New study reveals eye-watering cost of united Ireland | Politics | News

The initial cost of a united Ireland would be up to €20billion (£17.15billion) a year, according to a new study.

The research by the Institute of International and European Affairs (IIEA) think tank focuses on subvention, which is the shortfall between what is raised in taxes and the amount spent on public services.

Co-authors Professor John Fitzgerald and Prof Edgar Morgenroth conclude that the initial cost of absorbing Northern Ireland would “put huge financial pressure” on the people of Ireland “resulting in an immediate, major reduction in their living standards”.

The report looks at subvention for 2019 as the data for 2020 and 2021 is distorted by the Covid pandemic.

It estimates a cost of almost €11billion (£9.4billion) a year after adjusting the 2019 figures to reflect some changes a united Ireland would make.

But if social security benefits and public sector wages in Northern Ireland were immediately raised to match levels in Ireland the subvention would increase to more than €20billion a year for 20 years.

The authors said the “huge sum” is equivalent to 10% of national income.

They add: “To deal with the resulting deficit, which under the most favourable circumstances would persist for many years after unification, there would have to be a dramatic increase in taxation and/or a major reduction in expenditure.”

The cost of unification could be reduced if Northern Ireland makes changes to its economy to boost productivity, according to the report.

The paper concluded: “While the very low productivity of Northern Ireland’s economy continues to leave it among the poorest regions in the UK, it will have a very large fiscal deficit.

“Even though Ireland has a much higher national income, funding the needs of the people of Northern Ireland in a united Ireland would put huge financial pressure on the people of Ireland, resulting in an immediate major reduction in their living standards.

“If, instead, Northern Ireland made major changes in its economy designed to dramatically raise productivity, over time this would narrow the gap in living standards between Northern Ireland, the rest of the UK and Ireland.

“In turn, this would reduce the Northern Ireland deficit and also reduce the cost of applying similar standards in Northern Ireland to those in Ireland. This could substantially reduce the cost of unification.

“If Northern Ireland chose to remain in the UK indefinitely, by reforming its economy it would also greatly enhance its economic position within the UK, realising a substantial improvement in its relative standard of living.

“However, even under the most favourable circumstances with optimal policies, it is likely to be at least two decades before the productivity gap could be substantially narrowed.

“Nonetheless, the sooner such changes are implemented, the sooner the benefits will accrue to the people of Northern Ireland whether they remain in the UK or eventually join in a united Ireland.”

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