The Stormont Executive faces a financial “cliff-edge” when stabilisation funding provided by the UK Government runs out, MPs have been told.
Sir Robert Chote, chairman of the Northern Ireland Fiscal Council, said that money which was provided by the Treasury when the powersharing Executive was restored last year was “helpful” but would not lead to financial sustainability for the region.
A £3.3 billion financial package accompanied the restoration of devolution in February 2024 following a two-year suspension.
This included a commitment that the region receives 124% of any equivalent increase in funding for England for the policy areas run out of Stormont, including health, policing and education.
The Treasury provided a financial package when the Stormont powersharing institutions were returned last year (Liam McBurney/PA)
The deal also included a £1.125 billion stabilisation fund over two years and a pledge that a Stormont overspend of £559 million would be written off when the Executive balanced its budget, including generating £113 million in additional revenue.
Finance Minister Caoimhe Archibald published a Budget Sustainability Plan in October that set out details on how the £113 million could be delivered by the end of 25/26 financial year.
Stormont ministers have also since agreed a draft budget, but have continued to warn of huge financial challenges facing their departments.
Sir Robert appeared before the Northern Ireland Affairs Committee hearing on the funding and delivery of public services in the region.
He told MPs that the stabilisation funding provided by the Treasury had been “inescapable” given the financial situation Northern Ireland faced at the time.
He added: “One challenge at the moment is that short-term stabilisation money runs out, thus confronting the Executive with a potential cliff-edge in 2006/2027 when that money goes away but the 24% top-up to the Barnett consequentials won’t have been large enough to fill that gap.
“I think there is a particular challenge around that point.
“That cliff-edge could in theory move forward to 2025/26 if the Executive doesn’t manage to balance the budget this year and also to meet its commitment to deliver some £113 million of additional revenue as well.
“It (stabilisation funding) has clearly helped in the short term but departments are still over-committed, they are saying they are over-spending relative to available funding.”
Sir Robert said the deficit facing Stormont departments in the current financial year was now “more manageable” following extra funding provided in Chancellor Rachel Reeves’ budget.
He said: “The short-term stabilisation was certainly helpful but not on its own putting you on a sustainable pattern for five years ahead.”
Sir Robert was later asked about the potential benefit of the Executive being able to set multi-year budgets going forward.
He said: “In the Northern Ireland context this is the 10th or 11th consecutive single year budget, which is obviously a different situation from the (rest of the) UK because for Northern Ireland to run a multi-year budget you need to have the institutions to be stable and in place and you need to have a multi-year budget at the UK level to give you a multi-year block grant settlement.
“We haven’t had that for a decade or more.
“It is clearly desirable.”
Dorinnia Carville, comptroller and auditor general (C&AG) for Northern Ireland told MPs that a multi-year budget had to be linked to outcomes (Liam McBurney/PA)
Northern Ireland’s comptroller and auditor general Dorinnia Carville told the committee that a multi-year budget had to be linked to outcomes from the Executive’s programme for government.
She said: “It will allow for longer term planning, especially for large infrastructure projects, things that naturally can’t be delivered within a one-year window.
“The element of certainty and stability that would come with that shouldn’t be overlooked for departments as well.
“We have talked about this firefighting mode they have been in.”