Devon County Council has revealed the perilous state of its finances in its final annual budget before the local elections in May, with its Special Educational Needs & Disabilities (SEND) children’s services spending “now having a significant impact on cash balances”.
Its service delivery budget will increase by 5.9% from £743 million 2024-25 to £784 million in 2025-26, of which nearly 80% will be spent on providing adult health and social care and children’s services.
However, £66 million of the total – more than one and half times the increase – is allocated to what the county council calls cost “pressures”, including £32 million for inflation and April’s National Living Wage increase.
The county council, which has previously chosen to outsource many of its services, will only receive £5.7 million from the government towards its increased in-house staff employment costs.
It also says it will make £22 million of spending cuts – which it describes as “savings” – by “reducing costs, maximising the value of commissioned services and streamlining staff structures”.
Overall, the county council will deliver fewer services at greater cost. Its strategic leadership team admits that an impact on “vital” county council services is “inevitable”.
Devon County Council budget meeting, 20 February 2025
Devon County Council’s finances have been under strain for several years. In 2022, then-council leader John Hart warned that County Hall was at risk because of a £40 million overspend, with additional overspending on SEND children’s services adding further pressure.
The council has since continued to overspend on SEND children’s services in order to meet demand.
In March last year it signed a SEND overspend “safety valve” agreement with the government which required it to stick to specified overspending targets and break even on SEND spending by the end of 2025-26.
The agreement also committed it to making £50 million in budget cuts, selling £13 million of publicly-owned assets and using £20 million of its financial reserves.
What is the “safety valve” deal?
The “safety valve” deal, agreed in March last year, requires the council to rapidly reduce its cumulative SEND spending deficit from the expected 2025-26 peak to zero by 2032.
At the end of last year the county council expected its SEND deficit to reach £195 million by the end of 2024-25 before rising to £207 million in 2025-26.
However it has repeatedly exceeded the spending targets set by the agreement. By January this year the council expected to exceed its overspend target by £20.4 million, meaning its cumulative deficit would rise to £227 million next year.
The agreement with the government also requires the county council to break even on SEND spending by the end of 2025-26 and commits it to £50 million in budget cuts, the sale of £13 million of publicly-owned assets and the use of £20 million of its financial reserves.
In return the Department for Education said it would contribute a total of £95 million over nine years to 2032, the period covered by the deal.
At the same time the deal requires significant progress in improving SEND services provision following numerous poor Ofsted and Care Quality Commission reports over the past six years.
The government has since paused the national “safety valve” programme, with no new councils permitted to join, but existing agreements remain in place.
It was reported on Monday that the government is intending a “complete recalibration” of the SEND system, with a white paper expected in the next few months.
Devon County Council government funding for SEND services is increasing by £8.6 million in 2025-26. However it says this will not be “sufficient to meet the continued demands or requirements by the Department for Education” to clear its backlog of Education, Health and Care Plan (EHCP) assessments or keep its spending “in line with safety valve projections agreed”.
The county council is also now admitting that its SEND deficit is having “cash flow implications” and a “significant impact on cash balances”. At a scrutiny meeting in January county council finance director Angie Sinclair said that although the government required the council to hold the deficit in a ring-fenced reserve, “cash has gone out the door to pay for these services”.
SEND deficit ring-fencing is set to end next March, leaving 43% of local authorities at risk of issuing a section 114 notice – effectively declaring bankruptcy – according to the National Audit Office. Returning Devon County Council’s SEND deficit to its balance sheet would wipe out its financial reserves.
The county council says that, after discussion with the Department for Education, it is reworking its “safety valve” projections “to inform and recognise the changing pressures faced by SEND and the high risk of costs exceeding the funding available”.
When Devon County Council published its draft 2025-26 budget in January, it claimed it would mean “more money to provide care for Devon’s vulnerable adults and children” without making clear that adult and children’s services delivery would actually be cut.
Conservative county council leader James McInnes was asked to explain where the cuts would fall and where the impact on Devon’s residents would be felt, but he did not reply. County finance director Angie Sinclair instead responded, but did not answer the question.
Liberal Democrat opposition leader Caroline Leaver said: “What we are looking at is savings being found across every service, budget figures which say there are more actual pounds going in, but what we are looking at in reality is a real-terms cut”.
Liberal Democrat county councillor Julian Brazil added: “Communities in Devon have been shafted by this Labour government”.
The 2025-26 Devon County Council budget was approved on 20 February. Councillors lamented the government’s decision to replace the rural services grant with a “recovery grant” to be “distributed to places with greater need and demand for services” based on the English indices of deprivation.
The county council received a £10 million rural services grant last year, 10% of the national total but only about 1.3% of its £743 million 2023-24 services delivery budget.
It did not receive any recovery grant funding for 2025-26 – along with half of all councils – and it received the lowest 2025-26 government funding increase among the 21 remaining county councils.
