Pay parity policy undermining public services, research suggests

The quality of Northern Ireland's public services is being undermined by a policy of matching public sector pay awards in England, research suggests.

The Stormont Executive has a policy of "pay parity" which means it aims to match annual percentage pay increases agreed in England.

That has placed pressure on the Stormont budget because the unique structure and size of Northern Ireland's public sector workforce means those pay increases are not fully covered by UK government funding.

The NI Fiscal Council suggests that to fund the pay awards, departments have squeezed non-pay spending down to levels well below those in England.

It said: "Funding for other services outside pay has been reduced below 100% of that in the rest of the UK, while need in NI is 124% of that in England.

"Other things being equal, lower non-pay spending per head would be expected to reduce the quality and quantity of service provision."

Pay parity is a politically sensitive issue and has been at the centre of two major industrial disputes in recent years.

It led to an unprecedented nurses strike in 2019 and long-running industrial action by teachers which disrupted school inspections.

The most recent teachers' pay rise in December 2025 was only awarded after a ministerial direction.

That is a process which has to be used when the senior official in a department believes a minister is proposing to do something which the department cannot afford.

The Fiscal Council found pay levels and pay grades are not the primary cause of pressure on Stormont's budget.

Median public sector pay in NI was actually fractionally lower than the UK average in 2025.

Instead the major issues are that NI has significantly more public workers per person compared to the UK average and carries out more functions in the public sector.

That interacts with devolution funding rules to produce an inescapable squeeze on the executive's budget.

Increases to the NI budget are determined by a calculation known as the Barnett formula.

Whenever spending is increased on a service in England, Stormont gets an equivalent spending increase, adjusted for the extent to which each service is devolved. This money is known as "Barnett consequentials".

Stormont has a relatively larger public sector than England.

So when the UK government increases spending to finance a pay deal there, the amount of money coming to NI does not increase sufficiently to finance the same percentage uplift.

That is exacerbated by the fact that some services delivered by the public sector in NI are privatised in England.

The Fiscal Council said this issue was significant: "There are large cohorts of staff in NI whose pay awards are not directly (or only partially) supported by Barnett consequentials, including in areas such as social care, water, transport and housing."

Launching the paper, Sir Robert Chote, chair of the Fiscal Council, said: "We are not taking a view on whether pay parity with England is desirable.

"Our role is to examine the implications of policy choices and to assess what they mean for the sustainability of the executive's finances.

"When funding generated by pay awards in England is insufficient to cover the cost of matching those awards in NI, the executive faces difficult choices.

"We view this report as the start of a conversation rather than its conclusion."