Three families had claimed during a June High Court challenge that government budget decisions were leaving local authorities across the country unable to provide education to children with SEND.
However, campaigners learned yesterday that the judge in the case found that the government had not acted unlawfully.
Despite the government's recent announcement of £700m in high needs funding for the coming year, the National Education Union warned that a £1bn shortfall remains.
Last week, the Local Government and Social Care Ombudsman warned the SEND system was in "crisis" amid a 45 per cent rise in complaints, and last month the government announced a major review of the system.
Dr Mary Bousted, NEU joint general secretary, described the court decision as a "huge blow" which "allows the government to once again shirk its responsibility for these young people by fobbing them off to severely underfunded local authorities, who do not have the financial capacity to provide the specialist care and provision these families need and deserve".
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Bousted said: "The NEU will continue to stand in solidarity with SEND Action and fight to ensure that all children with SEND have access to the provision they deserve."
There's no easy way to break this: the judgement didn't go our way. It was always going to be a difficult challenge. Three disabled children and their families against the government. Endless pages of redacted documents. The odds were stacked against us. https://t.co/t05Adet4hc— SEND Action (@SEND_Action) October 7, 2019
Jolanta Lasota, chief executive of Ambitious about Autism, said: "The very fact that parents had to mount this High Court challenge reveals the inherent problems and lack of support within the current special educational needs system.
"We know that chronic underfunding has left far too many vulnerable children and young people without the help they need to thrive in education.
"As a result many families are facing lengthy and costly legal battles with local authorities to get their children the support the desperately need - and deserve.
"The government has already pledged an additional £700m to support children with special educational needs next year - an acknowledgement of the current funding shortfall.
"As the number of autistic pupils in schools continues to grow - the government must fulfil its obligations to these young people and make further investment in special educational needs an urgent priority in the upcoming spending review."