and young people were being placed in the independent and non-maintained special schools at high cost.

• The removal of the SEN protection scheme would result in wiser spend on more targeted support which would help all schools at the right time.

• Increase in independent school places were, in part due to the special schools in Herefordshire being over capacity. The provision menu in Herefordshire was too narrow and needed to be expanded, the outdated code of practice which included parental preference is driving pressures in local authorities.

• Greatest growth areas in Herefordshire are primary needs in ASD and SEMH.

• The Four key actions of the DSG deficit management plan were explained to the group;

·       Intervention

·       managing demand

·       sufficiency of local places and

·       financial management of the high needs block. 

• Regular updates would be brought back to the budget working group and schools forum.

On behalf of the BWG Richard Foster highlighted how valued the SEN protection scheme had been to all schools but equally they appreciated, the challenging times the authority was in financially. Officers had explained to the group how the scheme was no longer being used as its original intended purpose and that this would be a phased removal which had provided them with some assurance. The group had requested further modelling which officers had provided in their presentation at the meeting.

Paul Jennings (Chair of the BWG) highlighted how this was an extremely challenging time having several authorities announcing this week how they were no longer financially viable. The SEN scheme had been in place and supported by the BWG for as long as he had been involved, but it was known then that it was a luxury, of which the authority could no longer afford. The financial pressures were undeniable and unavoidable, with no other option but to slow down the growth in the debt and thanked the BWG and colleagues who had been looking at this over the last few years. The plan moving forward looked incredible, and it was hoped that the authority would deliver on it and start to turn around the growing deficit and provide the quality services that their young people deserved.

The forum were appreciative of the work of the finance and governance teams and particularly to the Director, Education, Skills and Learning and her team for their excellent support of young people in Herefordshire.

The Cabinet Member Children and Young People assured the forum that he was briefed frequently on the detail of the high needs budget and the strategies being employed by the Director, Education, Skills and Learning and her team and would continue to provide support to these elements of work.

The Director, Education, Skills and Learning explained through her meetings particularly with the f40, reform was coming, but how extensive and far reaching that would be was not known.