Autumn Statement underscores funding model flaw

The UK Government’s Autumn Statement, which it states aims to “fix the foundations and deliver change for Northern Ireland”, has increased funding for the Executive, but challenges abound as local spending needs continue to not be met.

The latest UK Budget, described by British Chancellor of the Exchequer Rachel Reeves MP as a plan to “stabilise public finances and promote growth,” has significant implications for the local economy, public services, and living standards.

With a record allocation of £18.2 billion for 2025/26 – an increase of £760 million – this Budget can be described as a lifeline for Northern Ireland amid fiscal pressures, but it also comes with strategic choices that local policymakers must navigate.

The UK Government frames the Budget as a pathway to stability, highlighting that the most recent allocation is the largest real-terms increase for Northern Ireland since the Good Friday Agreement. The Chancellor emphasises that these funds aim to “unlock growth and support public service stability,” suggesting that regional investment, such as city and growth deals, will help stimulate local economies and ease public service burdens.

While the boost in funding is broadly welcomed by Finance Minister Caoimhe Archibald MLA, Northern Ireland’s public spending needs are still not being fully met. With higher public service demand and generally worse service outcomes than England, particularly in healthcare, economic experts and local politicians alike continue to argue that the Barnett formula falls short of addressing the region’s unique needs.

While Archibald has expressed appreciation for the UK Government’s additional support, she remains critical of the overall funding model, further outlining her party’s assessment that the Barnett Formula, which calculates funding for devolved governments based on changes in England’s public spending, is insufficient for Northern Ireland’s specific challenges.

Health challenges

Northern Ireland faces elevated demand for public services, stemming from higher levels of poverty and poorer health outcomes relative to other parts of the UK. “While the additional funding is welcome, it still falls short of the pressures facing departments,” Archibald states, noting that local departments must continue to manage within tight budgets.

This limited funding will force the Executive to make difficult choices. For example, health receives the largest allocation – 51 per cent – out of the devolved departments, with the Budget allocation £350 million to address immediate demands, but this will only partially offset the severe strain on Health and Social Care (HSC) trusts.

For instance, compared to England, the local health service faces longer wait times for surgeries and specialist consultations. Currently, around 25 per cent of patients in Northern Ireland wait over one year for a consultant-led outpatient appointment, while in England, this figure is closer to 4 per cent. As a result, health outcomes lag behind, with fewer resources and slower service response times.

Public services shortfall and reforming the Barnett Formula

Politicians, including Archibald and former Alliance deputy leader Stephen Farry, and economic experts such as David Heald from the Institute for Fiscal Studies (IFS) have argued that such one-time allocations fail to address the structural funding deficits facing the region.

Public services, such as education and infrastructure, also suffer due to resource shortages. The education sector receives £170 million, but rising costs and increased demand mean that schools must make budgetary compromises, potentially impacting quality of education. In addition, infrastructure funding, although partly supported through targeted investments like the £39.6 million for wastewater infrastructure, remains limited.

Archibald reaffirms that “overspending is not an option”, given Northern Ireland’s strict budget rules and past overspending penalties, making it clear that Executive departments face a significant challenge in balancing quality service delivery with fiscal discipline.

The effectiveness of the Barnett formula in serving Northern Ireland’s unique socioeconomic landscape has long been a topic of debate, with former Alliance Party deputy leader Stephen Farry arguing in agendaNi in January 2024 that there is a need for a fiscal floor of 127 per cent in Northern Ireland, compared to the rest of the UK.

“A fiscal floor for Northern Ireland would ensure we are fairly funded in relation to our specific level of relative social and economic need, and funding could not fall below that level,” Farry writes.

Heald argues that the formula’s lack of consideration for regional disparities results in chronic underfunding. The IFS has noted that Northern Ireland’s health and social needs are high and rising, largely due to a more rapidly ageing population and higher rates of chronic illness.

Without adjustments to the formula, Heald states that Northern Ireland may struggle to achieve the standard of public service outcomes seen in England and Scotland, as higher demand places an increasing strain on limited resources.

Despite these funding challenges, the commitment of £162 million over the next 15 years for city and growth deals, which aim to stimulate economic development in underinvested areas, like the ‘Mid South West’ region and Causeway Coast and Glens, will be welcomed by members of the Executive.

Enhanced Investment Zone

Additionally, the Enhanced Investment Zone initiative aims to attract investment in key sectors such as clean energy and digital infrastructure, with the goal of creating high-quality jobs and improving long-term economic resilience.

While these investments can catalyse local development, they are insufficient for solving the immediate, structural pressures on Northern Ireland’s public services. The combination of economic growth policies with insufficient core funding for public services may deliver uneven results, with some areas seeing long-term benefits while public services continue to lag.

Overall, while the funding increase is a step forward, it underscores Northern Ireland’s ongoing reliance on a funding model that economic experts and politicians alike view as inadequate.

Archibald and public finance experts advocate for a comprehensive review of Northern Ireland’s fiscal needs, suggesting that the Barnett formula should be replaced with a needs-based funding model that reflects regional challenges.

While the Budget’s record funding does provide a sticking plaster to the Executive’s broad financial challenges, achieving parity in public service outcomes with the rest of the UK and the Republic will require a shift toward a more responsive funding approach that genuinely accounts for Northern Ireland’s public service needs and economic aspirations.