Northern Ireland’s failure to introduce compensation payments for victims of the Troubles is disappointing and frustrating, the UK Government has said.

Innocent people injured during the years of terrorist violence had waited too long for financial help, and the devolved administration “must deliver”, a minister told peers.

In the absence of a functioning Northern Ireland Executive at the time, legislation was passed at Westminster requiring a pension scheme to be up by the end of May.

Victims have waited too long for these payments. The Government provided a legislative framework for it and the Executive must deliver

But there is a stalemate over funding the compensation system, with Stormont arguing it should be the UK Government which pays, while London insists it should come from Northern Ireland’s block grant.

Viscount Younger of Leckie said: “The Government takes this matter most seriously. We are extremely disappointed by the current delay.”

Pointing out that the Secretary of State had held talks with both the First Minister and Deputy First Minister on the issue, he added: “We have been offering and providing all appropriate support to help progress this scheme.

“Victims have waited too long for these payments. The Government provided a legislative framework for it and the Executive must deliver.”

Tory peer Lord Caine, who served as a special adviser to six secretaries of state for Northern Ireland, said: “Victims and survivors who have campaigned for so long and with such dignity will be rightly angry and devastated by the latest setback.”

He said it was “always envisaged” any scheme would be run by the Northern Ireland Executive and financed through the “substantial” block grant it received.

Lord Younger said: “The funding of the scheme is to come from the block grant. As this is a devolved matter, devolved matters are funded through the block grant.

“Meetings are happening… particularly at the most senior levels.”

He said the Secretary of State had met on Tuesday with the Northern Ireland leadership.

Labour former Northern Ireland secretary Lord Hain stressed the need to “break the deadlock”, hitting out at the Executive’s “shameful failure” to have a scheme in place, as required by law.

He said: “Surely it would be a terrible failure of politics if these elderly, vulnerable victims are forced to judicial review to make Northern Ireland’s ministers honour their legal obligations.”

Lord Younger said: “It’s extremely disappointing we have this delay. We are doing our utmost to move this forward.”

Tory former Northern Ireland minister Lord Duncan of Springbank recalled the “great efforts” made to ensure payments could be made at the earliest date, which had now passed.

Surely it would be a terrible failure of politics if these elderly, vulnerable victims are forced to judicial review to make Northern Ireland's ministers honour their legal obligatio

He said: “Frankly, that is shameful. We knew how much it was going to cost, we knew how much it would be to administer it, and we have let the ball slip from our fingers.”

Pressing for an urgent resolution, Lord Duncan said: “Every single day is a day too long for those poor victims.”

Lord Younger said: “We must put these political disagreements to one side and go ahead as soon as possible and make these payments.”

He added: “This is being dealt with now as a matter of urgency.

“It is not just disappointing but very frustrating for all concerned, particularly the victims, that these payments have been delayed.”