Stormont can repay a £300m budget overspend across two years rather than one, Chris Heaton-Harris has said.
The Northern Ireland secretary made the announcement as he published a Northern Ireland budget for 2023-4.
Repaying the 2022-23 overspend over a longer period will “provide some protection to frontline public services”, he said.
But he added departments still faced difficult decisions “in order to live within the funding available”.
Stormont officials have been planning for budget cuts of at least £500m in cash terms in this financial year.
Difficult settlement
The Department of Health, the largest department, is receiving an allocation of £7.3bn for day-to-day spending – similar to the amount it got last year.
This “flat cash” funding will likely be viewed as a difficult settlement for the department, given the current high rate of inflation and outstanding pay demands.
An initial comparison with last year’s budget figures suggests among the major spending departments, the amount of money going to Education, Justice and Economy has been cut slightly in cash terms.
Mr Heaton-Harris said the overspend would be cleared by using any additional in-year funding from the Treasury.
Should this not cover the full amount, the outstanding balance would be paid in 2024-25 by reallocating money from previously announced Northern Ireland funding packages.
It is understood that the possibility of drawing on a funding stream known as financial transactions capital (FTC) is being considered.
This is a conditional form of capital funding which Stormont consistently underspends.
The Treasury would have to agree that FTC could be used in this way.
No new money-raising policies, such as water charges, were advanced by the Northern Ireland secretary.
He repeated that lower levels of revenue generation but higher public service provision in Northern Ireland compared to the rest of the UK was “unsustainable”.
New legislation to allow the UK government to explore options for increasing budget sustainability has also been introduced.
It will work with the Northern Ireland Civil Service to review areas for further revenue raising.
Stormont can expect more money if the UK government allocates new funding to settle public sector pay deals in England.
But if that money must be used to reduce the overspend, it could be very difficult for senior officials to offer similar pay deals to public servants in Northern Ireland unless savings are found in other areas.
Ulster University economist Esmond Birney said the budget presented a tough challenge for the Stormont departments.
He described allowing the overspend to be paid down over two years as being the least worst option, compared to doing it immediately which “would have implied very large spending cuts in this year”.
On Wednesday the head of Stormont’s civil service, Jayne Brady, warned that the “damage” caused by the proposed budget reductions would be unprecedented.
Writing to Mr Heaton-Harris’s office, she outlined her “profound concern” about senior civil servants being placed in “harmful decision-making positions” about which services should be cut.
It was a rare and significant intervention, and one not typically made by senior civil servants.
‘Punishing ordinary families’
The Stormont political parties met Mr Heaton-Harris on Thursday afternoon about the budget.
They are not in government due to the Democratic Unionist Party’s (DUP) boycott of Stormont, which began in February 2022.
Sinn Féin’s former Finance Minister Conor Murphy said the budget would devastate public services.
“The absence of an executive is really reprehensible at this stage when this is the outcome for people we represent,” he said.
Ulster Unionist Party leader Doug Beattie said the budget did not contain “any flexibility”.
“It’s quite grim, if I’m really honest, but it’s been put to us and it’s difficult to do anything without a government up and running,” he said.
Alliance Party assembly member Andrew Muir described the discussions as “grim and truly bleak”.
He expressed concern that it would be left to civil servants to take decisions about cuts and said that was “entirely wrong”.
Social Democratic and Labour Party assemly member Matthew O’Toole described the meeting with Mr Heaton-Harris as concerning.
He said the budget would mean “a real squeeze on public services” imposed on people in Northern Ireland that they did not deserve, ask or vote for.
Permanent secretaries – top civil servants – have been running Northern Ireland’s nine departments since October but their powers are severely limited.
They can only implement policies previously agreed by politicians and their ability to react to changing circumstances is negligible.
Departments have been operating without proper budgets since the start of the financial year in April.
Source – BBC News
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