Give it time. The funding gap will be narrowed if a united Executive discover a change of culture and keep their heads

Financial responsibility in the Guildhall ( photo) 

The negotiations have begun.   First off, the shiny new Executive have said thanks and no thanks to the Treasury . “ Thanks guys for £ 313mn but no thanks to your demand for us  to raise regional rates by 15%.” “What?” the Treasury might reply, “ You refuse to raise a measly £ 113 mn in exchange for us writing off your debt of £550mn? You must be crazy”.

Let’s get a bit of context.  From the NI Fiscal Council report:  

The various components of the package provide almost £850 million to help the Executive balance its budget this year, including meeting the cost of backdated pay settlements. It then provides more than £750 million in both 2024-25 and 2025-26, before dropping sharply to around £320 million in 2026-27.

This apparent ‘cliff-edge’ in additional support is presumably there to encourage the Executive to take decisive action on revenue-raising, budget savings and public service reforms – of which there is no immediate evidence as Stormont Ministers take their posts.  This incentive is sharpened by the prospect of having to repay £560 million of calls on the Treasury Reserve in 2025-26 if a convincing budget plan (including a 15 per cent rise in the rates, or its equivalent) is not put in place.  

It’s enough to make local politicians’ heads spin and double  down  on the old default of no.

If the cost of living makes this the worst time to raise the rates you can depend on it that  it’s not the right time  either for London to keep topping up the begging bowl.

First Minister Michelle O’Neill said parties were going to “continue the fight” with Treasury for additional tax and spending powers. Deputy First Minister Emma Little-Pengelly said the government was being inflexible about its timetable of asking the Executive to have a sustainability plan and other measures agreed by May.

The meeting comes as the Northern Ireland Fiscal Council (NIFC) warned Stormont faced another financial “cliff-edge” in 2026.

The independent budget watchdog said future cuts could be needed to run a balanced budget after analysing the £3.3bn deal..

So is it crisis already? Not necessarily. The issues were  well aired on The View last night. David Sterling former head of the NI Civil Service said a rates rise was something of a distraction. What London was looking for was public service reform and a  three year  programme for government with a balanced budget.  Thisa may be the real focus of negotiations, with revenue raising to follow.

There is also a move towards a ‘needs-based’ funding of public services, based on the model in Wales, which recognises that it costs more to deliver public services in Wales and Northern Ireland of an equivalent standard to those provided in England.

In Wales £115 is allocated for every £100 per head spent on public services in England. NI is currently estimated to be funded at a level of around £120.

The relative spending need for NI is estimated to be £124 but the NIFC warns that under the current deal that level of need would not be met until around 2035.

 Robert Chope head of the independent NI Fiscal Council which has just produced a crucial report on the financial position was previously head  of the formidable Office of Budget Responsibility  tasked with casting a critical eye on  the Treasury’s performance.

Over the longer term, the most significant feature of the package is a 24 per cent increase in the so-called ‘Barnett consequential’ increases in the Block Grant that the Executive receives when the UK Government increases spending on public services and capital investment in England

It remains unclear exactly how this mechanism will operate, how far below the 124 estimate of relative need we are starting from, and how the premium of Block Grant funding over equivalent UK Government spending will evolve. The uplift will not take the total funding premium to 24 per cent immediately or guarantee to keep it there.

But in time the overall funding per head premium could exceed 24 per cent because the NI population is projected to grow more slowly than England’s.  “The funding package should balance the Executive’s budget this year, provide significant support over the next two years and arrest the ‘Barnett squeeze’ over the longer term. But if the deal is to deliver sustainability, the Executive will need to take and implement tough decisions on revenue, spending and public service reform and some may question whether this is realistic to expect in the time available.”

“Tough decisions” will test the Assembly’s cohesion when it comes to case by case and health service reform in particular. It requires a change of culture by political parties always looking over their shoulder to see who will blink first. But  encouraging signs have come from the unlikely source of Derry and Strabane Council.   The district councils  have  increased their district rates.  In the Guildhall after a terrific row, the Sinn Féin majority carried the increase on its own opposed by all the other parties. If you want good public services you’ll  have to pay for them.  Financial responsibility from Sinn Féin who hold both economics departments at Stormont. Other Assembly parties please note.  And London, give us time. There is hope.