HM Treasury has identified the size of Northern Ireland’s public sector as a contributory factor to the devolved government’s ongoing budget issues.
A policy paper published this week suggests Northern Ireland’s public sector is around 50% bigger than that of the rest of the UK as a proportion of the local population.
The Treasury’s Open Book Review of Northern Ireland Executive Budget says that reducing headcount and not implementing pay awards mirroring those offered to public-sector staff in England or Wales could save more than £1bn a year.
The review was commissioned as part of the financing agreement that resolved the Northern Ireland Executive’s projected £467.6m overspend in 2025-26, which required a £400m reserve claim from HM Treasury.
It is designed to inform future Northern Ireland Executive budgets and budget-setting processes, although the document is clear that devolved spending decisions are a matter for the executive.
The review says the Northern Ireland Executive’s forecast overspend in 2025-26 primarily resulted from the cost of public sector pay awards, which it describes as a “core affordability challenge”.
It says that public sector employment has been 26-27% of the population since 2020, compared with 17-18% in England. While the UK government gives Northern Ireland funding for devolved services at a level that is 124% of the proportional spend in England, public sector headcount is 144% per person of the level in England.
Total full-time-equivalent headcount in the Northern Ireland Civil Service was 28,994 in 2025-26, with the wider public sector employing 143,222. The Treasury report says the NICS paybill was £1.2bn in the last financial year, while that of the wider public sector was £8.9bn.
The report notes that as a proportion of the local population, the NICS employs 83% more staff than is the case for civil servants in England. However NICS has a broader remit that includes some roles undertaken by local authorities in England.
The report says that the larger public sector poses a “significant budgetary challenge” for the Northern Ireland Executive if pay parity with counterparts in Great Britain is maintained – which has been recent practice.
According to the Open Book Review, for the current situation to be sustainable, the Northern Ireland Executive would either need to find funding through savings or reductions in spending elsewhere or reduce the size of its paybill.
It says savings to the paybill could be delivered through changes in the size, structure or pay bands.
According to HM Treasury, mirroring the 15% efficiency target UK government departments signed up to at the 2025 Spending Review could realise savings of £180m in Northern Ireland.
It says that, based on NI Fiscal Council analysis, scaling the number of members of the NICS who work on devolved areas to 124% of the comparable proportion in England would release £393m a year in savings.
The review adds that scaling back public-sector pay to a “closer” equivalent proportion of RDELex (resource departmental expenditure limits excluding depreciation) to the UK government could generate savings of £1.25bn a year.
HM Treasury’s exercise also looks at the costs of different service areas.
For a number of Northern Ireland departments, funding per head is significantly in excess of 124% of comparable spend by the UK government. HM Treasury says analysis shows that health spending – excluding social care – is 152% of spend per head in England, while policing spend is 166% and schools spending is 140%.
The report says that if health spending in Northern Ireland was 124% of comparable spending in England, the cost would be £1.3bn lower than current spending on health. Education spending would be £424m lower under the same circumstances.
It provides options for the Northern Ireland Executive to consider that HM Treasury says could increase spending power by up to £3.3bn per year.
“Decisions are for the executive, who will want to consider the delivery options and timescales, noting that some of these could be delivered more quickly than others,” it says.
Civil Service World sought a response from the Northern Ireland Executive.