The Westminster government should provide “stable and sustainable” multi-year funding settlements to the Northern Ireland Executive to enable it to properly plan public services transformation, a committee of MPs has said.
Multi-year funding – rather than “one-off pots of money to address short-term issues” – is needed to enable departments and service providers in Northern Ireland to “plan meaningful changes”, the Northern Ireland Affairs Committee said in a report today.
“In the medium term, it is important that public services are reformed, so that they can perform better for the people of Northern Ireland,” the report says.
While the committee was carrying out its inquiry, Northern Ireland was experiencing its “tenth or eleventh” consecutive single-year budget, according to the report.
This is because of two factors, it says: political instability in Northern Ireland; and because the Executive can only set budgets which reflect the periods covered by spending reviews announced by the Treasury.
“We were told that this budgeting arrangement could not achieve the scale of public transformation that is necessary to achieve real differences in Northern Ireland. Rather, it had actively ‘hindered transformation’,” the report says.
The report notes that the Executive has access to £235m in ringfenced funding for public services transformation and the work of the Public Sector Transformation Board. However, it says a “significant amount” of that funding has been diverted for day-to-day spending.
The report suggests this could be addressed in part through longer-term funding settlements, which would enable better long-term planning, implementation and outcomes. “With the political institutions stabilised, funding needs to follow suit,” it adds.
Also in the medium term, the MPs called for the “cohesion of government structure in the Executive and between the departments in Northern Ireland” to be “enhanced” because the siloed nature of departments “works against joined-up government and collective responsibility”.
Public services have been extremely stretched in recent years, with the Northern Ireland comptroller and auditor general telling the committee that “not one department in the last couple of years had said to her: ‘My funding is sufficient’”.
The report highlights strain on the health service, schools and criminal justice system in particular, which it attributes partly to “the legacy of the recent past, with poor public services stifling Northern Ireland’s ability to invest in skills, infrastructure and grow its economy”.
In the longer term, the report calls on the government to consider devolving more fiscal powers to Northern Ireland.
This is because Northern Ireland has the highest public spending per person in the UK but raises the least revenue per person, relying mostly on the Block Grant allocated to it by Westminster to fund its public services.
As part of the package agreed in February 2024 to restore the Northern Ireland Executive after nearly two years of political deadlock, the government required Northern Ireland to raise more revenue itself.
The £3.3bn settlement provided £1bn in additional “‘stabilisation funding’” for public services and a one-off sum of £584m to help settle 2023-24 public sector pay awards. It also upped the Executive’s spending power and paused departmental overspend repayments – subject to several conditions, including having a balanced budget for 2024-25 and departments raising at least £113m in “locally generated income”.
However, raising more revenue is “easier said than done”, according to the Northern Ireland Affairs Committee.
“Revenue raising is politically difficult, as it means charging people more, and it may disproportionately impact people on the lowest incomes. Currently, Northern Ireland has few options for revenue raising, as executive ministers have limited powers in this area,” the report says.
Greater tax devolution could enable the Executive to fund public services “more innovatively and sustainably, enabling them to deliver better outcomes”, it suggests.
The report says Northern Ireland “must be funded according to its level of need”. Since the restoration of the Executive, it has received 124% of any funding increase allocated to England – decided by the previous government on the basis that for every £100 spent on public services in England, it costs £124 to run the equivalent services in Northern Ireland.
But the funding will “not make a significant difference to Northern Ireland’s public services on its own in the short term”, according to the committee.
The report says there is a “compelling case” for backdating the 124% uplift to the start of the 2021 Spending Review period, and reflecting that in the Block Grant baseline figure for SR25. It says the UK government should otherwise compensate Northern Ireland in future years for the shortfall.
“Whatever the means, the key objective is to ensure that Northern Ireland is fully funded according to need, through stable, sustainable and predictable allocations, starting with the allocation at the next Spending Review,” the report says.
It also calls on the government to “engage constructively” with the conclusions of an independent review of Northern Ireland’s level of need being carried out by economist Gerald Holtham.
Committee chair Tonia Antoniazzi said: “The crisis afflicting public services in Northern Ireland has gone on for far too long with the crippling effects of underfunding impinging on the day to day lives of people across communities.
"The current hand-to-mouth approach when it comes to funding has often been too little, too late, particularly when it comes to what one witness to our inquiry called the three hungry children of the health service, schools and the police.
"The aim must be that public services in Northern Ireland are fully funded according to need, through stable, sustainable and predictable allocations, and our recommendations for the short, medium and long term set out the path to get there.”