Cost of united Ireland would be ‘heavy’ for north and south, TCD economists warn

Top Irish economists have warned that a united Ireland could cause “a major cut in the standard of living” of 5% to 10% in the Republic of Ireland.

Wednesday, 18th September 2019, 7:30 am

Whatever the approach to unification, they said, the outcome would be “a heavy economic cost” both north and south.

The warning came from Trinity College Dublin economists John FitzGerald and Edgar L W Morgenroth in their new paper, The Northern Ireland Economy: Problems and Prospects.

While ostensibly analysing the structure and future of the NI economy, the paper also examines the possible impact of a united Ireland.

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Their conclusions will add to ongoing discussions about the prospects of a north-south poll on unification.

Pro-unification voters in NI could face “a dramatic fall” in their standard of living to attain such a dream, the economists warned, while pro-unification voters in the south could also have to swallow “a major cut in the standard of living” in the order of 5-10%, they warned.

When asked last year, the Irish government declined to tell the News Letter whether it had ever done an economic feasibility study on the prospect of Irish unification.

Republicans and unionists have varied in their estimates of how much it would cost to finance NI annually, ranging from £10bn to almost zero.

The report by the economists said: “Irish unity, if it involved ending transfers [of finance from Britain] to Northern Ireland, would produce a dramatic fall in the standard of living there.

“Alternatively, unification, where Ireland took over responsibility for the transfers [of finance] to Northern Ireland, would necessitate a major cut in the standard of living in Ireland of 5% to 10% in order to allow Northern Ireland to maintain a standard of living between 10% and 20% above the Irish standard of living.”

There is no way around the huge impact on standard of living for voters both north and south, they warned. “Whatever form Irish unity took there would be a heavy economic cost for both Northern Ireland and Ireland.”

Northern Ireland economist Esmond Birnie told the News Letter that in broad terms he endorsed the analysis. In particular, he agreed that whatever economic approach was taken to unification, it would be “problematic”.

Mr Birnie told the News Letter last year that NI receives about £10bn in net funding annually from the UK exchequer.

“A case can be made that post-unity a Dublin government would not need to make quite so large a transfer,” he said, adding if NI’s contribution to UK defence and diplomacy is removed, the figure could be argued to be as low as £6bn.

But even then, Dublin would still have to raise £6bn annually, which would equate to £1,250 per man woman and child every year, he said.

“Either they pay more taxes, borrow more or accept less money will be spent on public services within the former Republic of Ireland,” he said.

There is a tendency for some commentators to assume the UK would continue to subsidise NI, he added. “But is that a realistic assumption?”

Last year DUP MP and former finance minister Sammy Wilson said that unification is “not viable” in economic terms.

However, it was understood at that time that Dublin had never published a formal feasibility study on the matter. Asked to comment last year by the News Letter, the Irish government declined to offer any comment on a feasibility study.

Sinn Fein, however, dismissed the “unaffordability myth” of unification and claimed that the annual UK subvention to NI could be as low as £2.7billion.

But Fianna Fail Senator Mark Daly, who had been leading research into unification, went further, claiming that NI actually “comes close to a balanced budget”.

Mr Wilson added: “Sinn Fein’s fantasy figures will convince only themselves. When HM Treasury produces evidence Sinn Fein does not like it is simply dismissed by a party who held the finance department [at Stormont] but could not even produce a budget.”