Half of London boroughs are at risk bankruptcy over insufficient schools funding from the government, it has been warned.
Sixteen of the capitals 33 local authorities have said they face “severe budget deficits” totalling £500million next year over the crisis, according to analysis from cross-party group London Councils.
Grants for supporting children and young people with special educational needs and disabilities (SEND) have not kept pace with rising pressures, the town halls said.
London Councils forecasts deficits for SEND provision will be £500million by the end of 2026/27.
On Thursday it was warned this will destabilise already under pressure town hall budgets and undermine investment in schools.
Ian Edwards, the leader of Hillingdon Council and London Councils’ Executive Member for Children and Young People, said: “Boroughs are determined to provide high-quality support for all young Londoners with SEND, but we’re extremely concerned by the unsustainable finance pressures we face.
“The sums don’t add up. Government funding has failed to keep pace with rising levels of SEND support need in the capital, leading to major deficits.”
It comes as the Chancellor prepares to unveil her Spending Review next week.
London boroughs are seeking more funding to meet the needs of children and young people with SEND.
They say they have seen a significant increase in the number of pupils with special educational needs, growing 9% in the last year alone.
Government data shows there were 85,601 children in London with Education, Health and Care Plans (EHCPs) in 2023 compared to 93,487 in 2024.
The government has extended its “statutory override” for councils running deficits on their SEND spending to March next year. This means councils can hold high needs shortfalls off their balance sheets. But when it comes to an end the losses will count against council budgets and this could lead to some authorities becoming insolvent.
London Councils said 16 town halls in the capital will seriously struggle to cover the shortfalls if the statutory override is removed and would likely require emergency government funding or have to issue a Section 114 notice, effectively declaring bankruptcy.
Mr Edwards added: “The Spending Review needs to recognise these pressures and help us restore stability to the system.
“We are calling for funding that reduces the deficit and reflects London’s fast-growing SEND numbers, enabling us to boost inclusion in schools and continue meeting the needs of all children in the capital.”
A record seven councils in the capital this year applied for hundreds-of-millions-of-pounds of emergency cash from the Government as they struggle to stay afloat amid skyrocketing social care and temporary housing costs.
Lambeth, Newham, Havering, Croydon, Enfield, Barnet and Haringey all said they could face going bust in the future unless they get more money to fund services.
It comes as Sir Keir Starmer opened up about his late brother's struggles with school as he paid tribute to his sibling's "resilience" and "personal courage".
The Prime Minister’s younger brother, Nick Starmer, had learning difficulties because of complications at birth. He died, aged 60, last year after being diagnosed with cancer.
Sir Keir said his brother's story had "shaped" his life as he welcomed Sir Lewis Hamilton to Downing Street on Wednesday for a roundtable discussion on supporting young people in education.
Sir Keir said: "(My brother) really struggled at school - and had difficulties learning, not because of a learning difficulty, but because then in his time he was pushed to one side and treated as someone who would never learn.
"He struggled a lot as a result of that. You might think someone who sits here as Prime Minister has no idea what it's like to struggle at school, but I know from my own brother what it was like, and how much resilience and personal courage he had to have.”
As part of the talks, Sir Keir vowed that the Government would develop a "best practice framework" to "help schools increase pupil engagement", Downing Street said.
The meeting came as the Department for Education expanded its free school meals programme to ensure all pupils in England whose families claim Universal Credit will be eligible for the scheme.
Labour introduced VAT on private school fees in January and Chancellor Rachel Reeves said the money raised would help "provide the highest quality of support and teaching" in the state sector.
It is estimated that extending the tax to school fees would raise £460 million in 2024/25, rising to £1.51 billion in 2025/26, according to House of Commons data.
Labour has said the money will go towards funding 6,500 extra teachers by the end of the Parliament.
However the Department for Education (DfE) has admitted delivering the pledge will be a “significant challenge”, partly due to a “fiscally constrained environment” making it harder to offer the necessary financial incentives to attract new teachers.
