The cost of a united Ireland would be €3bn in the first year, with any additional financial burden disappearing entirely within a decade, according to a new report.
The academic research argues that the initial public spending deficit for the north inside a newly-unified 32-county state would be in the region of £1.5m – roughly one-tenth of the often quoted £10bn subvention figure.
Based on the expectation of a boost in public spending of up to €1bn-a-year by the Dublin government, coupled with phased public sector wage increases to bring employees in the north into line with their southern counterparts, the report concludes that the cost of unity would be a relatively modest €3bn in the first year.
It says the deficit in public finances would last for between five-to-nine years, depending on economic growth, but would decline gradually over the same period.
Author Professor John Doyle, whose research is part of a collaborative programme involving Dublin City University and Ulster University, makes his arguments in the context of the Republic’s current tax/PRSI revenues of approximately €138bn a year.
His report is the first peer-reviewed study calculating the cost of unity over the first decade, taking account not only the subvention but expected investment and gradual economic convergence.
Its calculations include the gradual equalisation of public sector wages, along with the steady transfer of pension costs.
Prof Doyle said much of the commentary around the cost of Irish unity fails to look at the detail of how the subvention is constructed.
The author argues that when pension costs, interest payments on UK national debt and defence spending are subtracted, the required subvention is around £1.5m.
DCU’s Professor John Doyle
He also believes that anticipated economic growth is rarely factored in.
“With the same set of policies on education, infrastructure, tax and foreign direct investment, there is no obvious reason why Northern Ireland would remain so much poorer and so much less economically productive that, for example Munster,” he said.
“Convergence with the more productive and wealthier Southern economy will take time, but the deficit will close much more quickly.”
Dr Eoin Magennis of UU’s Economic Policy Centre said: “A key element of any debate about the Northern Ireland subvention or indeed investment in public services is how the NI economy can be shifted onto a higher growth trajectory with not only more jobs but better ones, and a significant improvement in productivity.
“This paper sets out the ambitious level of growth needed to close gaps in public finances but also the time that will be needed to produce such a necessary convergence.”
Sinn Féin finance spokesperson Pearse Doherty welcomed what he termed “the clear recognition in this research that the cost of unity has been exaggerated because the subvention has been misunderstood and misinterpreted”.“This comprehensive research has delivered a fatal blow to economic arguments against a united Ireland,” the Donegal TD said.
Former SDLP leader Colum Eastwood, who chairs the party’s New Ireland Commission described the report as a “rigorous and substantive exploration of the initial costs of unification and the path toward economic convergence”.
The Foyle MP said it examined the “opportunities for growth as well as ongoing liabilities for a new state”.
“It provides clear evidence, based on a range of economic models, that uniting Ireland has enormous potential to improve outcomes, quality of life and opportunities for people in the north,” Mr Eastwood said.
“That is an exciting prospect and a much needed antidote to the politics of despair and deadlock that has gripped the north and Britain.”