* About one in four pupils in England and Wales is identified as having some form of special need. The number registered as having special needs has almost doubled from 792,000 in 1995 to more than 1.5 million today

* Around pound;3.6 billion is spent on special needs as a whole every year, more than two-thirds of it on children with statements - about one in 30 pupils. Each statement costs about pound;2,500 to produce

* Since 1992, the proportion of children with statements educated in mainstream classrooms rather than special schools has increased from 40 to 55 per cent Special needs

It is a year mostly remembered for a royal wedding, race riots in Brixton and Toxteth and the near collapse of the Labour Party. But for thousands of children then and since, 1981 has another significance. It was the year when, at one stroke, they ceased to be “maladjusted” or “subnormal”.

With one shove, the Education Act of that year sidelined the post-war system for dealing with pupils judged vulnerable or undesirable, based on a still-growing number of special schools, and swept away the terminology that went with it. In its place was a new order based on special educational needs.

These needs were directly shaped by the four-year Committee of Enquiry into the Education of Handicapped Children and Young People, led by the philosopher Mary, now Baroness, Warnock. In place of the 11 categories of mental and physical disability laid down by the education department, her 1978 report introduced a “continuum of need”. Hundreds of thousands of children need some additional support to help them learn, she said, and the same educational process should deal with all of them. This was true whether they were in a school for the blind or a comprehensive remedial class. And with this change of attitude came one of the defining shifts of the past two decades: the demand that children be taken out of their “segregated” world to be educated with their peers in ordinary primary or secondary schools.

What are special needs?

Confusingly, there is no absolute definition. The Special Educational Needs and Disability Act 2001 says: “A child has SEN if he has a learning difficulty which calls for special educational provision to be made for him. A child... includes any person under the age of 19 who is a registered pupil at a school.”

“Needs” are judged, not according to a predetermined scale of disability or achievement, but in relation to how a child is doing in comparison to his or her peers - an open-ended definition that has generated ceaseless debate.

Who has them?

This is not clear either. Warnock and the 1981 Act assumed that around 20 per cent of children would have special needs at some point in their school career, and 18 per cent would require help at any one time. Around one in 50 of these children would require a level of additional support that demanded the protection of a “statement of special educational need”, an agreement drawn up by the local education authority with parents, teachers and outside professionals.

Two decades on, these estimates appear inadequate. The number of pupils identified as having some form of special need has risen steadily since the 1981 Act, and now accounts for roughly one in four pupils in England and Wales. The number of children registered as having special needs has almost doubled from 792,000 in 1995 to more than 1.5 million today. The number with a statement - those judged to have the most complex or severe problems - has also risen sharply, and stands at 275,000, or one in 30 pupils. Between 1994 and 2001, the number of statements in primary schools jumped by 50 per cent. In secondary schools, the figure rose by almost two-thirds. Special needs legislation in Scotland is currently under review; a “record of need” - similar to an English and Welsh “statement” - will end and be replaced by “more flexible support plans”.

Do “gifted” children have special needs?

Not according to the law. Even though the Government has a particular interest in encouraging talented pupils, and acknowledges they may need extra support, they get no help through the special needs budget. Attempts to bring them within the scope of the legislation have repeatedly been rejected. The 1981 Act is about allowing children to join their peers in the mainstream; it is not about enabling children to maximise their potential.

Ministers hope instead that very able children will be helped through specialist teaching funded by the “gifted and talented” strand of the Excellence in Cities programme, and by the National Academy of Gifted and Talented Youth.

What is a “statement”?

A statement of special educational need is effectively a contract setting out what additional help a pupil needs, and how and when it will be delivered. A statement is intended for children who, as the 2001 Act puts it, have “severe or complex needs”, and follows an assessment by medical, psychological and educational professionals. It is drawn up and paid for by the LEA (although the health service might contribute) and may, for example, conclude that a child needs two hours’ speech therapy a week, some specialist equipment or a teaching assistant for a few mornings a week.

The process of obtaining a statement starts when the parents or, thanks to recent legislation, the headteacher requests a formal assessment of a child’s needs. The local authority has six weeks to respond and the parents can appeal if it turns them down.

If a child does need a statement, the LEA should in theory produce it within six months of the request. Once signed, the statement must be reviewed annually, a process co-ordinated by the head. If a child moves to another authority, the statement continues. But when a pupil moves from primary to secondary, it will have to be amended.

How much does it cost the taxpayer?

A great deal. Around pound;3.6 billion a year is spent on special needs as a whole, more than two-thirds on the small proportion of children with statements. LEAs in England and Wales spend more than pound;100 million assessing and writing statements every year, with each one costing an average of pound;2,500 to produce, according to the Audit Commission.

Is the cost important?

In theory, no. The legislation says children must be helped irrespective of the cost - up to the point that the “efficient” education of the majority is threatened. But in practice the expense matters greatly: it makes tensions inevitable. A statement brings extra funding, staff or equipment for a school, placing heads and parents under pressure to seek one wherever possible.

Local authorities, on the other hand, are understandably keen to keep them to a minimum, complaining that the extra costs have destabilised their entire budgets. The late Eighties and early Nineties were marked by increasingly aggressive attitudes from all parties as parents’ expectations increased and council budgets diminished. The 1992 Audit Commission report Getting in on The Act, updated in 1998, had a major impact when it said what everybody already knew - that LEAs used delaying tactics and ambiguous language to help them control their budgets, so children were left waiting for many months, and sometimes years, without the help they had been promised.

Such strategems have become less common. But according to a report due to be published by the Audit Commission last week (Statutory Assessment and Statements of Special Educational Need: in need of review?), delays are still common. After all, the process of producing a statement is exceedingly complicated, varying from child to child, and LEAs have many other spending priorities. Even now, qualifying for a statement can be a geographical lottery. The proportion of children who hold one varies from less than 1 per cent in some LEAs, to 5 per cent in others.

The revised code of practice

The Education Act 1993 sought to reduce this rising sense of conflict between parents and local authorities, not to mention the rising legal bill, by spelling out just what was expected of teachers, schools and LEAs through a five-stage code of practice. At stages 1 to 3, the school and local authority took progressively more serious action before a child was professionally assessed (stage 4) and given a statement (stage 5). The idea was to cut out the room for confusion, delay and, in some cases, evasion. It also helped ensure that any problems were identified and addressed early.

Since January 1, 2002, the code has been simplified into three overlapping processes: l “school action” is taken by a teacher nominated as the special needs co-ordinator when a problem is identified;l “school action plus” brings in professional help and may introduce an individual education plan (IEP) with targets for progress. A multi-disciplinary assessment may take place, leading, potentially, to l a full statement of special educational needs.

Children must be assessed individually, whatever the cost. Schools’

responsibilities have remained largely unchanged. They should, for example, publish a special needs policy paper each year, and appoint a special needs co-ordinator, or “Senco”, to co-ordinate its implementation. The Senco, says the code, must be given enough non-teaching time to plan, maintain records, teach SEN children, observe classes and liaise with other schools. He or she should also have access to a telephone and interview room. Schools are no longer obliged to keep a register of children requiring extra help - although many do so. Annual reviews of statements and IEPs have, like the code itself, been simplified.

While the code of practice is not compulsory, schools must “have regard” to it. Failure to do so places a school in the same jeopardy as a driver ignoring the Highway Code. Moreover, Ofsted has been asked to report on how far schools follow the revised code.

The special educational needs tribunal

The 1993 legislation made a second important innovation in the shape of the special needs tribunal. This was introduced partly because the existing appeals system - relying on appeals to the local authority, to the Education Secretary and, ultimately, to the High Court - was clumsy and wasteful of time and money. The child had frequently left school by the time a case had wound its way through to a judicial review.

For most families, a protracted appeal was not a realistic option. The local government ombudsman gave some form of redress but, again, this was time-consuming, and the ombudsman had few powers. And anyway, some councils ignored his or her recommendations. The special needs tribunal has introduced a lightweight system that does away with the need for endless appeals and, for the most part, the expensive presence of solicitors or barristers. Most parents have welcomed a system that is easy to understand and produces decisions that are binding on local authorities.

One of the system’s great successes is that 50 per cent of complaints are settled before a hearing, most in favour of the parent. Of those that do go before the three-person panel, 60 per cent are won by the parents. The tribunal is based in London, but its cases are heard locally.

Who goes to special schools?

The movement in favour of integration has grown ever stronger since the 1981 Act, and special schools are continuing to close. Since 1992, the proportion of children with statements educated in mainstream classrooms has increased from 40 to 55 per cent, according to the Audit Commission.

But in the past five years, this trend has tailed off and, even if the number of buildings is diminishing, the pupil population squeezed into the remaining special schools appears to have remained stable. So, while children with, for example, physical disabilities and moderate learning difficulties are increasingly found in ordinary classrooms, others are not. For example, the number of children identified with autism, severe behavioural problems and dyslexia has risen. Many of them are educated in a specialist setting, often at the behest of parents who consider large secondary schools unsupportive. And medical advances are saving infants with profound physical and mental impairments who may not have survived in a previous era but who now need highly specialised schooling.

New legislation - more integration?

Two important amendments to existing laws were passed last year, as a result of the Special Educational Needs and Disability Act 2001. Each is intended to boost integration.

The first is an amendment to the Education Act 1996, which, since January, has limited the grounds on which a school or local authority can refuse to admit a pupil who has a statement of special educational needs. In the past, it was possible to argue that a SEN child should be turned away because of the expense and the “issue of efficient use of resources”. This reasoning is no longer valid. Instead, a school or local authority will have to argue that “efficient education” will be compromised - that other children will suffer as a consequence. The Act contains a new duty to inform parents when a school decides their child has special needs. Parents previously had no legal right to be told, although most were.

The same Act has also amended the Disability Discrimination Act 1995, which, for the first time, now applies to education. Confusingly, the law sees disabled pupils and those with special needs as separate groups (although in practice they overlap heavily).

So, in September, schools will get yet another code, the Disability Rights Commission Schools’ Code of Practice, aimed at ensuring that disabled children receive equal treatment. They must not be placed at a “substantial disadvantage” in relation to admissions or “education and associated services” - although a school can take into account the effect on academic and sporting standards, and potential expense.

As a result, schools will have to draw up an accessibility plan for improving physical access, and LEAs an accessibility strategy. The SEN tribunal, meanwhile, will be renamed the special educational needs and disability tribunal.

Outstanding issues

Ministers have made little fuss about special educational needs since Labour came to power, perhaps deliberately so. Part of their difficulty is the open-ended nature of SEN, which fits uneasily with the targets and tables of performance management. There is no obvious way of measuring the effectiveness of the SEN system, or the way its money is spent. The tension can be most clearly seen in the flip-flopping over exclusions. On coming into office, ministers promised to reduce the number of children kicked out of school - influenced by Downing Street’s social exclusion unit and possibly by former education secretary David Blunkett’s own miserable experience of a school for the blind, and separation from friends and family at an early age.

The number of exclusions duly fell. But now, concerned at the volume of practical problems entailed in containing disruptive children, not least the threat to academic targets, the Government has changed its emphasis. Schools are once more being encouraged to exclude where necessary - and children with special needs are three times more likely to be expelled than others.

Worse, some evidence suggests that including children with problems has an adverse effect on a school’s results. Research by Professors Ingrid Lunt from the Institute of Education and Brahm Norwich, now at the University of Exeter, could identify only 42 secondary schools that combined high levels of achievement with high levels of integration.

The biggest issue remains the cost. One by one, LEAs have had their strategies for controlling costs eliminated, with the introduction of strict time limits and the tribunal system. Long delays and ambiguous promises are no longer tolerated. So special needs continue to gobble up an ever bigger slice of the educational pie.

Now, serious questions are being asked about the viability of the whole structure, with the Audit Commission recommending a complete overhaul of the system, arguing in its report that, for most children, statements are a bureaucratic waste of money. The commission believes the financial savings from reducing the number of formal assessments and statements could be better used on additional staff and equipment - a theory backed by many local authorities. But parents and their advocates want to see the colour of the Government’s money. The protection of assessments and statements should in no way be reduced until schools, aided by substantial investment, have proved they can do the job differently. The current system may not be perfect, they argue, but at least it works.