Stormont: Some budget issues result of UK spending squeeze

Gerry Holtham says the squeeze is due to "general austerity in public spending in the UK as a whole"

Some current Stormont budget issues are due to a general squeeze on UK public spending, MPs have heard.

Prof Gerry Holtham said the most influential factor in devolved finances was the growth of public expenditure in the UK as a whole.

He was speaking to the Northern Ireland Affairs Committee on Wednesday.

"The experience you are having now is the direct result of general austerity in public spending in the UK as a whole," he said.

Stormont overspent its budget last year and senior officials have told unions there is no money for pay rises.

Stormont overspent its budget last year

Spending on public services in Northern Ireland is largely financed by a core block grant from Westminster, which evolves according to the Barnett Formula.

This ensures that when the government increases spending in the rest of the UK, the block grant rises by broadly the same amount in pounds per head in Northern Ireland.

Paul Johnson from the Institute for Fiscal Studies said that since 2010 there has "clearly been a general squeeze on finances."

"English local government spending is something like 20% down on income per person, education is not up, we've had cuts in justice spending," he told the committee.

"So a lot of the 'Barnettable' funding has gone down over the period since 2010," he added.

Mr Johnson said that in the shorter term, since 2019, there have actually been "quite big increases" in public spending but on current government plans another squeeze is coming.

He said: "The real worry for all public services across the UK is if you take seriously what the chancellor has pencilled in for spending going forward.

"My bet is the numbers in the budget red book will not come to pass but that is a bet which would require a government to put up taxes even further."

Prof Gerry Holtham and Paul Johnson before the committee

The independent NI Fiscal Council found that the immediate causes of the overspend included inflation, pay pressures and a weakening of spending controls when ministers were in post but had no Assembly to hold them to account.

Earlier this year the council said that a budget imposed by the Secretary of State meant day-to-day spending would fall by 3.3% in real terms in this financial year.

The secretary of state has also ordered Stormont departments to consult on possible revenue raising measures.

The first consultation, launched this week, would see rates reliefs removed which would increase rates bills for some households and businesses.

The Welsh government has also been facing a funding crisis and last month a round of cuts were announced in an emergency budget.