Schools should be made to pay for alternative provision and transport if a child is excluded, and Ofsted should focus more closely on how inclusive a school is, according to the Local Government Association.
The body said the watchdog should also hold schools with low numbers of children with special educational needs and disabilities (SEND) to account in inspections.
It comes after a survey of councils found that mainstream schools are increasingly unable to meet the needs of SEND pupils and more parents are concerned about the provision on offer.
A lack of money, accountability pressures and curriculum changes have reduced non-special schools’ capacity to offer good quality provision for children with SEND, the councils say.
Their claims come just weeks after MPs warned that the education sector needed a multi-million-pound cash boost to prevent it reaching “breaking point”.
That intervention, in which MPs described current funding levels as “bleak”, itself followed reports of headteachers begging parents for donations, and not being given the money to accommodate pupils with special needs or disabilities.
The LGA also says the government needs to invest in councils so they can better support SEND pupils, who they claim face a £1.2bn funding shortfall.
Recent figures show a 30-per-cent rise in pupils being placed in special schools since 2014, equating to an extra 29,000 students with SEND.
There are currently 138,980 pupils with education, health and care plans (EHCPs) – documents detailing the extra care they need – in special schools or alternative provision.
The average annual cost to a council of a special needs placement in 2017-18 was £6,000 per pupil per year in a mainstream school, compared with £23,000 in a maintained special school and £40,000 in an independent special school.
The rise in children with EHCPs placed in special schools has cost councils around £200m.
Anntoinette Bramble, chair of the LGA’s children and young people board, said: “Councils want to help realise the government’s vision of making sure that every child gets the best education and that every parent can choose the sort of education setting they want for their child.
“While a special school may be the right setting for a particular child, it is really important that mainstream schools are also able to offer a high quality and suitable education for children with special needs.”
She added: “We need a system that incentivises and rewards those schools to provide an education for children with SEND, and as a result creates a more inclusive education environment.
“The government needs to address this in the upcoming spending round and also give councils the funding they need to support children with SEND.”
Geoff Barton, general secretary of the Association of School and College Leaders, said: “Schools exclude pupils only as a last resort and in order to ensure that other pupils are able to learn in a safe and orderly environment.
“It would not be right to make schools pay for the cost of alternative provision and transport if a pupil is excluded because this would effectively mean they were being financially penalised for taking a decision in the best interests of the wider school community.”
He added: “Schools do a fantastic job for children with special educational needs despite severe pressures on their budgets caused by the inadequacy of government funding.
“What we most need is improved funding from the government for schools and high needs provision to ensure that the appropriate level of support can be given to every child and young person with special educational needs.”
A spokesperson for Ofsted said: “Our education inspection framework, which takes effect next Monday, makes it clear that schools should be inclusive and support those pupils with special educational needs and/or disabilities (SEND).
“Inspectors will check that schools are meeting the needs of pupils and are making the most of specialist support.”
The report comes after a leaked document from the government suggested £800m in funding could be given to children with SEND.
A Department for Education spokesperson said funding for young people with more complex needs “is a priority”.
They added: “We are clear that the vast majority of children with special educational needs should be supported and taught in mainstream schools and the SEND code of practice clearly sets out schools’ responsibilities in this regard.
“For some children with the most complex needs a special school will be the best environment to provide the support needed for that child to lead a happy and fulfilled life.”
Register for free to continue reading
Registration is a free and easy way to support our truly independent journalism
By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists
Already have an account? sign in
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies