LAST UPDATE | 4 Apr
A UNITED IRELAND would cost €20 billion every year for 20 years according to a new research paper by the Institute of International and European Affairs think-tank.
The consequences of reunification would likely include large increases in taxation across the island with unification, substantial cuts to public expenditure, increases in social welfare spending and a financial burden placed on the six counties.
According to the researchers, Northern Ireland can offset the financial impacts by increasing productivity in its own economy.
But the experts believe it will take two decades for productivity in both economies to begin aligning, and a considerable amount of time before Northern Ireland see the benefits of being in the European single-market.
The researchers suggest that there would be a “dramatic increase” in taxation of around 25% across the island, with the bulk of contributions coming from the Republic’s 26 counties.
The figures, which are based on those from 2019, also show that matching social welfare payments post-unification would cost the State 10% of the modified Gross National Income, as Northern Ireland would only add 5%.
The researchers suggest the preferred method that the northern counties can aim to reduce these costs would be to increase its productivity to make major changes to its own economy first.
Co-chair of the Institute, John FitzGerald, said: “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.”
The authors of the report said even if the preferred methods are followed and the Northern Irish economy manages to reduce its own deficits, “it is likely to be at least two decades before the productivity gap could be substantially narrowed”.
The study suggests that separating Northern Ireland from the British economy would likely lead to a substantial financial burden being put on the six counties and it would take “some considerable time” for the costs to be offset by the European market.
Fellow-author Edgar Morgenroth said: “Also, under the Windsor Framework, Northern Ireland currently enjoys some of the benefits of EU membership insofar as it affects goods produced in Northern Ireland.”
Seamus McGuinness, Research Professor of Economics at the ESRI, has disputed the estimates of the subvention in the report as “problematic”.
He noted that the report takes a “static view of the world”.
“The estimate of €20 billion assumes that [a] border poll takes place on a Friday, everything transfers on a Monday,” McGuinness said.
He said it’s “not a realistic set of assumptions”, adding: “What happens in terms of any major constitutional reform, there will be a transition period and there needs to be a planning for a transition period.”
McGuinness said subvention is “not something that is set in stone that can’t be changed by policy”.
He said the cost of €20 billion “would only be possible if there was no planning for reunification and the Irish Government agreed to hold a border poll with absolutely no planning for a post-reunification scenario”.
With reporting by Hayley Halpin
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