The UK government has made a new offer of £3.3bn to revive Stormont’s devolved executive, including £584m to give civil servants and other public sector workers pay rises.
Northern Ireland Secretary Chris Heaton-Harris has boosted the financial package to resolve the 22-month deadlock, having proposed a £2.5bn deal just a week ago.
The minister said in a press conference that the financial package "reasonably and generously" responds to concerns from political parties in Northern Ireland and is the final offer, adding it is “now time for decisions”.
Stormont's overspend – almost £560m in the last two financial years – will be written off as part of the package if the Northern Ireland Executive produces a fiscal sustainability plan.
In November, the permanent secretary at Northern Ireland’s Department of Finance warned of a £450m shortfall to be able to continue to deliver public services and said £590m was needed for “fair” public sector pay awards. Officials in the Northern Ireland Civil Service have been put in charge in the absence of an executive devolved government. Departments have already found spending cuts of almost £1bn this year.
The Democratic Unionist Party has boycotted devolved government at Stormont for 22 months in protest over the Windsor Framework, the UK’s government pro-Brexit trade arrangements with Europe. The party said there is still no agreement with the UK government over the framework and no "basis to deliver the financial stability Northern Ireland needs".
Heaton Harris said it is “disappointing” that there will not be a new executive up and running before Christmas.
"However, this package is on the table and will remain there, available on day one of an incoming Northern Ireland Executive to take up,” he added.
Heaton-Harris 'must make money for pay rise available now'
Thousands of public sector workers, including civil servants, are set to go on strike next month over pay. Union Nipsa said the strikes could be the "biggest ever seen in Northern Ireland".
Nipsa general secretary Carmel Gates said: "It is unacceptable to say that only if the executive returns will public sector workers get a pay rise. Given that the Northern Ireland Secretary Chris Heaton-Harris has admitted our services are underfunded, given he has accepted public sector workers need a pay rise, he must make that money available now."
Ms Gates said civil servants doing the same jobs in other parts of the UK can earn between £3,000 and £10,0000 more than those in Northern Ireland.
Ulster Unionist Party leader Doug Beattie has called for the pay package for public sector workers to be "taken out" of the process and delivered before Christmas.