The study by Dr John Marks, director of the Educational Research Trust and a former adviser to John Major's government, found that almost twice as many pupils as a decade ago are classified as having special needs.
One in five of today's pupils - including children with serious physical disabilities, psychological problems and learning and behavioural difficulties - has special needs.
Dr Marks says pound;7.1 billion is spent a year on services for these pupils. However, the Government says that this is an exaggeration. The Audit Commission, the local government spending watchdog, puts the figure at about pound;3.5bn.
Dr Marks, in a pamphlet for the Centre for Policy Studies, blames the increase on the "perverse incentives" of a funding system which allocates schools more money for any pupils classed as having special needs. The report also blames poor teaching which it says is more likely to cause pupils' problems than learning difficulties.
Brian Lamb, of Scope, the disability charity, said that Dr Marks had failed to realise that professionals may now be better at spotting when children need special help.
Meanwhile, ministers look set to continue their crackdown on bad teachers. Guidelines are set to be tightened to make it harder for teachers to escape "competency" proceedings by claiming sickness and will aim to ensure that staff failings are identified earlier.
Although heads welcomed the news, unions representing classroom teachers reacted angrily. Doug McAvoy, general secretary of the National Union of Teachers, warned the nw guidelines would be a "recipe for confrontation in schools".
Teachers will have less to worry about if the Liberal Democrats win the next election. Their leader, Charles Kennedy, has called for the scrapping of all national targets for schools. He wants to replace them with individual pupil plans, tailored to children's separate needs.
"Evidence that targets can divert resources towards some parts of the education system at the expense of other, equally deserving, parts has been mounting for some time," he told the Local Government Association conference in Bournemouth.
It has been a busy week for councils. In its first review of local education authority performance, OFSTED, the schools inspectorate, called for authorities to be "slimmed down" and questioned their role in raising standards. OFSTED said that two in every five of the 44 it had inspected were "seriously deficient". However, it acknowledged "signs of improvement" since it began inspecting LEAs three years ago.
Councils are delegating more money to schools, figures released by the Government this week show. The proportion of the schools budget going directly to schools has risen from 82.4 per cent to 84.2 per cent - equal to an extra pound;385m.
Local authorities are also preparing to distribute pound;40 a week grants to 16 to 18-year-olds who stay on in education. The expansion of the Government's education maintenance allowance scheme will be accompanied by a TV advertising campaign aimed at reducing the numbers of teenagers dropping out.
The campaign is much needed. The fourth report of the Basic Skills Task Force revealed that one in five adults have a lower level of literacy than the average 11-year-old.