Stormont overspend: About 40% of £300m total can be repaid
- Published
About 40% of Stormont's £300m overspend can now be repaid to the Treasury.
On Wednesday it was confirmed that £75m allocated to Northern Ireland from the Autumn Statement would be used to reduce the overspend rather than on public services.
An additional £17m of allocations generated during this financial year will also be used in this way.
It is understood that the final 2022-23 accounts for Stormont departments will show an underspend of about £36m.
That comes to a total of £128m which can go towards the overspend.
The Independent Fiscal Council said the overspend in the 2022-23 financial year came about due to the unavoidable impact of inflation and pay pressures being "compounded by weak budget management in the absence of a functioning executive".
In April Northern Ireland Secretary Chris Heaton-Harris said any new money generated by UK spending decisions in this financial year should be used to pay down the overspend.
He added that if that did not clear the whole debt he would work with the Treasury to reallocate money from previously announced Northern Ireland funding packages, with any remaining shortfall to be repaid in 2024-25.
However the situation has been exacerbated by another looming overspend in this financial year.
This month Neil Gibson, the permanent secretary at the Department of Finance, said Stormont was on course for an overspend of £450m.
That figure is based on the assumption that there are no pay rises across public services.
Pay awards matching those in the rest of the UK would see the deficit balloon to about £1bn.
Northern Ireland politicians have been lobbying the government to ask for a change to the funding system which would see a greater "needs-based" focus.
The executive's spending on public services 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.
For historical reasons, Northern Ireland has higher government spending per head than other parts of the UK.
However, that premium is falling and is set to continue falling in the coming decades.
That is happening for a combination of technical reasons and the end of temporary additional funding Northern Ireland received as the result of various political deals.
Spending per head is set to fall from 38% above equivalent UK spending in 2017-18 to 25% above in 2024-25 and about 20% by the end of the decade.
Some politicians suggest Northern Ireland could seek a similar agreement with the UK government to that reached by the Welsh government in 2016.
It set a floor under the block grant premium at an agreed estimate of relative need and an additional uplift to Barnett Formula increases to slow the rate at which the premium approaches the floor.
Mr Gibson has suggested that if Northern Ireland currently had the Welsh funding model it would go a long way to tackling the crisis in Stormont's finances.
Related topics
- Published22 November 2023
- Published9 November 2023