The Institute for Fiscal Studies has warned Labour risks a repeat of the political turmoil that greeted past welfare reforms if ministers move to curb spending on special educational needs and disabilities (SEND). The think tank said councils face growing deficits driven by a large rise in pupils becoming eligible for state-backed support and that central government bailouts are "almost certain" unless the system is changed.
Labour is expected to publish a white paper on SEND reform this autumn. Education Secretary Bridget Phillipson has indicated she wants more special needs support delivered at school level, reducing reliance on external referrals. The IFS said any attempt to lower the legal protections tied to Education, Health and Care Plans (EHCPs) to cut costs could provoke fierce parliamentary resistance similar to the party's earlier rebellions over welfare cuts.
The IFS briefing said funding for SEND increased by more than £4 billion since 2018, a rise of more than 50% in real terms, driven largely by an about 80% increase in the number of people receiving EHCPs. The think tank attributed much of the growth to a marked rise in diagnoses of autism and attention deficit hyperactivity disorder and to "lower diagnostic thresholds" that mean more needs are recognised.
Luke Sibieta, a co-author of the IFS analysis, described the SEND system as "broken" and said reform was "long overdue." "The system is not financially sustainable," he said. "If the focus is on reducing legal rights to cut short-term costs, this could easily turn into welfare reforms mark two." He urged ministers to prioritise increasing specialist capacity in schools and local services, a step that the IFS acknowledged could be costly initially.
The briefing estimated councils' deficits on SEND budgets would total about £8 billion by March 2027 and said that outcome would "almost certainly" lead to central government bailouts. The IFS also said there was no clear way to assess whether the extra spending since 2018 had delivered value for money, citing a lack of robust accountability measures and a failure to direct increased funding toward a coherent transformation of provision.
The report put pressure on Labour ahead of the expected white paper, signalling potential flashpoints for backbench opposition. Earlier this year, Labour MPs forced a U-turn on proposed cuts to the party's welfare budget, and in July some MPs signalled they would again challenge the party if ministers appeared to threaten statutory SEND entitlements.
Ministers have said they are seeking to reform the system to ensure more children receive appropriate support in mainstream settings, reducing the need for formal EHCPs where possible. Proponents of that approach argue it could streamline access and reduce demand for costly specialist placements, while critics warn that weakening EHCP protections risks leaving vulnerable children without legally enforceable support.
The IFS recommended that policymakers use any reform process to invest in supply-side capacity — for example, training and recruiting specialist teachers, expanding specialist provision and improving early identification and support in mainstream schools. The think tank warned that avoiding short-term political costs by narrowing legal entitlements could create longer-term problems for children, families and councils alike.
Labour ministers have not yet published detailed proposals. The party faces a choice between seeking rapid cost savings through changes to EHCP entitlements or pursuing a potentially more expensive programme of capacity-building that, according to the IFS, would be more likely to produce sustained improvements in the SEND system.
As the white paper approaches, council chiefs, disabled children's organisations and MPs will be watching closely for measures that balance fiscal pressures with statutory rights. The IFS briefing makes clear that whichever route ministers choose is likely to be politically contentious and could determine whether the reforms are judged a success or a repeat of earlier welfare-era upheaval.