BUDGET 2023: Chancellor's Spring Statement puts squeeze on Stormont's spending power

Chancellor Jeremy Hunt leaves 11 Downing Street with his ministerial box on Wednesday. Picture by Stefan Rousseau
Chancellor Jeremy Hunt leaves 11 Downing Street with his ministerial box on Wednesday. Picture by Stefan Rousseau Chancellor Jeremy Hunt leaves 11 Downing Street with his ministerial box on Wednesday. Picture by Stefan Rousseau

PUBLIC finances and households around the north will come under even more pressure from next month in the wake of the latest Budget and the DUP’s boycott of Stormont.

UK Chancellor Jeremy Hunt may have announced a Barnett consequential of £130 million over two years for Northern Ireland in Wednesday’s Spring Statement, but the amount of funding available for running Stormont’s departments will decline from April.

An overspend in the current financial year will be clawed back by the Treasury, with £13.5 billion allocated for the day-to-day running of departments in 2023/24, down from the current year spend of £13.8bn.

Funding will rise to £13.7bn in 2024/25, but will stay below this year’s spending levels.

The pressure on public finances and the absence of an executive will leave it very difficult for Northern Ireland to replicate Jeremy Hunt’s big announcement on free childcare in England from April 2024.

Stormont has its own childcare system. And while the move in England may produce extra money via the Barnett formula, there is no requirement for the executive to spend it on childcare, if and when the institutions are restored.

Welfare is another devolved matter.

The Chancellor described his reforms aimed at supporting more disabled people into work as the "biggest change to our welfare system in a decade".

While Stormont typically follows Britain on welfare changes for practical reasons, the power vacuum creates uncertainty.

It also creates uncertainty on how an extra £40m “to widen participation in further and high education” in the north will be spent in the next year, not to mention the £3m for tackling paramilitarism.

But, Government ministers yesterday played down the language contained in Treasury documents suggesting Northern Ireland would not be able to set up an investment zone without an executive in place.

Announcing plans for 12 such zones, Jeremy Hunt said the zones will have access to £80m of support for skills, infrastructure, tax reliefs and business rates retention.

Speaking to journalists yesterday, NIO Minister Steve Baker said: “The problems which Northern Ireland will face if the executive is not restored, will go far beyond the investment zone.

“I am acutely conscious of the state of health in particular, there are infrastructure issues that need to be dealt with and great many things just need to be dealt with by devolved government.”

Referring to the DUP’s continued boycott of Stormont and its internal deliberation over the Windsor Framework, Mr Baker said: “That's why we're all somewhat on tenterhooks waiting for the DUP’s decision.

“It is a decision which will be acutely important, and the consequences of which will be long lasting for the 1.9 million people of Northern Ireland and I very much hope like me, the DUP feel able to accept the compromises in this agreement.”

One benefit of the Windsor Framework was on show in Wednesday’s Budget.

Although alcohol duty rates will rise in line with inflation from August, Jeremy Hunt confirmed that a freeze on duty for draft beer in pubs will be extended to the north.

Road users here will also benefit from the 12-month freeze on fuel duty.

However, the downgrading of support through the domestic energy price guarantee scheme from April will likely result in a hike in the price of electricity.

One of the biggest potential changes for mid to higher earners is the extension of the tax-free allowance from £40,000 to £60,000, which could encourage senior doctors to avoid early retirement to avoid penalties for breaching their pension savings allowance.

Meanwhile, businesses here earning profits of more than £250,000 will also pay corporation tax of 25 per cent from next month, double the rate of the Republic.

The Chancellor said a new policy of ‘full expensing’ will mean businesses investing in IT equipment, plant or machinery will be able to benefit from tax deductions.