Common Ground

Price of united Ireland: Bringing North’s welfare up to scratch presents cost challenge

Irish unification will cost hundreds of billions over decades, according to a new economic report

Welfare rates and public sector pay rates are substantially higher today in the Republic than in the North and it would cost taxpayers in the South more than €10bn a year to equal rates in the event of unification. Photograph: iStock

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Mark Hennessy
Thu Apr 4 2024 - 06:00

More than 50 years ago, Dr Garret FitzGerald wrote a highly regarded work, Towards a New Ireland, that examined the challenges that would have to be faced if the island was ever to unite.

The book reflected the times, peppered with references to Northern Ireland’s then substantially higher public spending, especially welfare. Matching such rates in a united Ireland would send southern tax rates spiralling, wrote FitzGerald, a decade before he became taoiseach.

“It is quite bluntly, economically impossible for the Republic to take on such a burden,” he wrote.

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Today, his son, noted economist John FitzGerald and Prof Edgar Morgenroth have authored a paper for the Institute of International and European Affairs that looks at the challenges unification poses.

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Fifty years on, the challenges have reversed. Welfare rates and public sector pay rates are substantially higher today in the Republic, so much that it would cost taxpayers in the South more than €10 billion a year to equal rates.

In all, unification would cost between €10 and €20 billion a year for at least 20 years, though the academics pointedly note that the issues raised by German unification have still not been fully resolved more than 30 years on.

“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,” warns Mr FitzGerald bluntly.

State spending in a united Ireland would rise sharply but produce only “a very limited increase in revenue”, the two academics warn in a paper that will, no doubt, be hotly contested.

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“To deal with the resulting deficit, which would be likely to persist for many years after unification, there would have to be a dramatic increase in taxation and/or a major reduction in expenditure south of the Border,” they went on.

Both academics dismiss the belief that His Majesty’s Treasury would continue its £11 billion (€12.9 billion) a year subvention, even though there are many who argue that such payments would last for years, if on a declining scale.

FitzGerald rejects the “incredible faith” held by some that London would do so, arguing that such an outcome would set a benchmark for those pushing for Scottish independence that would be utterly rejected by London.

In addition, the united Ireland would have to pay the £2.5 billion-a-year pension bill due to people living in Northern Ireland because the UK pension system is funded on a pay-as-you-go system, he argued.

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In addition, such negotiations would take place after referendums had taken place and been passed separately in Northern Ireland and the Republic, so Dublin would have “lost all our bargaining power because it’s going to happen anyway”.

In addition, FitzGerald doubts that the United States or the European Union would pick up some of the tab: “Ireland, remember, is one of the richest countries in the world and when so many are cross with us about corporation tax [that] is highly improbable,” he argued.

Unification would “cost an awful lot of money”, he told The Irish Times: “You might get a billion here or a billion there, but it’s not going to make the difference. It’s unlikely that we’re going to get a lot of sympathy. Short-term gesture but long term, I think, is unlikely.”

However, the costs could be reduced if Stormont did things now to reduce education discrimination that faces poorer-off children that sees them leave school earlier, with lower qualifications, and encourage graduates to stay at home.

“It is a major problem. It discriminates against kids from working-class backgrounds, Catholic and Protestant. They leave school early, and this has a big impact on productivity,” FitzGerald went on.

The 11+ exams in Northern Ireland, which divides pupils between secondary and grammar schools, were abolished in 2008, replaced by the so-called transfer test: “They just select by other criteria today. If you’re a really bright working-class kid now it may even be more difficult to get into grammar school,” he said.

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Education is the “single” most important change that could be made, but it could take 20 years to pay off, he said, noting that free second-level education, introduced in 1967 in the Republic, brought benefits “from 1990 onwards. So, it’s a long haul.”

Making change, however, is difficult because there is “huge opposition” to integrating secondary and grammar schools because “middle-class parents get their kids into grammars and the vast bulk of them go on to university, so it’s great for them”.

Large numbers in Northern Ireland go to third level, but many – especially from a Protestant background – go to British colleges and never come back because they do not want to live in a polarised society: “If you want big progress quickly, you’ve got to persuade a lot of them to come back.”

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