Increased defence spend in UK Budget could hit Stormont finances, warns O’Dowd
A UK government move to bolster defence spending in the Budget could make it even harder to balance the books at Stormont, the finance minister has warned.
John O’Dowd was commenting on the potential implications of chancellor John Healey’s first Budget on the ongoing impasse over the lack of a devolved budget at Stormont.
The Sinn Fein minister struck a somewhat different tone to DUP leader Gavin Robinson (pictured, inset) who on Thursday suggested next week’s Budget may help to “close the gap” on the shortfall facing the administration in Belfast.
Mr O’Dowd acknowledged that increased public spending allocations in England would deliver a proportionate uplift for Northern Ireland through the Barnett formula for distributing funds to the devolved regions.
However, he cautioned that funding could be reduced for Northern Ireland using the same formula if Mr Healey makes significant cuts to public services to free up money to increase investment in UK defence spending.
“The way these things work is that the Treasury play their cards very, very close to their chest in regards to the Budget, right up until the Budget is announced,” Mr O’Dowd told BBC Radio Ulster.
“Now, as finance minister, I will get advance notice, but that will be hours or so before the actual Budget is announced.
“And here’s the crux in relation to Barnett consequentials. Barnett consequences work two ways: one, you can get money from them and, two, you can lose money from them.
“Because if there is going to be significant cuts across public spending in England, which is highly likely, then that will have an impact on our budget here. If there are areas of increased public spending, or areas where Barnett consequences flow from, for instance in terms of health or education, then we will benefit from those. But if there’s money taken away for defence, for spending on for military spend etc we will lose.”
Executive departments have been operating without a budget since the beginning of the current financial year in April, and are currently only allowed to spend up to 95% of last year’s funding.
Ministers in the devolved powersharing administration have insisted they cannot strike a budget for 2026/27 without additional financial support from Westminster.
The UK government has offered around £1.5 billion in extra funding over the next three years, with £525 million delivered this year, in an effort to assist with balancing the books, but Stormont’s leaders insist that is not enough.
In response, Northern Ireland secretary Sir Chris Bryant has accused devolved ministers of “irresponsible” overspending. He has made clear he will move to set a budget at Westminster over the heads of Stormont ministers if an agreement cannot be reached.
The Stormont parties held further talks on the budget with Sir Chris on Thursday.
Afterwards, DUP leader Mr Robinson expressed hope of the potential of closing the funding gap sufficiently to allow a Stormont budget to be agreed.
Mr Robinson said a “sense of realism” had entered budget discussions with the UK government.
He suggested a closing of the funding gap flowing from the UK-wide Budget next week could give Stormont ministers a “fighting chance” to balance its budget.
“It is clear to us – and has been for some time – and I think it is now clear to the Secretary of State that no matter whether this Executive passes a budget, or indeed he steps in and the government pass it on the Executive’s behalf, the books cannot balance,” he said.
“That realisation is important. I think there is an understanding of the gap and there is an understanding of the constraints both here and in Westminster, but I do think there is an opportunity for us to continue engagement.”
Yesterday, DUP education minister Paul Givan also suggested Barnett consequentials could deliver good news for Stormont.
Mr Givan said Sir Chris also appeared to have “walked back” from a suggestion that the offer of £525 million of extra funding this year would be withdrawn if the UK government had to step in to set the budget.
“I believe there was a more realistic approach that was being taken by the Secretary of State (in Thursday’s discussions), and obviously there will be the Budget on Wednesday, and I anticipate that what has been put on offer of the £525 million should be confirmed within that Budget statement to Westminster,” Mr Givan told Radio Ulster.