SDLP Opposition Leader Matthew O'Toole has warned that, without an agreed Budget, departments will be limited to 95 per cent of last year's funding, effectively enforcing a five per cent cut across public spending.

With the Executive yet to sign off a Budget, a legal fallback will cap expenditure at 95 per cent of the previous year's allocation, intensifying pressure on already stretched services. The SDLP said ministers are, in effect, inflicting cuts on their own plans while attempting to shift blame onto the UK Government.

Party sources said the situation underlines the need for immediate decisions on spending and for long-promised reforms to the institutions at Stormont.

Ahead of introductory meetings with the new Secretary of State, Chris Bryant, Mr O'Toole urged London to prioritise fixing the budgetary impasse while also advancing institutional reform. Matthew O'Toole MLA said: "The Executive's failure to set a Budget means that from midnight tonight there will be even more risk to public services, as civil servants will only be legally permitted to spend 95 per cent of last year's Budget – meaning ministers are imposing a brutal five per cent cut on themselves.

"The Finance Minister and his Executive colleagues have refused to take one iota of responsibility for this failure. Agreeing a Budget is one of the most basic responsibilities of any government, but once again they have failed to do the bare minimum. They will blame the UK Government and hide behind bluster, but that will provide little comfort to the thousands of people across the North who will pay the price for their negligence.

"The UK Government is not blameless and that is the message we will be taking to the Secretary of State today. The SDLP wants to see a fairer funding model for Northern Ireland, but the Executive has failed abysmally to set out a clear set of priorities or make a coherent argument for how they would make good use of improved funding. All of which makes the case again – as if it needed made – for urgent reform of our political institutions.

"Chris Bryant needs to offer a serious and urgent response to the stasis facing Northern Ireland, and the Executive needs to finally take responsibility for governing this place."