Northern Ireland Office

[Relevant documents: First Report of the Northern Ireland Affairs Committee, Policing and security in Northern Ireland, HC 184; Second Report of the Northern Ireland Affairs Committee of Session 2024-26, The Government’s new approach to addressing the legacy of the past in Northern Ireland, HC 586, and the Government response, HC 1716; correspondence between the Northern Ireland Affairs Committee and the Chief Secretary to the Treasury, on the Northern Ireland Executive Budget, reported to the House on 17 June; correspondence between the Northern Ireland Affairs Committee and the Secretary of State for Northern Ireland, on the Northern Ireland Executive budget and the Public Sector Transformation Fund, reported to the House on 3 June.]

Motion made, and Question proposed,

That, for the year ending with 31 March 2027, for expenditure by the Northern Ireland Office:

(1) further resources, not exceeding £14,256,865,000, be authorised for use for current purposes as set out in HC 1855 of Session 2024-26,

(3) a further sum, not exceeding £14,317,396,000, be granted to His Majesty to be issued by the Treasury out of the Consolidated Fund and applied for expenditure on the use of resources authorised by Parliament.—(Taiwo Owatemi.)

(2) further resources, not exceeding £9,525,000, be authorised for use for capital purposes as so set out, and

(3) a further sum, not exceeding £14,317,396,000, be granted to His Majesty to be issued by the Treasury out of the Consolidated Fund and applied for expenditure on the use of resources authorised by Parliament.—(Taiwo Owatemi.)

The debate will be opened by the Chair of the Northern Ireland Affairs Committee.

I thank the Backbench Business Committee for granting time for this timely debate on the spending of the Northern Ireland Office. As I stand here today, it remains the case that Northern Ireland has no agreed budget, despite it being a quarter of the way through the financial year. Executive Ministers have failed to agree a budget, which has left Departments and civil servants forced to rely on emergency contingency powers, with spending limited to 95% of last year’s opening budget. Most concerningly, this leaves the people of Northern Ireland uncertain about the public services they will be able to access in the coming year.

Although the Finance Minister published a draft multi-year budget in January, it was not supported by the other parties in the Executive and, frustratingly, that deadlock is still unresolved.

Will the hon. Member also acknowledge that even Members of the Finance Minister’s party are now opposed to the budget he produced?

I recognise that we do find ourselves in a rather ridiculous situation, which impacts directly on the lives of people in Northern Ireland.

This precarious financial situation has serious implications beyond Northern Ireland, and the consequences for the Northern Ireland Office and the Treasury should be of concern to Members across the House. The vast majority of Northern Ireland’s funding comes from the UK Government through the block grant. Executive Ministers have raised concerns about the adequacy of the settlement and are calling for further funding. They cite the current financial year as being particularly challenging for Departments, with the block grant set to drop by 2.7%, before only modest increases in the following years.

We know that the Secretary of State has met the Finance Minister on a number of occasions in recent weeks, and I would be most grateful if he updated us on his discussions with Executive Ministers on urgently finding a resolution to agree a budget, and on the support the Government are providing to enable such a resolution to be found.

I commend the Chair of the Northern Ireland Affairs Committee for all that she does, but this issue of course goes beyond what she is setting out. The Northern Ireland Office is tasked with co-ordinating the local growth fund across the Province, yet my local community and voluntary sector are expressing deep concerns about its flawed programme design. They say that the funding structure is inaccessible and unresponsive to local realities on the ground. Does the hon. Lady not agree that, when the Secretary of State gets to his feet, he must explain why the Northern Ireland Office has failed to properly engage with our community sector? Does she agree that urgent steps must be taken by his Department to reform this programme to ensure that these vital funds actually reach the groups who need them most?

I thank the hon. Member for his intervention about the local growth fund. In our Committee session today, we grilled the Parliamentary Under-Secretary of State for Northern Ireland, who is sitting on the Front Bench, about this funding. On numerous occasions, we have noted our disappointment that the relevant Department has been able to shift the spending, but I am sure that the Secretary of State will give the hon. Member an explanation later.

Given the potential impact of having no agreed budget on the delivery of public services if the situation continues into the autumn, does the Secretary of State foresee a circumstance in which he would step up and step in to set a budget for Northern Ireland, should the Executive remain unable or unwilling to do so?

Linked to this are concerns about the Executive’s overspending and budget sustainability. At the end of the last financial year, the Government provided the Executive with a £400 million reserve claim loan to cover departmental overspends in health and education. That follows the £559 million Executive debt write-off by the Government in 2024 as part of the financial package accompanying the restoration of power sharing.

The Northern Ireland Fiscal Council warns that overspending is now becoming normalised, and it describes how repeated bail-outs

Does the hon. Member accept that the Northern Ireland Fiscal Council has also said that, if spending allocations to the Executive were based on need, the Executive would be entitled to receive between £1 billion and £3.5 billion extra, which is part of the reason for this problem?

I think there are further discussions to be had about need, the Barnett formula and all those things. I am sure those discussions are happening and that those things are being continually reviewed, but I do agree about the need.

The Executive will repay this £400 million loan over three years—£80 million this year and £160 million next year, with £160 million due in 2028-29. Given the Executive’s track record, are the Government confident that these payments will be met? Northern Ireland Ministers have warned of further overspends, given their continued constrained financial position. The two Departments responsible for the reserve claim are likely to see a drop in their resource funding this year. How will the Government respond to further overspends?

Granting the reserve loan was on the condition that the Treasury conducted an open book exercise on the spending of Northern Ireland Departments. This found that spending per head on policing in Northern Ireland is 166% of what it is in England, spending per head on health, excluding social care, is 152% and spending per head on schools is 140%. On the other hand, spending per head on prisons and probation services is only 79% of that spent in England and Wales. The report presents a number of policy options, and says that the Executive could make savings of up to £3 billion. However, Northern Ireland Ministers contest many of its findings. In his response, will the Secretary of State address the Government’s expectations of the Executive taking forward these options, and tell us what steps the Government are taking to help put Northern Ireland’s finances on a more sustainable footing?