Northern Ireland Secretary James Brokenshire introduced the budget with "the utmost reluctance" and said there was "no other choice" after the failure of months of efforts to bring the two sides in Belfast's power-sharing assembly together.
"My strong preference would be for a restored executive in Northern Ireland to take forward its own budget," he told MPs during a debate.
Northern Ireland has been without an executive for more than 10 months.
Its two largest parties -- the Democratic Unionist Party (DUP), currently in a coalition with his ruling Conservative Party, and the nationalists Sinn Fein -- have failed to agree on a power-sharing executive, wrangling over several issues including an Irish language law.
Brokenshire, who has warned for weeks that Westminster would be forced to step in, said the budget was needed to keep public services running.
Opposition political parties in Westminster supported the budget bill but voiced concerns.
"If this is not direct rule, this is getting perilously close to it," Owen Smith, Labour's shadow Northern Ireland secretary, told MPs.
"Direct rule would be a massive backwards step," he said, adding the province was now entering a "twilight zone between devolution and home rule."
Simon Coveney, Ireland's foreign minister, said he was "deeply disappointed" months of negotiations had not yielded a deal.
"The issues under discussion -- particularly those on language and culture -- go to the heart of the divisions in society in Northern Ireland and so agreement on them is always going to be very challenging," he said.
Coveney said he remained confident an agreement could be reached on the basis of the 1998 peace accord that first devolved government to the province. -- AFP