Public services in Northern Ireland still face a £130m shortfall this year despite an additional £640m from the Budget, Northern Ireland’s Finance Minister Caoimhe Archibald has said.
In her first Budget as Chancellor, Rachel Reeves announced additional funding of £1.5bn for Northern Ireland next year as a result of how money is distributed by the UK Government around the regions.
But a budget of £40bn in tax rises brought an increase in the rate of national insurance contributions for employers to 15%; an increase in capital gains and inheritance taxes; and a 6.7% rise in the national minimum wage to £12.21 an hour.
Business groups in Northern Ireland said the measures added to the cost burdens they were facing — with one small business saying the rise in national insurance alone would cost it an extra £35,000 a year.
UK Government money is channelled to Northern Ireland under the Barnett formula, which the Finance Minister said would mean an additional £640m for 2024/2025.
Ms Archibald said the amount was much-needed, reflecting “just how badly public services have been funded as a result of 14 years of austerity”.
But it was still not enough this year. “Departments are facing pressures of £770m, so the extra funding falls short of what is needed and will inevitably mean departments have to take decisions to live within their budgets.”
She acknowledged measures in the Budget, including the rise in national insurance contributions, “will be difficult for some businesses to manage, I have no doubt”.
Chancellor Rachel Reeves announced £1.5bn in new funding for NI next year
But she said she supported the Labour Party’s commitment to improving public services through investment.
Ms Archibald said: “My initial assessment of this Budget is that there does seem to be genuine attempts to protect public services and invest in infrastructure. But unfortunately it will not undo the damage caused from the underfunding of our public services.
“Austerity was never going to be reversed in one Budget. The scale of the current pressures are so severe that this will take time and significant further investment to turn the tide.”
The minister said she would act quickly to disperse the new funding to departments, but added: “The reality is that public services are still stretched, and this level of funding announced today still doesn’t plug the current gap.”
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Ann Watt, the director of think tank Pivotal, said the £1.5bn for next year — made up of £1.2bn for day-to-day spending and £270m for big projects — was a significant “step up”.
Ms Watt said: “Injections of new funding on this scale are rare, and the Executive must not miss the opportunities this provides.”
However, it’s been claimed that other changes announced in the Budget, including reform of inheritance tax, will harm businesses here.
Reform of agricultural property relief means inheritance tax after death is now payable on farm businesses with a value of £1m and above.
William Irvine
William Irvine, president of the Ulster Farmers’ Union (UFU), said UFU was “bitterly disappointed”, adding that £1m was a “low threshold”.
“Family farms are vital assets, but that does not make those who work them wealthy,” he said.
“This is a bad decision for the economy and for family farms and, without action, these changes will compromise our nation’s food security.”
The Budget brought the announcement of £162m investment over 15 years for City and Growth Deals — funding for which had previously been frozen — in Mid South West, an area including parts of Armagh, Down and Fermanagh, and Causeway Coast and Glens.
Suzanne Wylie, chief executive of the Northern Ireland Chamber of Commerce and Industry, said that “the alarming acceleration of the tax burden on businesses is deeply concerning”.
“In the absence of material growth, this will add to already high business costs and is likely to impact confidence and investment intentions.”
Suzanne Wylie
Alan Gourley, partner at business advisory firm Grant Thornton, said employers would be “dismayed” by the Budget.
“Perhaps even more alarming, however, is the seismic impact that the changes to inheritance tax will have on a lot of family businesses,” he said.
“Indeed, Northern Ireland has such a strong culture of retaining companies within the family that these changes will affect this region more than most.”
But he said the increase in capital gains tax, from 10% to 18% for the lower rate and from 20% to 24%, weren’t as high as anticipated.
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Johnny Hanna, partner in charge of KPMG in Northern Ireland, said the City and Growth Deals “will provide a boost to the local economies and to Northern Ireland as a whole”.
He said that even though the minimum wage and capital gains tax changes had been flagged in advance, they “will still hurt businesses and potentially damage investment in the future”.
The Chancellor announced a “flat rate duty” on vaping liquid from October 2026, while taxes also increase on tobacco.
Draught duty on alcoholic drinks is down 1.7%, which the Chancellor said meant “a penny off a pint in the pub”.
A 5p cut to fuel duty will be kept into next year, while the basic and new state pension will rise by 4.1% in 2025-26.