Inspectors claim that the term "special educational needs" is used too much.

Thousands of pupils are being wrongly labelled as having special educational needs when all they require is better teaching and support, Ofsted has said. It said up to 25% of the 1.7m pupils in England with special needs would not be so labelled if schools focused more on teaching for all their children. The National Union of Teachers said such claims were "insulting and wrong"

More than a fifth of school-age students in England have been identified as having some form of special educational needs (SEN), which range from physical disabilities to emotional and behavioural problems. The wide-ranging study was Ofsted's biggest yet into a system that some parents have complained draws them into long and difficult battles to secure effective support for their children.

Inspectors visited 228 nurseries, schools and colleges in 22 local authorities, and carried out detailed case studies of 345 young people with disabilities and special educational needs. Ofsted chief inspector Christine Gilbert said: "Although we saw some excellent support for children with special educational needs, and a huge investment of resources, overall there needs to be a shift in direction."

Ms Gilbert told BBC Radio 4's Today programme: "We felt that schools and teachers were well intentioned but they were over-diagnosing the problems - teachers in the classroom weren't confident they could deal with the problems. "We feel teachers and schools need to have more confidence themselves about looking at what are barriers to learning."

Some 54% of students with SEN - those with the least severe problems - are assessed by their schools, while the 2.7% with the most acute difficulties go through a complex process of assessment under their local authority to obtain a "statement" of their needs. Ofsted's inspectors said the term SEN was used too widely and assessments varied widely in different areas.

They said schools should "stop identifying pupils as having SEN when they simply needed better teaching and pastoral support". As many as half of all pupils identified for school action "would not be identified as having SEN if schools focused on teaching and learning for all", the report said.

The report's author, Janet Thompson, said these cases included children whose general educational needs had not been identified early enough - such as children who struggled with reading and later developed behavioural difficulties as a result. But, she said, there were also cases where schools had labelled students as having SEN - such as GCSE students becoming demotivated - when they just needed better support.

The report said the system focused too much on statements of need and not enough on whether support services were actually producing real progress. It also highlighted problems faced by students aged over 16 with SEN, for whom it said choice was limited. Ofsted said some schools had been over-identifying students with SEN in the belief that increased figures would boost league table scores on the progress pupils made, but there was no evidence this was a system-wide problem.

While extra funding available in some areas for children with SEN offered an "obvious motivation" for schools to over-diagnose children, inspectors did not find evidence that this was taking place. Ms Gilbert said that if SEN cases were over-identified, "the system becomes clogged" with pupils with less severe needs and "consumes vast amounts of time, energy, money and means that insufficient attention may be given to those with really more complex needs".

The National Union of Teachers, the largest teachers' union, said the report's findings were "insulting and wrong" Deputy general secretary Kevin Courtney told the BBC the report overlooked the pressures on teachers, and was "softening up the public for cuts to SEN budgets". "There is a real problem, if your class is big - 30 or 30+ children - then finding the time to give an individual child the attention they need is not easy," he said.

The second biggest teachers' union, the NASUWT, said it was "unacceptable to scapegoat teachers" for the variability in identifying and supporting children with SEN. And the Association of Teachers and Lecturers said the report had overlooked factors such as school league tables "which put pressure on schools to narrow their curriculum and teach to the test", and teacher training, "which ill-prepares teachers for working with children with SEN and disabilities".

Children's Minister Sarah Teather is calling for submissions for a Green Paper on overhauling SEN provision. "Ofsted said the system at the moment isn't working and I think they're right," she told the BBC. She said many parents felt they needed to battle the system to get the support their children needed. However, the coalition's proposed "pupil premium" will target extra money at children from disadvantaged backgrounds, and should give schools more flexibility to offer more one-to-one support, she added.

The Labour government tried, under a policy of "inclusion", to place pupils with special educational needs in mainstream schools wherever possible. The Conservative-Liberal Democrat government says, in its coalition agreement, that it will "prevent the unnecessary closure of special schools, and remove the bias towards inclusion".

The number of state and private special schools in England has fallen from 1,197 in 2000 to 1,054 in 2010.