There is a shortage of suitable schools across the country for children with special requirements.
Official stats show 4,050 youngsters with disabilities missed out on education last year because they couldn’t be placed in a school which suited their needs.
Kevin Courtney from the National Education Union said children were being kept at home because councils were being “starved” of funds despite the government promising to raise its budget for special education to £6bn.
The DWP said there is a greater demand to place children with special needs has doubled since 2016.
Authorities have asked if they can use a percentage of their budget reserved for main schools so they can find suitable education for disabled children.
They have also raised concern after their annual budgets which they are given from the government fails to take inflation into account.
With the number of children being diagnosed with conditions such as Aspergers autism hearing loss vision loss and other forms of disabilities the education system is unable to meet demand for youngsters requiring special tuition.
A survey carried out by the Association of Directors of Children’s Services reveals there has been a shortfall of £400m in funding for special education this year.
Courtney told the BBC: "Children are at home because local authorities don't have enough money to provide suitable education.
"Local authorities are being placed in an impossible position.
"They have a legal duty to plan high quality education for every child with SEND, but cuts have taken away the resources they need to educate children with complex needs."
Authorities now need permission from the education secretary to abide to their plan unless head teachers support their decision.
The Department for Education – DfE - declined 12 out of 28 requests for the school grants this year.
A spokesperson for the DfE said: "The number of councils applying to do this has remained stable in recent years.
"High needs funding has been protected in real terms over the next two years, and our extra £1.3bn investment for schools and high needs means we are giving local authorities more money for every pupil in every school."
Schools are required to provide £6,000 per year per pupil on an education, health and care plan.
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