Councils are starting to talk to lawyers about a potential judicial review of the Government amid a crisis in special educational needs and disability (SEND).
The move comes as the Department for Education (DfE) changes the law to effectively ban local authorities from funding any part of their dedicated schools grant (DSG) deficit from sources other than the DSG itself.
Local authorities that wish to use core council funds will need to apply to the secretary of state for permission.
There will also be a limit on how much councils will be able to move out of DSG, with local authorities told they will need ‘strong evidence' before they are given permission to ignore the normal threshold.
With one report estimating a national high needs spending deficit of between £1.2bn and £1.6bn by 2021, councils are hoping that the DfE will either soften its stance or provide extra funding to relieve deficits.
One council budget report warned: ‘If there is no additional funding then it is simply an unsatisfied debt which is unsustainable.
'At this stage we have no indication of further sufficient funding and, as s151 officer, I believe it is inappropriate and irresponsible to provide for a deficit to continue to accumulate without assurance of funds to re-pay this deficit.'
A local government source said: ‘The DfE is telling us to use DSG and build up our DSG deficit, but if you've got to dive into balances and you've got nowhere else to go then you're in Section 114 territory.
'You're going to have to make cuts and you're going to find a lower level of service.
‘If there isn't anywhere to go this will naturally follow through into the legal process.
'There appear to be few other places to go other than the courts.
'The whole insensitivity of the DfE to this critical issue is bewildering.'
The department has publicly recognised that some councils will not be able to pay off their historic SEND deficit within a reasonable time, and said it would offer ‘advice and help' to local authorities that have ‘significant' DSG deficits.
