It seems ages since the Chancellor delivered her Spring Statement on 26 March 2025. And now the Chancellor has significantly more factors to address in the aftermath of the American President’s trade tariff announcements on 4 April and his subsequent 90-day pause on some of those new tariffs on 9 April. Will the Chancellor adjust her ‘Fixing the Foundations’ plan for United Kingdom (UK) public finances and its economy at the UK’s next scheduled fiscal events this summer and in the autumn, amidst the serious uncertainty and unpredictability that exists now and for the foreseeable? And how will Northern Ireland (NI) be impacted by any such adjustments made by the Chancellor at those upcoming fiscal events?
Before considering those issues in a subsequent Research Matters article, it is well worth revisiting the relevance of Spring Statements and other UK fiscal events to NI public finances and its economy. Read on to learn more…
What is the purpose of a Chancellor’s Spring Statement?
A Chancellor’s Spring Statement is one of the fiscal events in the annual UK Budget cycle. The Statement is designed to:
…update Parliament and the nation on the economy, public finances and progress against the Government’s economic objectives, and is accompanied by publication of an Economic and Fiscal Forecast from the Office for Budget Responsibility (OBR)
How do Spring Statements impact Executive Budgets?
Under devolution, the ‘rules’ – meaning the institutional and financial arrangements under the current settlement – collectively determine who, when, and how budgetary/fiscal decisions are made. Simply stated, it starts at the UK Government level, and follows at the NI Executive level. That means, for example, the Executive Budget cycle is a sub-cycle within the UK Government’s (overall) Budget cycle.
Throughout the annual cycle, the UK Budget is managed by the Chancellor, in accordance with the noted rules, including the Spending Review and subsequent fiscal events in a given cycle, such as the Autumn Budget and the Spring Statement.
The UK Budget provides the majority of funding for the Executive Budget in the form of the ‘block grant’, which is determined by the ‘Barnett formula’ and ‘one-off’ allocations made by central government. Moreover, during the annual budget cycle, the Executive receives ‘Barnett consequentials’ if UK Government Departments receive in-year allocations, along with any further one-off allocations for NI, including those resulting from political agreements – for example, the NI restoration funding package in February 2024.
Also contributing to the Executive’s annual spending power is Executive use of its devolved fiscal powers, such as rating and borrowing.
Moreover, additional monies are available to NI Departments through other sources, such as centrally administered programme/project funding from: the UK Government (such as City and Growth Deals); the Irish Government ‘Shared Ireland’ Initiative and related fund; and, the European Union (such as PeacePlus).
The Executive is to rely on all the above to formulate and manage its agreed Budget to deliver its agreed Programme for Government (PfG); providing NI public services, rebalancing the NI economy, amongst other things.
The Executive is to do that in accordance with the rules specified under devolution, including those arising from:
- Prevailing Westminster and Assembly enacted legislation – for example, Northern Ireland Act 1998, as amended.
- Executive ‘Interim Fiscal Framework’ – this Framework was agreed by the Executive and the UK Government on 21 May 2024, following on from the resumption of fully functioning devolved government in February 2024. It was required under the February 2024 NI restoration funding package, which had accompanied the December 2023 political agreement. Some elements were implemented soon after this Interim Framework had been agreed, and others still were to be negotiated. Ultimately, all are to inform a Final Fiscal Framework, which still is to be agreed, by the Executive and the UK Government.
- Executive ‘Budget Sustainability Plan’ – this Plan was agreed by the Executive on 3 October 2024 under the above-noted funding package and political agreement, after devolution resuming. The Plan committed the Executive to raising at least £113 million (m) in additional revenue from 2025/26; and when implemented, committed the UK Government to ‘writing-off’ £559m of NI’s existing debts.
- Executive ‘Budget Improvement Plan’ – this Plan was agreed by the Executive on in October 2024 under the noted Budget Sustainability Plan; and focussed on key strategic improvements to the Executive Budget process, such as additional economic and fiscal analysis, exploration of zero-based budgeting, equality responsive budgeting (such as gender-based budgeting) and a more strategic alignment of budget to the PfG, the Climate Action Plan and the Investment Strategy.
- ‘Interim Transformation Board’ – this Interim Board was agreed by the Executive on 9 May 2024 under the above-noted financial package and political agreement. Ultimately, it is to lead to the formation of an Executive agreed ‘Transformation Board’, which will oversee implementation of the £235m Transformation Funding that the UK Government allocated to the Executive as a part of said funding package.
Note that past and recent criticism of the budgetary rules under devolution has focussed on the lack of multi-year budgets at both the NI devolved level and the UK central government level. To a lesser or a greater extent, that shortcoming has restricted the ability both to plan and effect change in public services, for example, to attract contractors to undertake large scale projects in NI, amongst other things.
What was the initial reaction in the UK and NI to Spring Statement 2025?
As the Institute of Fiscal Studies (IFS) commented, Spring Statement 2025:
…was just about the smallest fiscal event Rachel Reeves could have managed in the context of her fiscal rules and the minor forecast downgrade presented to her by the OBR. The fact that a fairly run-of-the-mill change to the forecast forced her to cut her spending plans reflects the tiny amount of headroom she chose to leave against her targets last October. In today’s Spring Statement, departmental spending plans and, it seems, welfare policy have been fine-tuned to return to precisely the same amount of headroom that she had previously
NI’s response to the Statement was mixed, featuring different responses to the increased defence spending. There was, however, universal negative reaction to the welfare changes; described as ‘disgraceful’ and ‘cruel’, with some parties noting NI’s ‘higher numbers of people relying on welfare support’. The full impact of the Chancellor’s decisions in this area will filter through in time, as will any subsequent decisions she takes and any subsequent action that the Executive/Departments may take to mitigate same. As the party leader of the Opposition in the Assembly reminded the Executive on 26 March 2025:
The Executive also cannot wash their hands of this situation. Many of these changes will not come into effect imminently, buying important time to plan and put mitigations in place. Ministers must do everything they can while we all work to press the UK Government to change tack.
At a later meeting of the Assembly’s Committee for Finance on 1 April 2025, Department of Finance (DoF) Officials confirmed that the Executive was ‘on track’ to meet the Chancellor’s stated requirements following her Spring Statement. The Officials explained that the Executive will receive an additional £520m in 2025/26 to support stabilisation of NI public services, while noting such support will cease in 2026/27.
Moreover, looking on immediately after the Spring Statement 2025, and onto the Spending Review in June and the Autumn Budget in October, before the recent American President trade tariff developments, there was much anticipation in the UK, including NI, of multi-year budgets going forward – at both central and devolved government levels. Over the coming months, the impact on the global economy will do much to inform the Chancellor’s future fiscal events and the finances of the NI Executive.
For more in-depth understanding of the technical content covered in this article, refer to the Public Finance Scrutiny Workshop Series and the Economic Scrutiny Workshop Series – compiled by the Public Finance Scrutiny Unit (PFSU) in the Assembly’s Research and Information Service (RaISe). Individually themed modules in that Series can be accessed here.
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