Civil Servants Estimate Stormont Funding Gap at £800 million Watchdog

David Young (PA)

Stormont civil servants estimate that departments face a funding gap of potentially £800 million this financial year, a fiscal watchdog has said.

Overall funding for departments will be cut by 3.3% in real terms in 2023/24, according to the Northern Ireland Fiscal Council.

The reductions are more severe than those being absorbed in England, where Whitehall departments received a 0.7% real-term cut.

The figures are included in the fiscal council’s assessment of last week’s Stormont budget set by Northern Ireland Secretary Chris Heaton Harris.

The council said civil servants currently running Stormont departments estimate that £800 million will need to be found through cuts or raising extra revenues.

The fiscal council is an independent body that scrutinises how public money is spent in Northern Ireland.

One of the council members, University of Ulster academic Dr Esmond Birnie, said the cuts were larger than those implemented in budgets during the post-financial crash austerity years.

“It will be a bigger real terms reduction than what we saw during the so-called austerity years, 2010 through to roughly 2016, 17, 18,” he said.

“So that just puts it into a bit of perspective. It’s going to be very challenging.”

Mr Heaton-Harris had responsibility for setting the Stormont budget due to the absence of devolved ministers in Belfast.

Devolution is currently in abeyance as a result of a DUP boycott of the institutions in protest at post-Brexit trading arrangements.

Last week’s budget settlement was better than some had anticipated due to the Treasury offering flexibility on the timeframe for paying back a £297 million Stormont overspend from last year.

Rather than being deducted from the 2023/24 block grant, the money is to be drawn back in a different way, with the potential for it to be spread over two years.

The council said if that flexibility had not been offered by the Treasury, the overall real-term cut to Northern Ireland’s resource budget would have been 5.5%.

The watchdog published several reports on Tuesday examining Stormont’s finances.

In them, the council members examined potential ways to put public finances in Northern Ireland on a firmer footing, including possible new revenue-raising measures such as domestic water charges.

They also highlighted a longer-term trend that is set to see Stormont increasingly lose out under the Barnett formula used the distribute money among the devolved regions.

Funding for the devolved regions has traditionally been higher per head of population than England, reflecting the higher cost of delivering services in smaller regions, however the way the formula works means that gap is steadily closing as the years go by.

The council said block grant funding in Northern Ireland is set to be around 25% higher than England in 2024-25 but this is likely to fall below 20% by the early 2030s.

The watchdog highlighted that the Welsh administration has secured a floor on its Barnett allocation, meaning the percentage differential with England cannot fall below a certain threshold.

It suggested that a similar model in Northern Ireland, with the threshold assessed on the basis of need in the region, could help to put Stormont’s finances on surer ground going forward.

Sir Robert Chote, chair of the council, said: “For many years NI departments benefited from funding-per-head that was not only well above spending in England but also above estimates of relative need.

“The funding premium has fallen sharply to broadly in line with relative need – which has already proved very challenging – and it is set to drop even further.

“That will increase the pressure on a restored Executive to deliver reform and improve efficiency, as well as confronting it with difficult choices over cutting services or raising more revenue.

“Another option would be to put a floor under the block grant funding in line with relative need, as in Wales, but that would need the agreement of the UK Government.”