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The public spending premium that Northern Ireland gets over the rest of the UK is shrinking, a spending watchdog has warned.

It added this would put Stormont's finances under increasing pressure.

The Northern Ireland Fiscal Council has published its first report on the financial sustainability of the executive.

For historic reasons, Northern Ireland has higher government spending per head than other parts of the UK.

The premium is falling and is set to continue falling in the coming decades.

That is happening for a combination of technical reasons and the end of temporary additional funding Northern Ireland received as the result of various political deals.

Spending per head is set to fall from 38% above equivalent UK spending in 2017-18 to 25% above in 2024-25 and about 20% by the end of the decade.

The executive's spending on public services is largely financed by a core block grant from Westminster, which evolves according to the Barnett Formula.

This ensures that when the government increases spending in the rest of the UK, the block grant rises by broadly the same amount in pounds per head in Northern Ireland.

But because spending per head was much higher in Northern Ireland when the formula was introduced, it means those cash increases are less in percentage terms.

That leads to the percentage premium shrinking over time.

The Fiscal Council has reviewed various studies on what spending premium is needed for the devolved nations to deliver equivalent public services to those provided in England.

They suggest that the relative need for spending may be about 20% higher in Northern Ireland than England.

On current projections, the premium will fall below 20% in the early 2030s.

The council suggests Stormont could seek a similar agreement with the UK government to that reached by the Welsh government in 2016.

It set a floor under the block grant premium at an agreed estimate of relative need and an additional uplift to Barnett formula increases to slow the rate at which the premium approaches the floor.

Finance Minister Conor Murphy said the report identifies "the Barnett squeeze" as the biggest threat to the sustainability of the executive's finances.

"Our spending power is decreasing over time relative to England. This is an unacceptable trajectory particularly given the cost-of-living crisis, our ageing population and the need for additional spend on our public services.

"This report helps provide a substantive and independent evidence base with which I will be engaging with Treasury on."