Future proofing for Independent APs.

If your main customer or only customer for your business was in danger of going bankrupt how would you feel? What would you do?

With headlines like this in todays’ Guardian: ‘Almost half of England’s councils ‘could face bankruptcy over 4.6bn deficit’ I thought it was worth thinking about this from the point of view of some of the provisions and independent schools I work with that rely on commissions from these councils. My experience is in education, I’m no expert in local authority finance but I think it’s important to think about the risk to independent AP provisions from insecure LA finances. The sector is susceptible to changes in practice or legislation so is there anything to worry about or be aware of?

This is an article to prompt thinking rather than offer definitive information or answers, I’d love to hear more from those who work in local authorities as to their thoughts too.

 Providers like independent APs and Specialist Independent School often rely on local authorities as their main (and in some cases, only) source of funding. This could be higher needs funding attached to EHCPs, commissioned places for students with medical needs or for those excluded from mainstream.

It’s been pretty well publicised that LA’s are struggling with funding but the National Audit Office has just produced a report on Local Government Sustainability  https://www.nao.org.uk/wp-content/uploads/2025/02/local-government-financial-sustainability.pdf which is really helpful in understanding the picture a bit more.

You’ll have seen from the media that local authorities are facing mounting costs, particularly around adult and children’s social care but also around the rising number of children with EHCPs (25% increase between 2022-23 and a 140% increase between 2015 and 2023-24). That is coupled with around a third increase in exclusion numbers (all of which LAs have a responsibility to place). I’m probably telling you what you already know but currently LAs can use something called a ‘statutory override’ to keep deficits in high needs budgets off their main balance sheets. The problem is that this override is due to expire in March 2026. The DfE estimates that 33% of local authorities will have a deficit in high needs budgets greater than their reserves when this override finishes. 

Currently there is great demand for specialist and AP places as there aren’t enough in the sector. Independent schools and unregistered provisions have filled the gap and these are mostly full and can sometimes charge huge amounts for places. It is both the rise in EHCPs and the fact that the LAs are having to pay large amounts to meet need that is leading to the deficit in this area.

The DfE is addressing this by trying to work on increasing inclusion in mainstream schools, through earlier intervention and development of specialist facilities within them. It has announced £740 million worth of funding for this. They have talked about wider reform of the whole sector but also that this will take years to make the sector financially sustainable. Some LAs have included targets in their SEN plans to reduce the reliance on the independent sector to help balance the books.

It is likely in the long-term that LAs will move to increase maintained places and reduce independent school SEN places. In the short-term it is also possible that quick and unexpected reactions will change the LA’s use of AP or independent schools – one LA pulled all its’ pupils in unregistered APs almost overnight earlier this year (they have since slowly been using them again as there wasn’t other options available but it makes for volatility in the market!).

There is also a real move through the DfE and Ofsted to encourage schools to be more inclusive. Schools are now committing significant resources to developing ‘Internal Alternative Provisions’ or specialist units to provide support where they would normally have used AP or specialist places.

That sounds worrying for those who rely on LAs for their work. There is some balance to this and increasing stability in the market are the following:

• A new maintained school takes around 5 years to start and there aren’t any current application rounds for AP frees schools open.

• Any major reform to the system will be very long-term.

• The number of high needs and AP pupils is growing sharply and there aren’t enough places available.

• Lots of internal alternative provisions are being used with the additional numbers of pupils needing support around mental health or EBSNA. A lot of the traditional ‘AP’ students are still being educated outside the school in alternative provisions.

• LAs are legally required to cover education of pupils with EHCPs, medical needs and who have been excluded. This is why this has grown and not been part of services facing cuts. They have to find education for them.

Here’s some ways to mitigate the risk – in no particular order:

·      Make sure schools are used as commissioners as well as LAs – widen your customer base.

·      Read your areas local SEND plans – they outline long-term trends and strategies which can give clues as to the future market.

·      Work hard on keeping strong and positive relationships with your LAs.

·      Transport is a significant cost for local authorities - covering this as part of any model increases value for money and makes you more attractive to use by the LA. Some spend more on taxis to provisions than the provisions cost themselves.

·      As much as possible site schools or provisions in areas where they can be commissioned by several LAs to reduce reliance on one ‘customer’.

·      Councils issuing section 114 (bankruptcy) notices between 2018-25: Hackney, Northamptonshire, Croydon, Slough, Thurrock, Woking and Birmingham. 30 LA’s received support to balance budgets for 2025-26 - lists can be found here:https://www.gov.uk/guidance/exceptional-financial-support-for-local-authorities-for-2025-26 . Some LAs have a lower financial risk profile – if you have the flexibility then work more with these.

At the moment AP and Independent Schools are a key part of the inclusion needed for education as a whole in England. This will probably have to change over the longer term - for those not working in maintained schools it’s important to keep an eye on developments and stay ahead of the curve in response. Do sign up for our updates at the bottom of this page as one source of information.