What is the DSG statutory override?

The DSG statutory override lets English councils hold their Dedicated Schools Grant deficit in a ring-fenced reserve, off the main budget, so it doesn't breach balanced-budget duties. It runs to 31 March 2028.

What the override actually does

The Dedicated Schools Grant (DSG) is the ring-fenced grant that funds schools and high needs. When spending on the high needs block runs ahead of the grant, the council carries a cumulative deficit. The override is an accounting rule that requires the net deficit on the whole DSG to be placed in an unusable reserve at the end of each financial year, rather than charged to the council's General Fund. It operates under the Local Authorities (Capital Finance and Accounting) (England) Regulations 2003, with the deficit-reserve treatment added by a 2020 amendment (SI 2020/1212, reg 30L).

The point is to keep the deficit out of the figure a finance director has to balance. Without it, a chief finance officer facing a large high-needs deficit could be forced to issue a section 114 report, the formal warning that a council cannot set a balanced budget under the Local Government Finance Act 1992. The override stops a SEND overspend from tipping an otherwise solvent council into that territory.

How long it lasts, and why the date matters

First introduced in 2020, the override has been extended several times. In June 2025 the government extended it by two further years, to the end of the 2027–28 financial year, meaning 31 March 2028. Any earlier sunset date you may see quoted, including the old March 2026 deadline, is superseded. The extension was framed as breathing space while wider SEND reform is brought in.

What happens to the deficit when it ends

The override is a temporary accounting fix, not a write-off. The write-off is a separate, conditional commitment. The Local Government Finance Settlement published on 9 February 2026 set out that all councils with SEND deficits are eligible in 2026–27 for a grant covering 90% of their high needs DSG deficit accrued to the end of 2025–26, with the remaining 10% falling to the council. The grant is projected at over £5bn against estimated combined deficits of around £6.6bn at March 2026.

The commitment comes with conditions worth modelling against:

• It is conditional on the council submitting a local SEND reform plan approved by the Department for Education.
• The grant is expected to be paid in autumn 2026.
• From 2028–29, SEND spending is set to be met from central departmental budgets rather than carried as a DSG deficit.

So the cliff-edge is not the override expiring on 31 March 2028 landing the full deficit on the General Fund. The 90% grant is designed to clear most of the historic position first, provided the reform plan is approved. The conditions, the figures, and the end date all sit inside a live reform programme, so confirm them against the latest settlement before you commit numbers to a medium-term financial plan.

This page is general information for local-authority finance and SEND officers, not legal or financial advice. For the current position, check the latest DfE explanatory note on DSG deficits and your settlement allocation.

This page is general information, not clinical or legal advice.