Northern Ireland departments are heading towards an overspend of £500m, which would rise above £1bn with “a fair and reasonable” pay rise for civil servants and other public sector workers.
Departments have already found spending cuts of almost £1bn this year, but Neil Gibson, the permanent secretary at the Department of Finance, has warned Stormont needs to find an extra £450m to be able to continue to deliver public services and £590m for public sector pay awards.
In a financial briefing to businesses and political leaders, Gibson said the situation is “beyond challenging”.
"We're now in a situation where our public finances are on a trajectory for overspending to the tune of about half a billion pounds, if we exclude providing a fair and reasonable pay award to public servants," he said.
"If we include a pay award that figure rises to over a billion pounds, so we're urgently in need of making some decisions and choices about how to close that gap."
Most Northern Ireland Civil Service officials received a pay rise of just £552 for 2022-23, which the Northern Ireland Public Service Alliance union said was worth less than 1% to the majority of officials, excluding the rank of administrative assistant. Additionally, unlike most of their counterparts in England and Wales, NICS officials were not offered a £1,500 cost-of-living payment this summer.
NIPSA and the GMB have held several strikes over the pay situation this year, with the unions seeking awards matching public sector colleagues in the rest of the UK.
Civil servants tasked with making spending decisions in the absence of an executive have made £980m in budget cuts since Northern Ireland secretary Chris Heaton-Harris unveiled their £14.2bn budget for 2023-24 at the end of April.
Gibson said civil servants have gone as far as they can in making savings and political leadership is now needed to make further cuts.
"I think most viewers will recognise the sort of cuts that have been coming through and you will have seen that in your public services," Gibson told ITV.
"We've had over, just close to a billion pounds of cuts taken by permanent secretary colleagues and myself to try and live within the numbers that we have.
"But there's a limit to how far civil service powers go, and there are decisions that can only be taken by politicians in order to make some of the scale of choices that would be required to deliver that level of cuts."
Gibson said the NICS is making a “very strong argument” to the Treasury for Northern Ireland to get more funding “in order to deliver services that are delivered elsewhere in the UK”. But he said people in Northern Ireland will also have to “be brave enough to think about what services we need, who pays for them and how we deliver them”.
The Department of Finance has also launched two consultations aimed at raising revenue. One asks for views on proposals to raise funds by removing rates reliefs which would lead to increased bills for some households and businesses. The other seeks ideas on potential cost-saving measures, such as stopping or reducing certain services or public services being delivered by others (e.g. local government, voluntary & community sector or private sector). This follow a directive from Heaton-Harris that the NICS consult the public on possible revenue-raising measures.