GROWING demand for additional learning needs is a significant factor in schools spending nearly £3 million more than they received in funding.

Deficit budgets, where schools are in the red, increased by £2.8 million in Monmouthshire during the past financial year meaning an overspend of £6.880m was carried into the current financial year that started in April.

The county council’s head of finance, Jonathan Davies, warned members of its performance and overview scrutiny committee: “School deficits are the highest risk that we are carrying in terms of financial resilience. Recovery plans are in place but we know they will take time to deliver.”

Despite the ballooning school deficits Mr Davies said the council’s overall financial position, at the end of the 2025/26 financial year, was a “positive one” with the authority having finished with an overall surplus, or underspend, of £1.068m even after it had stashed away a further £3.020m in earmarked reserves.

That meant the council finished the year with a £4.1m gross surplus, or underspend, against its overall revenue budget, the amount it spent on delivering services and running costs, of £208m.

The surplus is divided between a £3m allocation to the earmarked reserves, to cover expected future risks and investments, and the £1m being transferred to its general fund to maintain five per cent cover.

Mr Davies said supporting schools in their recovery plans is the “number one focus” for the current financial year.

Of the council’s 34 schools there are 19 with a deficit budget up from 15 at the start of the year. Deficits among its three secondary schools increased by £305,000 and primary schools drew £461,000 from reserves but still finished the year with an overall surplus of £306,000.

Abergavenny’s King Henry VIII all-through school for pupils aged three to 19 saw its deficit increase by £855,000 to £2.241m while the council’s pupil referral unit for children unable to attend mainstream school had to use £1.167m from reserves taking its deficit to £2.813m.

Director of education Will McLean said “real and significant” demand for additional learning needs, or ALN, is seen across all schools and said schools are providing support above what they are funded for by the council.

He said: “Every year we see growth in our spend on ALN and some schools feel the need to provide beyond that.”

Asked about the growing deficit in the council run referral unit Mr McLean said the service caters for a much wider range of pupils than it had before the 2020 Covid pandemic.

Previously it provided for pupils in years 10 and 11 of secondary school at risk of permanent exclusion and pupils who couldn’t attend school for medical reasons.

But he said the “most significant” growth in numbers, since the pandemic, has been among pupils unable to attend school due to anxiety and mental health challenges. Pupils are also facing risk of exclusion at an earlier age in secondary school meaning more are attending the referral unit, and potentially for longer, while there has also been an increase in pupils whose specialist independent placements have broken down.

Mr McLean said preventative work in mainstream schools can help reduce demand but acknowledged that places further financial pressures on them.

Welsh councils have said funding from the Welsh Government isn’t “keeping up with the demand” for ALN support.

The new Plaid Cymru run Welsh Government has allocated £40m towards school building maintenance and £15m to increase the number of secondary pupils entitled to free school meals, but there’s no extra cash for ALN.

The Welsh Government has received additional funding due to budget changes in England including extra money for pupils with special educational needs, which is the term used for ALN in England.