N. Ireland Politics

No Stormont budget - what happens next?

A security guard stands on the steps of Stormont's Parliament Buildings Image copyright Press Eye

Failure to agree a political deal at Stormont means no budget will be passed for the new financial year, which begins next week. So, what happens now?

The lack of a budget does not mean public services will grind to a halt.

Instead, the most senior civil servant at the Department of Finance, David Sterling, will use emergency powers to keep the money flowing.

On Wednesday, he will gain immediate control of a sum of money equivalent to 75% of this year's budget.

Section 59 of the Northern Ireland Act allows him to use that money "for such services and purposes" as he directs.

Community groups vulnerable

In practice, that will mean funding existing services at their current level.

In January, Mr Sterling told a Stormont committee that he viewed this only as an interim measure.

Image caption David Sterling will shortly become the man holding the purse strings at Stormont

"It is purely a stopgap to ensure that business continuity prevails and that departments have the cash necessary for them to run their services until such times as a budget act is put in place," he said.

On the whole, these emergency measures should not mean cuts to services in the short term.

However, voluntary and community groups which receive government funding on a year-to-year basis could be vulnerable.

They do not have certainty that their funding will continue and some organisations have already warned staff they are at risk of redundancy.

Health service difficulties

This extraordinary situation could also be storing up trouble for later in the financial year, particularly for the health service.

Mr Sterling told MLAs that the Department of Health "faces real difficulties in this scenario".

"The quality of service provided will depend on the pattern of spend that the department is allowed to incur from the beginning of April," he said.

Image copyright PA
Image caption The health service is set to face "real difficulties" in the absence of a budget

"So, some big decisions need to be taken around that - I cannot say what those decisions are.

"Obviously, from my perspective, it is better that it is ministers who are taking those decisions."

If we get as far as July and there is still no budget then the situation becomes critical.

The law says that Mr Sterling will then have the right to spend an amount equivalent to 95% of this year's budget across the whole of the financial year.

That will effectively mean in-year cuts of least 5% across the public service.

Resources seriously squeezed

There are other complications - Stormont has not set a regional rate so rates bills cannot be issued.

Households and businesses will get a bill at some point, but it is not clear when.

Image copyright PAcemaker
Image caption European subsidies for farmers will have to come from Mr Sterling's pot of money

Councils, which rely on rates revenue, will instead get their money directly from Mr Sterling's pot, but that cannot go on indefinitely.

The rules also mean that European farm subsidies cannot be paid out in the normal way.

Farmers will still get their money, but again that will have to come out of Mr Sterling's pot until such time as a budget is passed.

Resources could becomes seriously squeezed long before the end of the financial year.

One other thing to remember is that even in the absence of a crisis Stormont's budget was falling in real terms in the coming year.

When a budget is eventually passed it will mean cuts anyway.