Spending on special-needs education is to rise by 7 per cent this year, but many Welsh children are falling victim to a postcode lottery because of huge variations in council spending.

More than pound;260million will be allocated to local education authorities this year to spend on services for children with special needs - nearly Pounds 20m more than last year. But the Assembly money is not ring-fenced and experts believe that youngsters could be disadvantaged simply because of where they live.

Statistics released by the Assembly have revealed big differences in the special educational needs (SEN) budgets of local authorities with similar-sized populations. Caerphilly will increase its spending by 21 per cent this year, from pound;16m to nearly pound;20m, while Wrexham, which spent pound;11m last year, will increase its special-needs budget by just 0.5 per cent. Some budgets will fall.

Some LEAs have to cater for more pupils with special needs than others, but many are being criticised for their over-reliance on costly, out-of-county placements and for giving too much priority to those with official statements of special needs. Last year, 1,622 Welsh youngsters with statements were educated outside their local council area.

Peter Black, chair of the Assembly’s education and lifelong learning committee, said that each LEA faced special circumstances and therefore applied its own policy and discretion to allocations.

“One problem is the cost of out-of-county placements which can severely affect an LEA’s budget. One placement can cost hundreds of thousands of pounds. Costs are out of control in many areas.”

The committee recently recommended that authorities cut costs by working together to provide regional services for special needs.

Catriona Williams, chief executive of Children in Wales, a national umbrella body for organisations working with youngsters, said: “We want to see services developed equitably across Wales.

“We are concerned that families often feel that they are subject to local developments, while seeing more appropriate services in a neighbouring authority which they are unable to access.”

Special schools will receive just over a fifth (21 per cent) of the total budgeted SEN expenditure in 2005-06. Notional allocations to primary and secondary schools account for a further 36 per cent of the total. The remainder is made up of cash held centrally by LEAs.

Terry Mackie, an independent education consultant, said authorities needed to reduce the number of children being allocated expensive and legally-binding statements of special need and to spread their resources more equitably among schools.

“At the moment the system is very unfair. Only a few children with special needs have statements and they have access to excellent provision, but the vast majority don’t have them and they miss out,” he said.

Anglesey, an authority with one of the highest spends per special-needs pupil in Wales, is trying to restrict its number of statements.

SEN officer Mair Read said: “A very high proportion of our special-needs spend is tied up with statemented children and so we are now looking at reducing that and delegating more of our resources to schools.”

Rhondda Cynon Taff has a budget of more than pound;16m for SEN this year but has one of the lowest spends per pupil in Wales.

Ceirion Williams, its acting head of access and inclusion services, said it has a high number of pupils with special needs and so resources have to be spread more thinly. Funding is allocated to schools according to the proportion of pupils entitled to free meals.

“Statements are too prescriptive and too expensive,” said Mr Williams.

“The free meals figure might be a blunt way of doing it, but we believe it is the fairest way of making sure that the children who need it most get the funding.

“We believe in educating as many of our youngsters as possible in the mainstream, and within the services we have, so we are able to keep costs down by not having to go outside the area.”

A spokesperson for the Assembly government said it was working with local authorities on possible revisions of the formula for distributing SEN funding. Currently, this is mainly based on pupil numbers with “small elements” reflecting deprivation and sparsity.

But she added: “It is for individual local authorities to determine how much they wish to allocate to SEN. Both the finance minister and the education and lifelong learning minister welcome the 7 per cent increase in funding.”