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Beyond Budget Balancing: Towards a Sustainable Fiscal Settlement for Northern Ireland

HM Treasury
Report Series
 November 
24,
 2025
NERI Report Series No. 41 - Beyond Budget Balancing - Towards a Sustainable Fiscal Settlement for Northern Ireland

Northern Ireland’s public finances have been under acute and sustained pressure for many years. This culminated in a budgetary crisis in 2023, which was only averted by the restoration of the Northern Ireland Executive and a financial settlement from the United Kingdom government. While this new settlement offered short term relief, many of the same issues have reemerged as Northern Ireland seeks to navigate its fiscal future. Over this period the debate about Northern Ireland’s finances has necessarily intensified, but it has also become more narrow and insular. If Northern Ireland is to break out of its current vicious cycle, the debate must encompass the totality of Northern Ireland’s fiscal position and the interconnectedness of decisions at regional and national level. This paper seeks to address the question of fiscal sustainability for Northern Ireland by outlining the various interlocking determinants of NI’s fiscal position and how they should inform a solution. Rather than focussing simply on the sufficiency of the fiscal transfer from central government, the composition and sensitivity of that transfer needs to be determined by the reality of public service provision in NI. While much debate has centred on the possibility of revenue measures that NI itself could undertake, this analysis often ignores structural differences in the revenue base between NI and the rest of the UK. Fiscal devolution could provide a route toward greater stability in the longer term, but under the current fiscal architecture, it comes with considerable risk. In to break the cycle, it must be accepted that fiscal sustainability is a joint responsibility for both the NI Executive and the UK government. While the NI Executive can reasonably charged with ensuring budget sustainability, fiscal sustainability is a necessary prerequisite that requires the cooperation of the UK government. The paper argues for the building of a new system of fiscal equalisation that both empowers and NI Executive whilst also recognising the limitations of what it can achieve. 

Authors
Paul Mac Flynn
Dr Lisa Wilson
Taxes and the Welfare State

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