Fiscal implications of a united Ireland

Taxation and spending

Sir, – There are three main flaws in John FitzGerald’s analysis of the fiscal implications of a united Ireland (“Fiscal implications for a united Ireland are stark”, Business, Opinion, December 1st). First, the North’s “fiscal deficit” is the outcome of decisions on taxation, 96 per cent reserved by Westminster, as well as spending, also under London control. In modelling the future, it is important not just to take account of changes in public sector wages and social welfare payments, but also the Irish tax regime for businesses and workers which will raise more from the North than the British tax regime does at present.

Second, the assumption that unity will result in a negative shock to the North’s economy runs counter to the work of other economists who predict the opposite. Besides, why express the “cost of supporting Northern Ireland” solely in terms of the Republic’s national income, as if the North has none? Whatever the cost of unity, it will be shared across the island.

Third, on the specific issue of state pensions, Britain and Ireland agreed a Convention on Social Security which came into force at the beginning of 2021. The core of this is an agreement to recognise and honour the past social/national insurance contribution records of workers no matter which jurisdiction they end up living in. The British treasury currently pays state pensions to over 130,000 people in the Republic, an entitlement determined by the history of insurance contributions paid under the British system during their working lives. There is no reason to believe that, in the event of Irish unity, Britain would stop paying these pensions or current pensions in the north (about 298,000), and there is no case to be made for a new Irish state to assume financial responsibility for them. If, however, Britain did “renounce” the convention, article 67 states that “any right to benefit acquired by a person in accordance with this convention shall be maintained”. – Yours, etc,