From Saturday, Northern Ireland departments will be subject to automatic spending caps, as a legal deadline for Stormont to agree a budget passes at the end of July. Under public finance laws, the absence of an agreed budget triggers a provision allowing permanent secretaries to authorise spending up to 95% of the previous year’s levels.

The mechanism, previously used in 2017 and 2022 when devolution was not functioning, is unlikely to result in immediate cuts of 5% because the Secretary of State can intervene to pass a budget at Westminster. However, it introduces uncertainty for officials managing public finances.

The Executive has been operating without a full budget since the start of the financial year in April, using contingency arrangements. Hopes for a multi-year settlement in January, which would have been the first in over a decade, were not realised, and a one-year budget also failed to materialise.

Ministers have argued that the funding on offer from the Treasury is insufficient to cover unavoidable pressures, including public sector pay rises. They contend that Northern Ireland receives less than Scotland and Wales relative to need. The independent Northern Ireland Fiscal Council has supported that assessment, noting that the other devolved administrations are funded above their assessed need, while Northern Ireland is at or slightly below. It calculated that an additional £1bn to £3.5bn could be made available annually if the same funding formula were applied, though it cautioned that such an outcome was unlikely.

Finance Minister John O’Dowd has expressed a commitment among ministers to resolve the budget situation and called on the new UK administration to properly fund the Executive. Justice Minister Naomi Long warned that her department had exhausted all reasonable savings after years of underfunding and that further pressure on policing, prisons and courts could affect public safety.

Amid the budget standoff, the new Northern Ireland Secretary, Chris Bryant, is meeting the five main Stormont parties at Hillsborough Castle on Friday, his first official engagement since being appointed following a cabinet reshuffle. He will also meet business representatives. In a statement following his appointment, he said he planned to listen to all parties and work constructively with all communities.

The talks are expected to cover not only the budget impasse but also the legacy of the Troubles, a subject that has drawn criticism of the Labour government’s approach. The Irish Government is monitoring developments on legacy matters.

Leader of the opposition Matthew O’Toole said the SDLP would remind Mr Bryant that the UK government shares responsibility with the Executive for reaching a fair financial settlement. While acknowledging the validity of the funding comparison with Scotland and Wales, he argued that the Executive should not simply refuse to set a budget.

A Department of Finance spokesperson confirmed that the contingency provisions under the Northern Ireland Act 1998 and the Government Resources and Accounts Act (NI) 2001 would apply from 1 August, allowing the permanent secretary to authorise continued spending to avoid disruption to services.