It’s tempting to think that England was always a seafaring and financial power, but these skills had to be learned, together. That’s why An Introduction to Merchants Accounts by John Collins was a big deal when it was published in 1653.

England came late to the long-distance maritime trade, and so instruction on Italian methods of bookkeeping had tended to be translated from the Dutch. Collins, however, had spent time in the Mediterranean on an English ship fighting for the Venetians, and had learned the Italian methods himself.

The sample journal entries in Collins’ textbook reflect trades that were common in England at the time, the ones he had learned — oil from Provence, soap from Venice, the ginger and cotton that indentured servants grew on Barbados.

By the middle of the 18th century, both the trade and the textbooks had changed. John Mair’s 400-page Book-keeping Methodised became over several editions the most popular accounting textbook in the English-speaking Atlantic world — George Washington kept a copy at Mount Vernon.

Mair still promised to teach both theory and practice “according to the Italian form,” but his new examples reflected the new long-distance trade. A whole chapter of sample journals dealt with Jamaica, Barbados and the Leeward Islands, which Mair called the sugar colonies. He treated Virginia and Maryland in their own chapter, too, as the tobacco colonies.

While British had been teaching themselves Italian accounting, they had also been learning from the Portuguese and the Dutch the tenets of the engenhos, the mill system where enslaved Africans planted, harvested and processed sugar. The transatlantic trade wasn’t just incidental, this for that. The ginger and cotton on Barbados had become sugar because engenhos were much more profitable for their owners. As we can read now all the way down to the textbooks, sugar had become the engine of the Atlantic.

I went back to Collins and Mair this week after Daron Acemoglu, Simon Johnson and James Robinson won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. They won for taking on the question of divergence — why some countries have enjoyed enduring prosperity since the early modern period, while others have languished. What made the difference, they argued, were institutions, habits of law and society.

Inclusive institutions that secured property rights and encouraged investment were more likely to produce prosperity. Extractive institutions, which claim spoils for the elite and discourage investment, produce low growth over time.

In Why Nations Fail, Acemoglu and Robinson’s 2012 summary of their work on institutions, they use late 17th century England, Barbados and Virginia as examples. England and Virginia became inclusive: property rights, legislative assemblies, limited but slowly expanding franchise. Barbados became extractive, relying on enslaved labour to produce profits for a small elite.

These descriptions are true but insufficient, because England, Barbados and Virginia were all part of the same system. The same captive domestic market, protected by tariffs, sent slave tobacco and slave sugar through factors in the colonies and merchants in London and Glasgow.

The shape of this captive market was clear to John Mair, who wrote a chapter of instructions on how to account for the enslaved and the sugar trade through factors in Barbados and Jamaica, explaining how that trade “not only employs multitudes abroad in the colonies, but cuts out work for a vast deal of people at home.” Both manufacturers and merchants, he wrote, “are hereby not only maintained, but many of them enriched.”

London merchants and Barbadian planters, well represented in Parliament, became powerful advocates for inclusive institutions in Britain not in contrast to the extractive institutions on the other side of the ocean, but because of them.

It is easy to pick on Nobel Prize winners from afar. If they’re so wrong, it should be easy for you to prove it and claim your own trip to Stockholm. This question of just how much extraction contributed to England’s financial and industrial revolutions, though, is one of the most openly and furiously contested problems of early modern Atlantic history.

It offers another well documented, compelling explanation for the inclusive institutions of early-modern Britain. Acemoglu, Johnson and Robinson have encountered this question — it’s right there in their footnotes. They just don’t seem to think it matters.

They are by all accounts nice, thoughtful guys, so the problem doesn’t seem to be arrogance or wilful blindness. Rather, this inability to see how London, Virginia and Barbados function within the same system is, ironically, an institutional problem within the profession of economics.

Economists are really good with numbers. This is important. Numbers matter, and the ability to infer how they affect each other matters, too. Some things, however, don’t seem to respond in obvious ways to numbers, or sometimes the numbers are constrained by things that are hard to measure.

It’s helpful to think of these things as institutions, the habits of mind and the state that shape markets. Acemoglu, Johnson and Robinson are right to see the importance of institutions, and they were right to drag the rest of their profession in their direction. The problem is that institutions are exactly the parts of markets that are inherently resistant to discovery through numbers.

Luckily, there are other professions that find, train and accredit the kinds of people who are good at understanding the political and cultural forces that drive institutions. These professions are the rest of the social sciences — sociology, history, anthropology, political science.

Economists are socialised to look down on the rest the social sciences as unserious, but it’s a funny ol’ thing when you reach the end of numbers and bang into an institution. You need new tools, exactly the ones you were told lacked rigour. This week economists have been congratulating themselves on following Acemoglu, Johnson and Robinson into institutions. They are, in effect, proud to have discovered the rest of the social sciences.

It would be churlish to gatekeep the economists out. The study of history, for example, is just the application of eyeballs to paper over time. All should be welcome. But it’s reasonable to expect curiosity and discipline, to ask the economists to sit still long enough to encounter all the basic questions lobbed at every first-year grad student. Mastery of these questions is not just a status signifier; it shows that you understand what has already been said, so you can contribute something new and meaningful.

Economists would never dream of approaching the nature of the firm without explaining carefully where they stand on Ronald Coase, for example. But this is exactly what Acemoglu and Robinson do in the opening chapter of Why Nations Fail.

They argue that the Virginia Company began with an extractive model, looking for gold, and then by the 1620s had begun developing inclusive institutions, such as Virginia’s General Assembly, “the start of democracy in the United States.” The footnotes reveal the source to be Morgan (1975). Edmund Morgan published in that year what is still today the single most important book about early colonial Virginia. But the name of that book is, unfortunately, American Slavery, American Freedom.

Morgan argued that the institutions of democracy and slavery in early Virginia developed together, driven by the same events. For about the first 30 years of Virginia’s development as a tobacco plantation, enslaved Africans and white indentured servants were treated with similar disdain, worked together in the fields, often made common cause and even married.

When white Virginian servants started to live longer, however, they rebelled and demanded curbs to the privileges of the big planters. Virginians created their slave code over the same period, outlawing intermarriage, writing a womb law that tied the status of a child to the status of the mother, confirming that slave status was permanent, and discouraging white women from having children with Black men.

Morgan argues that the extractive institution of Black slavery had changed by the end of the century, becoming even more draconian and brutal, as the democratic institutions of colonial Williamsburg became more representative. Inclusive institutions for white Virginians became possible not despite the extractive institution of Black slavery, but because of it.

You don’t have to agree with Edmund Morgan when you’re writing about early America. But you do have to respond to him, in the same way you respond to Ronald Coase when writing about the firm. This is not a niche reading of an old work. It is one of the central theses of the historiography of early American institutions.

Acemoglu and Robinson read a book called American Slavery, American Freedom, used the bits about American freedom and tossed the bits about American slavery. The new economic institutionalists treat work on institutions by a celebrated historian not as a coherent argument, but as a source of anecdotes. If they did this with data, you’d call it p-hacking.

There’s more historiographical p-hacking in How Nations Fail. They quote Sheridan (1973) on conditions in Barbados. But Richard Sheridan’s Sugar and Slavery argues in part that the English didn’t just profit from slavery in the West Indies, they gathered both capital and competence in shipping and finance.

This is not hard to find in Sheridan; he frames his entire work around a late 18th century argument between Adam Smith and Edmund Burke. Smith argued that the sugar colonies had been an expensive mistake. Burke pointed out that the sugar colonies had become a crucial destination for English exports. Sheridan moves this argument forward, all the way to the big Atlantic question of growth.

Neo Smithians, he said, “tend to focus on such indigenous [British] forces of change as science and technology, entrepreneurship, and capital formation, acting and reacting in such a manner as to lower the institutional barriers to economic growth.”

The Neo Burkians saw in the Atlantic empire an “important source of wealth for the mother country,” one that “supported, and in some cases directly financed, the infant manufacturers who launched the Industrial Revolution.” The empire created new wealth, which paid for new landed estates and Parliamentarians who “influenced imperial policy in their own interest.”

Acemoglu, Johnson and Robinson are neo Smithians. That’s their right; most economists are. But again, if they’re interested in institutions and they’re going to use Sheridan, why not actually take Sheridan seriously?

You’ll find in Sugar and Slavery an account of the same accumulation of the skills in finance and the trade laid out in John Mair’s textbook. Sheridan offers an uncomfortable origin story for the institutions of British finance, which among other achievements produced the Financial Times. If you’re going to study institutions, you have to be curious about all of them.

This year the Riksbank awarded its prize to a treatment of early modern institutions so selective it functions as a bedtime story for capitalists. The good institutions produced prosperity. The bad ones produced misery.

But good and bad institutions have always been paired. It is not so easy to tease them apart into natural experiments, and just as useful to see how they’re connected. Democracy and the rule of law are the best institutions we have. We should celebrate them and fight to keep them. And they do create enduring economic growth. But the story of how they came about can cause discomfort. That discomfort is just as important as the celebration. Both help us make better policy now.

It is likely that after this Nobel more young economists will follow Acemoglu, Johnson and Robinson into institutions and history. That’s good! More, please! Stop by the history department. Grab a book. But you gotta make sure you read the whole thing.

Good morning. The result of Moldova’s EU membership referendum is on a knife’s edge this morning, with the result set to hinge on the last few thousand votes counted. And President Maia Sandu’s re-election bid will face a gruelling second-round run-off against her pro-Russian rival in a fortnight.

Today, our Rome bureau chief reports on Giorgia Meloni’s efforts to rescue her Albania migration scheme after it was shot down by the courts, and our energy correspondent reveals what’s undermining a technology many hoped would be a silver bullet for Europe’s green revolution.

Rescue mission

Italian Prime Minister Giorgia Meloni is scrambling to salvage her controversial scheme to hold irregular migrants in offshore centres in Albania, after an Italian court ordered the first group of migrants dispatched there to be transported immediately to Italy, writes Amy Kazmin.

Context: Meloni came to power promising tough measures to stem the influx of irregular migrants from across the Mediterranean, but has struggled to fulfil that pledge. She had touted the Albanian scheme as an innovative model the rest of the EU could follow.

Meloni and Albanian Prime Minister Edi Rama agreed last summer that Italy could operate two centres in Albania with a total capacity of 3,000 healthy, male migrants per month from countries deemed “safe”, while their asylum requests were processed.

The centres formally opened last week, when Italian coastguard officials delivered 16 migrants from Bangladesh and Egypt — two of the 22 countries Rome has designated safe for migrant returns, with some specific exceptions. 

Of those first arrivals, four were sent on to Italy immediately: two on suspicion of being minors, and two for medical reasons. On Friday, Rome’s immigration court ordered the remaining dozen to follow suit, citing a European Court of Justice ruling that countries could not be “partially safe”.

Italy’s opposition parties — highly critical of a deal they consider little more than a political theatre — are up in arms over an estimated €60mn spent on the centres and supporting infrastructure so far this year. 

At a cabinet meeting today, Meloni’s government will try to strengthen the legal foundation of designating countries safe for migrant returns, in a bid to ensure the transport of future groups of migrants withstands judicial scrutiny.

The legal wrangling is not just pertinent to Meloni, whose core electorate is closely watching. Many other EU leaders have endorsed her Albania model or intimated they would be keen to try something similar.

European Commission president Ursula von der Leyen said last week that Brussels would “draw lessons” from the scheme as it “explore[s] possible ways forward as regards the idea of developing return hubs outside the EU”.

Chart du jour: Innovation race

If Europe wants to take a digital leap across its innovation gap, it should focus less on state handouts and instead push the private sector to do more, writes Martin Sandbu.

Hot air

Heat pump policies in nine EU countries are “deeply flawed”, according to a new study assessing the lagging take-up of a technology seen as critical to cutting emissions from household heating, writes Alice Hancock.

Context: Heat pumps work in a similar way to air conditioning but in reverse. When powered by renewable energy they are seen as a way to decarbonise heating in buildings, which accounts for 35 per cent of the bloc’s greenhouse gas emissions.

The EU aims to fully decarbonise its building stock by 2050. To do that it will need at least 60mn heat pumps by 2030 but will fall 17mn short, according to the European Heat Pump Association’s estimates. 

After a bump following the energy crisis, sales of heat pumps, a clean technology of which Europe can claim leadership, have started to lag. 

The reason? Few countries have established “robust” policy frameworks, according to a report from the Polish think-tank Reform Institute.

Out of the 10 largest heat pump markets in Europe surveyed, Reform Institute found that nine — including UK, France, Spain and Germany — have “deeply flawed” policies to incentivise take-up. 

Among the problems: delays to subsidy payments, a lack of loans to pay for costs not covered by grants, and poor outreach to vulnerable households.

The stakes for encouraging the heat pump sector are high: it employs 170,000 people in Europe.

French socialist MEP Thomas Pellerin-Carlin said that heat pumps were “central” to the EU’s energy transition. 

“[They] can help free us from our dependence on Vladimir Putin’s gas, and lower energy bills for European families and businesses. But here lies the paradox: despite its pivotal role in Europe’s energy security, the heat pump industry is now struggling,” he added. “This downward trend is the direct result of poor policy decisions at both EU and national levels.”

What to watch today

1. European parliament president Roberta Metsola opens the chamber’s plenary session and meets with Ursula von der Leyen, president of the European Commission.

2. EU agriculture and fishery ministers meet in Luxembourg.

Now read these

WORKERS can scour their payslips to discover if they are due a tax refund that could be worth thousands of pounds.

HMRC codes indicate the level at which you are being taxed on your income.

1

If your code isn’t correct for your financial circumstances, you could be paying more in tax than you should be and may be owed money back.

The code you need to look out for is a mixture of numbers and letters.

If you realise you’re paying the wrong amount in tax, you can claim back overpaid cash for up to four years after.

However, the onus is on you to check that it’s right and let HMRC know if there is a discrepancy.

Here we explain what each code means so you can work out if you’re being taxed the correct amount.

Plus, how to challenge your code if you realise that it’s wrong.

TAX CODES EXPLAINED

The letters at the start of your tax code all mean something different and will show whether you are entitled to the personal allowance. This is the amount you can earn each year before being taxed and it currently stands at £12,570.

• L – You’re entitled to the standard tax-free Personal Allowance. The common tax code is 1257L.
• M – Marriage Allowance: you’ve received a transfer of 10% of your partner’s personal allowance (£1,257)
• N – Marriage Allowance: you’ve transferred 10% of your personal allowance to your partner
• S – Your income or pension is taxed using the rates in Scotland
• T – Your tax code includes other calculations to work out your personal allowance, for example, it’s been reduced because your estimated annual income is more than £100,000
• 0T – Your personal allowance has been used up, or you’ve started a new job and your employer doesn’t have the details they need to give you a tax code
• BR – All your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension)
• D0 – All your income from this job or pension is taxed at the higher rate (usually used if you’ve got more than one job or pension)
• D1 – All your income from this job or pension is taxed at the additional rate (usually used if you’ve got more than one job or pension)
• NT – You’re not paying any tax on this income
• Tax codes starting with K mean you have income that isn’t being taxed another way and it’s worth more than your tax-free allowance

There are different reason you could be on the wrong tax code. Often an error can be made if you change your or your salary changes.

HMRC might not have been given updates relating to new circumstances.

You should check your tax code when you move jobs or if you have a change in salary to make sure you’re still paying the right amount.

What if my tax code is wrong?

If you think you might be on the wrong tax code, contact HMRC. You can call them on 0300 200 3300.

Or, you can send a letter to the following address: Pay as You Earn and Self Assessment, HM Revenue and Customs, BX9 1AS, United Kingdom.

If you are on the wrong tax code and have been paying too much, HMRC will change it so you pay the correct amount moving forwards.

You should then be reimbursed for any tax you’ve overpaid.

You could, however, contact HMRC about an incorrect tax code and find you have underpaid tax.

In this case, you will usually have to pay the money back over 12 months.

But, only if you are earning enough income over the Personal Allowance, which is currently £12,570, and owe less than £3,000 back.

HMRC might get in touch with you to tell you you’re owed a tax rebate, too.

In this case, you’ll get a P800 letter or a simple assessment letter in the post.

A P800 might tell you if you’ve not paid enough tax and have to pay it back. It will say if you can claim online through the government’s website.

If you can claim online, you’ll need your Government Gateway ID and password. The money will then be sent to your bank account within five days.

You can also claim your refund through the HMRC app.

If your P800 letter tells you you will be paid your tax rebate via cheque in the post, you should receive it within 14 days of the date on your letter.

If you’re owed tax from more than one year, you’ll get a single cheque for the entire amount.

One thing to start: Meet the non-doms fighting Rachel Reeves’s tax raid on wealthy foreigners. Are you a non-dom and caught by the UK’s proposed changes? I’d love to hear from you: harriet.agnew@ft.com

And one hire: Murray Roos, the former group head of capital markets at the London Stock Exchange Group, is joining alternatives investment house Ocean Wall as chair next month.

In today’s newsletter:

• Nicolai Tangen on the geopolitical risks facing the chip industry

• Harvard donations drop sharply in wake of criticism over Israel protests

• Yen resumes decline on doubts over Japan interest rate rises

Norway’s $2tn man

Norges Bank Investment Management, also known as Norway’s oil fund, is the largest single sovereign wealth fund on Earth. It contains approaching $2tn in assets, based on money earned from the country’s oil reserves, and owns on average about 1.5 per cent of every listed company. 

In the latest episode of the FT’s Unhedged Podcast, markets columnist Katie Martin talks to Nicolai Tangen, the man in charge of making this supertanker run smoothly. In a wide-ranging discussion, Tangen outlines why he’s worried that a toxic mix of investor concentration in Big Tech and geopolitical risks in Taiwan leave global stock markets vulnerable to a large correction and means “we are heading for a period of low returns”. 

The stock market dominance of companies with links to artificial intelligence — such as Nvidia, which designs the chips powering the AI revolution, or the likes of Amazon, Meta and Microsoft that buy them — is “absolutely worrying”, he says. 

Taiwan is at the epicentre of the global semiconductor supply chain, leaving the chip industry vulnerable to tensions in China-Taiwan relations. 

On the geopolitical front, Tangen says:

“I think the main thing to watch is the relationship between the US and China, because that has implications for Taiwan and it has implications for what’s happening with the microchips and the supply chains, which involves pretty much everything we do, you know. Chips into everything: phones, toasters, cars, dishwashers. Just everything.” 

Tangen also had some tough love for Europe, which he said “has not been a great place to invest” in comparison to the US. Why? 

“Because the economies are much slower, it’s more difficult to innovate, it’s more regulated, the labour market is less flexible, just a lot of things which make it more difficult to operate. And that’s not something that I think — that’s something that we hear from the CEOs of the largest companies in Europe and in the US. So it means that returns in Europe have been half of what they’ve been in America over the last 10 years, right? This has important implications.”   

Listen to the podcast or read the full transcript here. Meanwhile, Tangen has his own podcast series called In Good Company, one of a growing number of business-focused podcasts that have sprung up to showcase top-flight chief executives as hosts, interviewees or both. Look out this week for his podcast interview with Schroders chief executive Peter Harrison.

Harvard donations drop sharply

Student protests over Israel’s war in Gaza have roiled the Harvard University campus for much of the past academic year, and wealthy alumni including Pershing Square founder Bill Ackman and Citadel founder Ken Griffin criticised the university for its handling of the demonstrations. 

Last week, the first sign of the economic toll on the Cambridge, Massachusetts, institution emerged. Donations to Harvard fell 14 per cent in the fiscal year ending June 30, as large donors cut ties, report Brooke Masters and Sun Yu in New York. 

Overall gifts, including grants and loans, to the western world’s wealthiest university dropped to $1.18bn from $1.38bn a year ago, as outrage over campus protests led to the resignation of president Claudine Gay. 

The drop was a result of lower donations to the university’s endowment, where the very largest gifts tend to be concentrated. Those gifts fell by one-third, while donations to the operating fund, which covers day-to-day expenses, rose 9 per cent year on year to $528mn.

US endowments such as Harvard’s are also closely watched for another reason: their performance is seen as a proxy for the health of the private equity industry. 

Since Narv Narvekar in 2016 took over as chief executive of Harvard Management Company, which manages the endowment, its private equity allocation has more than doubled to 39 per cent of its assets to become the biggest component of HMC’s investment portfolio. 

Private equity lagged behind public equity for the second year in a row as a slump in stock listings as well as mergers and acquisitions put the asset class under stress. 

Narvekar said in the letter that HMC’s private equity portfolio underperformed in part because portfolio managers who had not marked down their holdings sharply during the 2022 market crash then also refrained from valuing their investments upward “in the context of rising public equity markets” in 2023 and 2024.

Overall, the endowment generated gains, returning 9.6 per cent and pushing total holdings back up to $53.2bn. 

Chart of the week

The Japanese yen has fallen sharply in recent weeks, hitting levels not seen since before a sudden surge in the summer that reverberated across global markets, writes Ian Smith in London.

The yen last week sank below ¥150 to the US dollar, and has lost about 5 per cent over the past month as investors bet on a slower pace of interest rate rises from the Bank of Japan, at a time when the US Federal Reserve is also expected to cut rates more slowly than previously thought. Dovish comments from Japan’s new Prime Minister Shigeru Ishiba, who had previously been critical of the BoJ’s very loose monetary policy, have helped the currency resume a slide that carried it to 34-year lows earlier in the year.

The shift, investors said, has rekindled interest in the so-called yen carry trade, where investors borrow in yen to fund bets in higher-yielding currencies, a bet that blew up spectacularly in August after the BoJ raised borrowing costs.

Hiroki Hashimoto, a senior fund manager at Royal London Asset Management, said the recent weakness could “likely be explained by the recent widening interest rate differentials between the US and Japan”. He said the risk that the governing party loses its lower-house majority at a snap election this month “could have led to the less hawkish comments” from the new prime minister. 

Ishiba said this month that the economy was “not in an environment” for further interest rate rises by the BoJ.

Five unmissable stories this week

Klarna is offloading most of its UK “buy now, pay later” portfolio to US hedge fund Elliott, in a deal that will free up as much as £30bn for new loans. Deputy editor Patrick Jenkins suggests that there is problem borrowing in the area nicknamed “buy now, pain later”.

Forcing UK pension funds to buy British assets as a way of increasing domestic investment would be a “huge mistake” that could reduce payouts to pensioners, some of the country’s biggest investors have warned.

Blackstone plans to list some of its largest investments, according to its president Jonathan Gray, after sluggish asset sales hit third-quarter profits at the world’s biggest private capital group. 

Private equity investors are selling second-hand stakes in ageing funds at a blistering pace this year, as pensions and endowments find ways to get out of unlisted investments amid a slump in deal activity that has curtailed cash payouts.

Michael Summersgill, chief executive of investment site AJ Bell has warned that uncertainty over potential tax changes in this month’s Budget has led to customers taking money out of their pension pots.

And finally

The Neue Galerie is one of my favourite galleries in New York, located in a magnificent townhouse on Museum Mile in the Upper East Side that was originally constructed for the industrialist William Starr Miller. Among the treasures in the permanent collection of early 20th-century German and Austrian art is Gustav Klimt’s Portrait of Adele Bloch-Bauer. From now until January a temporary exhibition, Egon Schiele: Living Landscapes investigates the importance of landscape in the Austrian artist’s work. Don’t miss the Wiener schnitzel in the museum’s Café Sabarsky.

Laleham Gap school in Kent lacks the clattering corridors and ringing bells found in most UK schools. Headteacher Les Milton says this is because his pupils, who have autism and communication needs, are acutely sensitive to noise, touch and light.

“The building has sound-absorbing materials and wide corridors, no bells and specific lighting. Most schools are not autism-friendly in this way,” said Milton, who has seen a rapid rise in demand for places at Laleham Gap since it opened in 2016.

“The school was built to meet the needs of 168 pupils. Today we have 237 pupils, so we’ve had to massively increase capacity to meet demand.”

Surging demand for places at state-funded schools such as Laleham Gap is reflected across England following a huge jump in the number of children diagnosed with autism, communication and mental health problems.

Official data shows the number of so-called education, health and care plans, which grant costly specialist support for children with the most acute needs, has risen by 83 per cent since 2015.

The rapid rise in demand has outstripped funding, despite a real-terms rise in the government’s high-needs budget of more than 50 per cent over the past decade — growing from £6.8bn in 2015 to more than £10bn in 2024.

This has placed huge financial strain on councils and left the government facing a growing crisis over how to manage special educational needs and disabilities (Send) provision.

New data from the County Councils Network, whose members cover around half the population of England, finds that 26 of England’s 38 county and rural councils risk bankruptcy before 2027 if Send deficits are not addressed by central government.

A temporary change to accounting rules was introduced in 2018 to keep these costs off council balance sheets but is due to expire in March 2026. Kate Foale, CCN special educational needs spokesperson, said the government needed to provide “immediate clarity” on plans to eliminate or manage deficits.

“We also need root and branch reform of the system to address the key issues driving demand and cost, including flipping the system to make mainstream schools more inclusive for Send pupils,” she added.

Almost all the council chief executives surveyed by CCN said that “comprehensive and fundamental reform” was essential, with Send deficits at county and rural councils projected to rise from £2.7bn to £3.8bn in the year to March 2027 without significant changes to the system.

The Department for Education said it was focused on “fixing the foundations” of local government, providing long-term stability through multiyear funding settlements and ending the need for councils to spend time and money bidding for pots of government cash.

However, with the number of children with EHC plans in England rising to more than 434,000 over the past eight years, surging Send deficits leave many councils with near-impossible choices to meet their obligations.

Sam Freedman, a former government education policy adviser, said the rapid rise in EHC plans reflected a decade of cuts to other Send support in mainstream schools, such as specialist teachers and occupational therapists. This had led to a “vicious cycle” in educational funding as parents turned to EHC plans to get support.

“The lack of early years intervention and a lack of other kinds of provision means that the only way for parents to obtain help and funding is by obtaining a statement, which means more money is sucked into plans, so there is less money for everything else,” he added.

Demand has far outstripped the capacity of state-funded special schools, forcing councils to pay for much more expensive privately run alternatives. In Kent, these private special schools cost almost £50,000 on average, compared with £23,000 for state-funded provision.

Nationally, Department for Education data shows councils in England expect to pay £2.1bn for placements at independent schools this year, a threefold increase since 2015.

The growing burden on councils has made it increasingly difficult for parents to obtain plans for their children and led to a surge in the number of parents disputing council decisions at tribunals. A record 14,000 parental appeals against Send judgments were registered in 2022-23, with parents winning 98 per cent of the cases taken to tribunal.

The Department for Education said that children with Send had been “let down” by the system and it was determined to tackle the issues with better inclusivity and expertise within mainstream schools.

“There is no ‘magic wand’ to fix these deep-rooted issues, but we have already started with Ofsted reform, our curriculum review, and more training for early years staff,” it added.

Freedman said that any solution must involve giving parents other options than seeking a Send plan for their child, although he admitted this would be challenging at a time of fiscal belt-tightening.

Reform is already under way in Kent after the council agreed to a “safety valve” programme last year that secured a £140mn bailout from the Department for Education on the condition it reduced its Send deficit.  

The council has drawn up plans to take many Send children back into mainstream education but the proposals have drawn intense criticism from special needs headteachers and risk creating a backlash from parents of non-Send children unless properly resourced.

Roger Gough, leader of Kent County Council, said it was already starting to slow the growth in spending by supporting more children in mainstream schools, by providing training for staff and sharing best practice from other schools.

“We absolutely have to think differently and in many ways what you need to do to make the ‘safety valve’ work is what you need to do to make the system as a whole work,” he added.

Kent County Council is also looking to make admission criteria for specific special schools less narrow, mixing different types of special needs students, so more students’ needs can be met locally. 

However, Laleham Gap’s Milton said that while he understood the need for reform, he warned that the current plans risked worse outcomes for children, citing the challenges of mixing children with mental health and behavioural problems with those with sensory issues.

“Send funding in mainstream schools has been continually cut so they cannot meet the needs of these children. If they want inclusion, they need to invest heavily in the environment and support services,” he added.

The plans have been criticised by the heads of 22 other Kent Send schools, including Stone Bay in Broadstairs, which currently supports students with autism and severe learning difficulties.

Headteacher Jane Hatwell said this would drive many parents back to a tribunal to once again to fight for their child to get the right provision.

“The school is a Victorian building on a steep sloping road to the sea. I am flabbergasted that the local authority is considering changing our designation to accommodate pupils who have a range of medical equipment . . . poor mobility or sensory impairments,” she added.

“Like many special schools we are bursting at the seams and this is already having a detrimental impact on our current pupils.”

In recent years, critics and jaded diners have deemed the multi-course tasting menu dead. It’s gotten repetitive, the argument goes, with chefs serving luxury courses like caviar at the expense of any point of view. But recently, our host Lilah Raptopoulos had a meal that felt extremely alive, at Victoria Blamey’s restaurant Blanca, in Brooklyn. Victoria is from Chile and worked at Michelin-starred restaurants around the globe before becoming Blanca’s executive chef. Today, she tells us what she’s doing differently (“We want to slap someone’s face, like hey, wake up!”) and why restaurants should take bigger risks.

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We love hearing from you. Lilah is on Instagram @lilahrap, and email at lilahrap@ft.com. And we’re grateful for reviews on Apple and Spotify!

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Links (all FT links get you past the paywall):

– For some background on the current state of fine dining, listen to our interview with restaurant critic and chef Tim Hayward, which we called “Why fine dining isn’t fine”: https://www.ft.com/content/4ad8f359-396c-4867-af42-5a11d770f3ef

– Victoria is on Instagram at @victoriablamey

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Special FT subscription offers for Life and Art podcast listeners, from 50% off a digital subscription to a $1/£1/€1 trial, are here: http://ft.com/lifeandart

The discount code for Banking Summit is BTM20 for a 20% discount (applicable on all ticket types): https://banking.live.ft.com/home?promo=BTM20

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Original music by Metaphor Music.

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