Northern Ireland Secretary of State James Brokenshire has said there is still time to save powersharing in Stormont.
Mr Brokenshire said there are only a small number of differences between Sinn Fein and the Democratic Unionists, mainly around Irish language rights and culture.
He warned that Northern Ireland will begin to run out of money in the coming weeks and said it is highly unlikely a new executive could be formed in time to pass a budget by the end of November.
In a statement to the House of Commons, the Secretary of State said he was making plans to impose a budget to protect public services over the next year. It will not make any spending decisions, he said.
“The government’s strong desire would be for a restored executive in Northern Ireland to take forward its own budget,” Mr Brokenshire said.
“So this step is one that I am now taking with the utmost reluctance and only in the absence of any other option.”
The Secretary of State said: “Even now, however unlikely this may be, should the parties demonstrate that an executive could be formed in the immediate future I would clearly wish to proceed instead with legislation to allow that to happen,” he said.
Mr Brokenshire said a last-minute powersharing deal would be conditional on a budget being agreed and passed by the end of November.
He also said he will also reflect carefully on MLA’s salaries, £49,500 a year - which cannot be stalled or docked without primary legislation in Westminster.
Phone call Varadkar and May
He made his statement after Taoiseach Leo Varadkar and British prime minister Theresa May spoke on the phone and said it is still possible to revive powersharing .
Mr Varadkar told Mrs May there could be no return to direct rule like it was before the 1998 Belfast Agreement.
In a statement from the Taoiseach’s office the leaders said the gap between the two sides is narrow.
On Wednesday Mr Varadkar warned that Northern Ireland is “sliding towards direct rule” after the DUP and Sinn Féin failed in their talks to reinstate the Northern Executive and Assembly.
The Taoiseach said the Government could not accept the form of direct rule that existed prior to the 1998 Belfast Agreement.
“Both leaders also expressed the view that it is still possible to form an executive which would be in the interests of all the people of Northern Ireland,” a Government spokesman said.
The Taoiseach’s office said Mrs May made it clear she did not want to see a return to Westminster running all of Northern Ireland’s affairs and that budget preparations were not the first step on that road.
“Both leaders agreed that there is still time to reach an agreement,” Mr Varadkar’s office said.
Sinn Féin’s northern leader Michelle O’Neill said the talks broke down over the DUP’s refusal to sign up to a number of “rights issues” including an Irish language Act, same-sex marriage, the holding of outstanding Troubles-related inquests and a bill of rights for Northern Ireland.
East Derry DUP MP Gregory Campbell accused Sinn Féin of demanding a “shopping list of preconditions” before it would agree to restore Stormont.
Sinn Féin president Gerry Adams said the talks had been a “failure” but he did not rule out continuing engagement with the DUP.
“This has been a failure. There has been progress made but we have failed to put together the institutions and we are identifying that failure very, very clearly as being the responsibility on the one hand of the DUP and the British government. That is where the failure lies,” he said.
The DUP and Sinn Fein failed to meet Mr Brokenshire’s original Monday deadline for a deal, after Stormont had been effectively in limbo since January. Irish language rights and other cultural issues are the main sticking points.
‘Outstanding differences’
Mr Varadkar, speaking in Seattle, expressed concern Northern Ireland was “sliding towards direct rule” but said his Government was not giving up on the DUP and Sinn Féin resolving their outstanding differences.
“I think it’s important to say that there really isn’t a huge gap now between Sinn Féin and the DUP. I actually think there is enough common ground to allow the two parties to form an executive in Northern Ireland if the political will is there to do so,” he said.
"It is the position of the Irish Government that we can't support a return to direct rule in the form that existed prior to the Good Friday [BELFAST]Agreement," he added. "If it's not possible for the DUP and Sinn Féin to form a government in Northern Ireland and if the British government has to step in, direct rule is going to have to be different and we'll expect all of the provisions of the Good Friday Agreement to be honoured," said Mr Varadkar. – Additional reporting PA
