Kensington and Chelsea schools are grappling with a significant financial deficit, with the Dedicated Schools Grant (DSG) reserve balance standing at over £4 million as of March 31, 2026. This shortfall has worsened from previous estimates, primarily due to escalating costs within the High Needs Block.

The increased costs are attributed to additional costs coming in, a situation exacerbated by a previous cyber incident that delayed the full accounting of expenses, including those from external providers and accurate financial year costs for post-16 placements. A significant budget pressure has also arisen from a 5.6% increase in the number of Education, Health and Care Plans (EHCPs) between January 2025 and January 2026.

A new High Needs Stability Grant is anticipated to cover approximately 90% of the overall deficit, amounting to around £3.7 million. This grant is subject to various checks by the Department for Education (DfE), including comparisons of statutory financial returns, to ensure accuracy before allocation.

Despite this support, the council must still find £400,000 to bridge the remaining gap. Concerns are mounting that the flat cash funding for the High Needs Block in the upcoming 2026-27 financial year will make it impossible to adhere to the deficit management plan previously submitted to the DfE. Meeting participants stated that with the flat cash funding for the High Needs Block in 2026-27 DSG, that we will not be able to stay on track with the deficit management plan.

Furthermore, the report warns that if early intervention is not sufficiently funded, unmet need will fall to schools, increasing pressure and undermining inclusion. This suggests potential negative consequences for schools if the deficit management plan cannot be followed.

In a contrasting trend, overall school balances in Kensington and Chelsea have seen an increase, with total reserves rising by £1.677 million to £6.538 million. This figure is £3.390 million higher than initially projected, although three individual schools remained in deficit at the close of the financial year.

The deficit management plan itself was largely in line with projections submitted to the DfE. The council is now facing the challenge of securing the remaining funds and navigating the implications of flat cash funding for the High Needs Block in the next financial year. Further details on school funding can be found in the Public reports pack and Recommendations from High Needs Block Reference Group.