29
Deferred
Statutory override for Dedicated Schools Grant deficits hides true local authority cost burden
Conclusion
The statutory override that allows local authorities to keep deficits of the Dedicated Schools Grant (DSG) off their books is an unsustainable measure that hides the true cost burden on local authorities. The recent extension of the override until 2028 is a necessary step to protect local authorities from the harmful consequences that would have ensued if it had ended in March 2026. As long as the override is in place, local authorities’ accounts will diverge further from reality, and it must not be extended further beyond
Government Response Summary
The Government did not address the sustainability of the Dedicated Schools Grant (DSG) deficit override, instead outlining a commitment to review the Code of Audit Practice by the end of 2027 and championing auditors' statutory reporting powers.
Government Response
Deferred
Government Response
Deferred
HM Government
Deferred
80. The Government published a strategy in December 2024 which includes the commitment to undertake a post-implementation review of the Code of Audit Practice by the end of 2027. This review will consider whether auditors should expand from VFM arrangements to assessment of VFM achievement. The LAO’s strategic responsibilities include championing auditors’ statutory reporting powers to strengthen the sector’s early warning. 24
Source
Report
2nd Report - The Funding and Sustainability of Local Government Finance
23 Jul 2025
HC 514
Addressee Bodies
Ministry of Housing, Communities and Local Government
Timeline
Recommendation age
0.9 yr
Report published
23 Jul 2025