Government deal with the DUP to restore power sharing in Northern Ireland

On 31 January 2024, Northern Ireland secretary Chris Heaton-Harris unveiled the agreement that the government had reached with the DUP to form the basis for the reestablishment of the power sharing executive and end Northern Ireland’s long period without a devolved government.

This explainer sets out the main elements of the agreement contained in the Command Paper published by the government.

What are the main elements of the agreement?

There are three principal components to the deal:

• Measures to address some of the DUP concerns about the operation of the Windsor Framework agreed between the UK and the EU last February and “secure Northern Ireland’s place in the UK internal market”.
• “Legal and practical” measures to strengthen the position of Northern Ireland in the Union and to reinforce some earlier commitments.
• A financial package to accompany the return of the Executive and start to address some of the pressures on the NI public sector. 

Windsor Framework and the UK internal market 

What were the DUP concerns about the operation of the framework?

The Windsor Framework, agreed last year between the UK and the EU, was intended to address unionist concerns about the impact on Northern Ireland of the customs and regulatory border in the Irish Sea created by the Northern Ireland Protocol agreed by Boris Johnson’s government in October 2019. The main features of the Framework were the creation of a new green lane – with very reduced checks and formalities – for goods “not at risk” of moving into the EU Single Market and a recognition that agrifood goods on sale in Northern Ireland could meet either UK or EU regulatory standards.

The Framework also addressed concerns about day-to-day issues like non-commercial parcels being sent from GB to Northern Ireland and pets being taken across the Channel and gave the UK government some greater flexibilities on applying UK indirect tax changes in NI. It also introduced a new mechanism – the Stormont Brake – which would allow Assembly Members (MLAs) to raise concerns about (and potentially block) changes to EU law that would have a significant impact on trade between NI and GB.

However, the DUP felt that these changes – while representing progress – still meant that Northern Ireland was being cut off from the UK internal market. The subsequent discussions between the DUP and the UK government have focused on allaying DUP concerns and providing a basis for the party’s return to Stormont.

How has the UK government addressed DUP concerns with the Windsor Framework?

A package of measures on the operation of the Windsor Framework includes: 

• The ditching of routine checks and customs paperwork on goods passing through a renamed green channel (now the UK Internal Market channel) – though some paperwork will still be needed to move goods to Northern Ireland. That does not mean no checks as there will still be “risk and intelligence-based checks” relating to “criminality, smuggling and disease”. The EU would have undoubtedly rejected any proposal that there be no checks whatsoever, and there were animal health checks between GB and NI when the UK was an EU member.
• There is also a new “Internal Market Guarantee” that at least 80 per cent of GB-NI goods will pass through the new internal market channel. While such a guarantee would be incompatible with the Framework, if more than 20 per cent of goods go through the red channel then a review from one of the new monitoring bodies set up under the agreement will be triggered.
• A change agreed on Tuesday between the UK and the EU also means that Northern Ireland can fully benefit from UK trade deals (though some have pointed out that may expose NI producers to unwelcome competition). There are also commitments to make it easier for MLAs to use the Stormont Brake by giving them early warning and notifying them of relevant EU proposals – and new guidance on how to use it. The Brake can only be operated after the Assembly is restored.

The government has also made a statutory commitment to commission an independent review of the operation of the Windsor Framework after a consent vote if it only passes by a simple majority (implying that it fails to get cross-community consent).

How does the UK plan to secure NI’s place in the UK internal market?

In addition, there are a whole raft of measures in the document to promote trade between Northern Ireland and Great Britain. It makes a clear distinction between “qualifying” Northern Ireland goods, which will benefit from unfettered access to the UK internal market, and goods moved from Ireland, which will not benefit and might use this as a backdoor route to evade the controls which are now being activated at the EU-GB border.  

A new body called Intertrade UK will promote trade in both directions between GB and NI (there is already an Intertrade Ireland designed to promote north-south trade. A new UK East-West Council with representatives from government, business and civil society will look at deepening links.  

The government is also putting some previous commitments into law. It will also legislate to reinforce unfettered access of NI goods to the UK and to prohibit any future agreement with the EU which would damage the functioning of the UK internal market (though of course, any future government could repeal that).  

The government has also committed to legislate to require all new UK laws to be screened for their impact on Northern Ireland, with a minister having to make a statement to parliament if there are such impacts. There is also an expanded role for the Office of the Internal Market in the Competition and Markets Authority in monitoring the impacts of future regulatory changes. 

Will changes limit the rest of the UK’s ability to diverge from EU law?  

On the face of it, no. There is no bar to divergence per se. But the requirement to screen all new legislation and draw any impacts to the attention of parliament may inhibit ministers who do not want to be accused of deepening the Irish Sea border. In practice, most of the divergence seen to date comes from changes introduced by the EU which the UK has not followed.

Are there any outstanding issues?

Yes. One big outstanding issue is on veterinary medicines, where there is a risk to the supply which comes from GB. The UK has committed to legislate to prevent divergence from EU rules, to ensure that the EU does not raise fears about different UK standards applying in NI – presumably as the basis for the long-term agreement it seeks to secure supplies.

Does NI still have to dynamically align with EU law?

Much has been made of the repeal of section 7A of the 2018 EU (Withdrawal Act), which gave direct effect to EU laws in the UK after Brexit. This is being amended to take account of the Stormont Brake, which gives MLAs a right to object to updated EU laws (completely new EU laws could only ever apply to Northern Ireland after agreement in the UK-EU Joint Committee). If this is successfully used (and there are quite high barriers to its use contained in the Windsor Framework), it could lead to a situation where new EU rules or unchanged EU rules apply in Northern Ireland and potentially different rules again in the rest of the UK.

Do the changes need EU agreement?

Most of these changes are either ones the UK can make unilaterally as they are about UK processes and institutions, or they use flexibilities within the Framework. The secretary of state has said that he has been in close contact with the Commission. The Commission has said it will study the changes carefully, and will still expect the UK to honour its commitments under the Windsor Framework.

How does the government propose to “strengthen the union”?

The DUP have long been worried about the impact of the new trading arrangements on Northern Ireland’s place in the union. The new package therefore contains what they have called “legal and practical measures” to reinforce NI’s place in the Union. The government commits to legislate to “affirm” Northern Ireland’s place in the Union and rule out any middle option “such as joint authority” meaning that the only choice is between being part of the UK or part of Ireland. This does not change the principle of consent in the Belfast/Good Friday Agreement and the secretary of state will still be obliged to call a border poll if there appears to be a majority in favour of a united Ireland.

The Command Paper also “sets out a series of measures to visibly evidence the government’s commitment to Northern Ireland –  and to strengthen it further –  as an integral part of the United Kingdom both now, and for the years ahead.” The paper notes increasing activism by the Irish government around the possibility of a united Ireland – and makes clear that the UK government is committed to doing more to make the positive case for the union.  

Those measures include a range of ideas to promote investment (creating a new investment zone), increase connectivity, deepen cultural links and also to increase mutual understanding between the two civil services and to train UK civil servants on Northern Ireland’s constitutional position. The paper also notes that Northern Ireland should never be referred to as a “third country” nor as a “member of the EU single market”. It also undertakes to promote better understanding of Northern Ireland’s position in the UK, The UK East-West Council looks like a key vehicle.  

What is in the new financial package? 

In December 2023, following discussion with the main parties in Northern Ireland, the UK government outlined a £3.3bn financial package that was conditional on a restored Northern Ireland Executive. Proportionate to the size of the Northern Ireland budget this is a large sum – using a simplified form of the Barnett Formula this would be equivalent to a £96.7bn uplift to England’s public services spending. Without further details it is difficult to be more precise, or indeed identify which financial years this £3.3bn package relates to. Following agreement from the DUP to re-enter power sharing, the secretary of state announced to the House on 31 January that “the money will flow as soon as the new Executive is up and running”. ⁵⁵ hansard.parliament.uk/commons/2024-01-31/debates/211B60F1-4CC0-43EB-97C3-C38F2ED7FD77/NorthernIrelandExecutiveFormation

The package includes some targeted funding including: 

• £584m uplift for public sector pay – in January 2023, over 100,000 public sector workers went on strike following a sharp real terms decline in pay. The UK government made the release of this funding conditional on restoration of devolution.
• £1bn towards Northern Ireland’s public services. ⁵⁶ www.gov.uk/government/news/secretary-of-state-statement-at-hillsborough-castle-19-december
• £600m transformation plan, with a £150m ringfenced for transformation projects. ⁵⁷ news.sky.com/story/uk-government-offers-3-3bn-to-northern-ireland-in-bid-to-restore-power-sharing-13034055
• £30m fund to address health waiting lists (which as of December 2022 stood at 500,678 people on a waiting list – approximately 26.3% of Northern Ireland’s population). ⁵⁸ www.niauditoffice.gov.uk/files/niauditoffice/documents/2023-10/NI%20Audit%20Office%20Report%20-%20Tackling%20Waiting%20Lists.pdf
• £15m towards claims linked to the PSNI data breach.
• £150m enhanced investment zone which will likely lead to tax reliefs and economic incentives for the area. ⁵⁹ https://www.gov.uk/government/news/secretary-of-state-statement-at-hillsborough-castle-19-december
• The annual NI capital borrowing limit for infrastructure projects would also be increased releasing £135m by 2028/29. ⁶⁰ https://www.bbc.co.uk/news/uk-northern-ireland-67968994

The UK government also committed to amend the Barnett Formula through the introduction of a new needs-based “funding floor” which would lead to £124 per head being spent on public services in Northern Ireland for every £100 per head spent in England. ⁶¹ https://www.bbc.co.uk/news/uk-northern-ireland-67577172 This would come into force from 2024-25. ⁶² www.gov.uk/government/news/secretary-of-state-statement-at-hillsborough-castle-19-december  This is in line with analysis from the Northern Ireland Fiscal Council (NIFC) which estimated that the baseline relative need for Northern Ireland should be set at 124%. ⁶³ www.nifiscalcouncil.org/files/nifiscalcouncil/documents/2023-05/NIFC%20Updated%20estimate%20of%20the%20relative%20need%20for%20public%20spending%20in… Table 4.1  The NIFC had previously warned that inaction could lead to the public spending model premium falling to 120% by the end of the decade. ⁶⁴ https://www.bbc.co.uk/news/uk-northern-ireland-66790113  The 124% baseline is lower than the 127% figure required when other factors such as taxable capacity are taken into account. ⁶⁵ https://www.nifiscalcouncil.org/files/nifiscalcouncil/documents/2023-05/NIFC%20Updated%20estimate%20of%20the%20relative%20need%20for%20public%20spend… Page 21  A £1.125bn stabilisation fund over two years was also included in the financial package to cover the backdating of the funding formula. ⁶⁶ news.sky.com/story/uk-government-offers-3-3bn-to-northern-ireland-in-bid-to-restore-power-sharing-13034055

Will this be enough to sort out NI Budget problems?

In the absence of a functioning Northern Ireland Executive to decide a budget, civil servants operated within budgets set by the Northern Ireland secretary with £14.2bn of non ring-fenced day resource spending, £1.2bn of ring-fenced resource spending and £2.2bn of capital spending budgeted for 2023-24. ⁶⁷ www.finance-ni.gov.uk/sites/default/files/publications/dfp/Department%20of%20Finance%202023-24%20%E2%80%93%20Budget%20Factsheet.pdf

These have been insufficient to meet the financial pressures facing Northern Ireland leading to overspends and debt. The NIFC has cited a combination of weak budget management due to a lack of a functioning executive, inflation and pay pressures contributing to a £300m overspend in the 2022-23 financial year. ⁶⁸ https://www.bbc.co.uk/news/uk-northern-ireland-67491506  Financial pressures have continued in the 2023-24 financial year with the head of the Northern Ireland civil service warning that despite £1bn of budget cuts, Northern Ireland faces nearly £571m of unfunded pay pressures and a further £437m of further pressures. ⁶⁹ https://www.civilserviceworld.com/news/article/northern-irelands-top-civil-servant-warns-of-unavoidable-overspend

The Northern Ireland secretary has stated ‘that we will be prepared to take steps’ to address debt concerns raised by parties in Northern Ireland if the Northern Ireland Executive ‘publishes and implements a plan to deliver sustainable public finances and services’. ⁷⁰ www.gov.uk/government/news/secretary-of-state-statement-at-hillsborough-castle-19-december  It is reported this would see £559m of overspend deferred for two years which would then be written off when a returned Executive published and implemented a fiscal sustainability plan. ⁷¹ https://news.sky.com/story/uk-government-offers-3-3bn-to-northern-ireland-in-bid-to-restore-power-sharing-13034055 The Labour Party has publicly stated their support for the decision to defer and write off budget overspends conditional on the Northern Ireland Executive producing a new financial sustainability plan. ⁷² hansard.parliament.uk/commons/2024-01-31/debates/211B60F1-4CC0-43EB-97C3-C38F2ED7FD77/NorthernIrelandExecutiveFormation

What happens now?

Parliament is approving two new regulations to give effect to some of the measures set out above. The Assembly reassembles but this time will successfully elect a Speaker. The DUP will nominate a deputy first minister to serve alongside the first ever nationalist first minister, Michelle O’Neill. Other cabinet posts will be distributed between parties who want to take part in the Executive in the normal formulaic way.