Taking budget to the wire creates 'deep levels of uncertainty' warns economist Andrew Webb
DELAYS setting Stormont's budget for next year is creating "deep levels of uncertainty" and affecting people's mental health, a leading economist has warned.
In the absence of an executive due to the DUP's boycott of the institutions responsibility for setting the regional budget falls to Secretary of State Chris Heaton-Harris.
But with just days to go before the new financial year, there's still no indication when departments will receive their spending allocation for 2023-24.
The Northern Ireland Fiscal Council warned on Tuesday that departments were facing cuts in real terms of more than 6 per cent in the forthcoming year.
The budget watchdog said the expected spending constraints "will not help reform or workforce planning".
NI Fiscal Council chair Sir Robert Chote said departments faced a "tough financial environment".
"Whoever eventually undertakes the task of setting next year’s budget – the secretary of state or a restored executive – will face some difficult decisions," he said.
Sir Robert said the Northern Ireland Office had "reined in overspending" since the departure of caretaker ministers last October but that the regional coffers were expected to draw almost £300 million from the Treasury reserve to balance the books.
He said the funds from the reserve were "in effect a short-term loan that has to be repaid next year rather than gradually over time".
"Together with front-loaded increases in the block grant, this results in a drop in funding for NI public services next year and a rebound in 2024-25," Sir Robert said.
"Adjusting for inflation as well, departments face a 6.4 per cent real cut next year and a 1.9 percent rise in 2024-25."
Mr Heaton-Harris last week signalled that he was not minded to set the regional budget.
"I think this is a matter for the executive and it very much should be a matter for the executive to be doing, we need an executive up and running for that to happen," he said.
"I do not want to be in a position where I have to set a budget."
A Department of Finance spokesperson said even though final budgets had yet to be set it was "already clear the Northern Ireland public sector is facing a highly constrained financial situation".
"The Department of Finance is keen the 2023/24 budget is set as soon as possible in order to provide all departments with certainty upon which to plan," the spokesperson said.
Andrew Webb, chief economist at Grant Thornton, said the delay in setting Stormont’s budget was "serving to create deep levels of uncertainty".
"This is not happening just across departments and their agencies but right across the many hundreds of organisations that rely on public funding," he said.
“I am aware of organisations having to place people at risk of redundancy – this uncertainty has several implications, not least of which is a mental health toll on those impacted."
Mr Webb echoed the Fiscal Council's warning on reduced spending.
"Running this close to the wire on setting a budget plan can only mean that crunching the numbers is proving exceptionally difficult," he said.
"That should concern us. I expect some very challenging outcomes to emerge in the coming days and weeks, all of which have a contractionary effect across the economy."
Alliance finance spokesperson Andrew Muir said the budget uncertainty made him "increasingly worried" about the the ability to deliver basic public services.
"Northern Ireland's public finances need urgent stabilisation with invest to save interventions as part of package for restored executive to turnaround the situation and end crisis of trying to build forwards upon a burning platform," he said.
SDLP MLA Matthew O'Toole said the absence of a budget had "heaped chaos and confusion on top of the already unbearable pressures on public services".
"Those who continue to shirk their responsibility to govern are forcing good people, good projects and essential services over a cliff edge and it’s ordinary, hard working people who will suffer the most – we cannot go on like this," he said.
Ulster Unionist finance spokesperson Steve Aiken said further delays in restoring the institutions would "exacerbate" the budgetry difficulties.
"Abrogating that responsibility to the secretary of state, as was the case for three years under the last hiatus, lets down all of the people of Northern Ireland," he said.