Recommendation 26

We asked about plans for helping local authorities with historic and accruing deficits from now to March 2028. The Department and MHCLG told us that government recognised that local authorities could not deal with these deficits on their own and that they would be a shared responsibility. They were clear that local authorities would not be able to rack up unlimited deficits and pass it on to central government and MHCLG explained that full details would be published alongside the final settlement in February 2026.65 Two months after we heard evidence, in February 2026, MHCLG published its Final Local Government Finance Settlement. MHCLG announced that local authorities with SEND deficits would be eligible to receive, in 2026–27, a grant covering 90% of historic deficits up to the end of 2025–26, subject to the Department for Education’s approval of a local authority SEND reform plan. For deficits arising in 2026–27 and 2027–28, MHCLG has announced that local authorities can expect MHCLG to take an appropriate and proportionate approach but that its support would not be unlimited.66