NI to receive £1.2bn more after spending review – but economist warns that alone won't fix challenges

Belfast Telegraph

a day ago

Announcing the outcome of Labour's spending review, the Chancellor Rachel Reeves declared: 'The devolved administrations will receive their largest real terms settlements since devolution began in 1998.'
Budgets across Westminster departments will grow by 2.3% per year in real terms until 2028-29.
Northern Ireland will see an increase in the amount of money it receives through the Barnett formula, the mechanism the Treasury uses to calculate how much money it gives to Stormont.
Speaking about the average increase of £1.2bn, the Treasury said: 'The Northern Ireland Executive will receive an average extra £1.2 billion through the Barnett formula, 24% more to spend per person than the comparable UK Government spending in the rest of the UK, reflecting Northern Ireland's unique circumstances."
Westminster has committed to maintaining some already-announced spending over the course of the review, for example allocating: '£137 million over three years in continued support for tackling paramilitarism and organised crime, and the Police Service of Northern Ireland's Additional Security Fund."
Some of the Chancellor's headline nation-wide policies will have a direct impact on Northern Ireland, including changes to asylum policy.
The government intends to end the use of hotels to provide accommodation to asylum seekers within the life of the current parliament.
The Home Office currently contracts private firm Mears Group to source accommodation – including in hotels – for people seeking asylum in GB and NI.
As of last September, there were over 300 such people in Northern Ireland living in hotels, in conditions which have been criticised by refugee rights' groups.
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The Chancellor said she will speed up the asylum process and cut the backlog in the system which is costing the government billions of pounds.
Other parts of wider UK policies will impact Northern Ireland, including the government's plans to increase defence spending annually by between 3.6-3.8%.
The precise location of defence spending increases will be announced later in the year in the defence investment plan, but it will include Northern Ireland, where the government spent £240m in 2023-24 on an industry that employs 600 people.
Speaking to the Belfast Telegraph, Chief Secretary to the Treasury Darren Jones said that 'both' new and existing defence facilities here would receive investment 'because there is just so much extra money going into defence spending.'
Mr Jones added that Northern Ireland would also see investment in the advanced manufacturing sector, including aerospace businesses.
Northern Ireland will also have access to an additional £350m from the British Business Bank, the governmental body that offers financing and investment to private firms across the UK.
It was through the bank that the Covid-relief loans were provided to companies.
It has supported 6,000 businesses in NI since 2014 and its NI investments include Reform RX, a Pilates reformer company which was recently sold on to a major US firm.
Northern Ireland will also be part of other pieces of investment, including the government's plan to aggressively grow AI capabilities in NI.
An AI unit will be set up within the Executive, part of what Deputy First Minister Emma Little-Pengelly called 'a huge agenda.'
'We are determined to try and ensure Northern Ireland can do transformation in efficiency and productivity improvements through all of the tools that are there. That includes the advances in AI,' she said.
'This has been underway for a number of months, as referenced in our programme for government. We believe that digitisation and AI agenda can really improve public services and the way that we deliver those public services.'
Responding to the spending review, Andrew Webb, the chief economist of Grant Thornton NI, said reform was necessary to ensure increased public spending was effective.
'Our public services face accumulated pressure - financial, structural, and societal.
'The Spending Review acknowledges this by calling for reform, but when we look around and see infrastructure deficits in areas such as waste water that are in the billions of pounds, we know we have a massive task on our hands.
'Our challenges aren't just money-related. New money helps, but money alone won't fix planning bottlenecks, staff shortages, or fragmented governance.
"Northern Ireland needs a structured, long-range recovery plan with investment in the right places, powers aligned with purpose, and a relentless focus on outcomes.
'Otherwise, we risk repeating the cycle of pouring more money in and improving little.'
Meanwhile, Stormont Finance Minister John O'Dowd said that agreements secured with the Treasury by his department will 'deliver an additional £600m of funding provided for vital public services here.'
Mr O'Dowd was referring to the Treasury's willingness to exclude over £300m of agriculture funding from funding calculations, saving the Executive £600m over the period of the spending review.
An independent review of Northern Ireland's Level of Need by Professor Gerald Holtham was also published yesterday, recommending an increase in the Barnett adjustment factor.