By Esmond Birnie
Professor John Doyle, of Dublin City University, has made the case in a report published by ARINS (Analysing and Researching Ireland North and South) and the Royal Irish Academy. In 2023 I published a detailed response to his arguments in an article ‘Why the Subvention does matter’, in the academic journal Irish Studies in International Affairs, which wasin reply to John Doyle’s 2021 article in the same journal, ‘What Subvention does not matter’. Professor Doyle’s report claims that an all Ireland would be affordable from the Republic of Ireland point of view. The fiscal subvention (subsidy) Northern Ireland would require in year one would be as low as £1.5bn – or about £3bn once allowing for some additional investment in public services and a slow convergence between Northern Ireland and Republic of Ireland levels of public sector wages and welfare benefits (currently, public sector wages and benefit rates are much higher in the Republic of Ireland). Doyle is trying to forecast the future. We all know how unreliable economic forecasts tend to be. Add to that the difficulty of trying to predict the outcome of any negotiations between the UK government and the Irish government about the terms of unification. One of the reasons for being doubtful about Doyle’s report is his extreme optimism about how much of the tab the London government would continue to pay post-unity. He assumes that the UK government would continue to pay all the state and public sector pension liabilities accrued prior to unification. And he further assumes the UK government would take over Northern Ireland’s proportional share of UK public debt: that there would be no liability on Dublin to pay the interest on such debt. I could imagine the UK conceding one or the other but not both. Back in 1925 it is true that the London government cancelled any debt interest liability relating to the Irish Free State. That, however, was a special quid pro quo given a perceived need to conciliate Eire after it received an adverse result in the Boundary Commission. A second reason to doubt Doyle’s conclusion that the finances of a united Ireland would be very manageable is his assumption that a post-unity Dublin government could string out the convergence of Northern Ireland public sector wage and benefit levels with the Republic over the space of 15 years. Such slow speed convergence might make economic sense but it is unlikely to be politically viable. After all, remember the precedent set at German unification in 1990: the old East German Ost Mark was replaced by the West German Deutsche Mark at a one for one parity overnight without any transition period whatsoever. Whatever the economic impact, Chancellor Helmut Kohl was probably right about the electorate not being willing to wait for years. Doyle also, very optimistically implies that post-unity the Northern Ireland economy would move on to a much accelerated economic growth path akin to the high growth achieved by some Eastern European countries since 1990. Of course, it would be desirable if the Northern Ireland economy grew more rapidly. And as someone who did economic research in three former Communist bloc countries during 1991-95 I recognise their experience is very instructive. Unfortunately, Doyle’s report does not evidence how unity per se would be either a necessary or sufficient condition to achieve the desired higher growth. Doyle has failed to engage with the considerable evidence provided by experience under the Protocol/Windsor Framework since 2021 that the process of decoupling Northern Ireland from its current position as a regional economy imposes sizeable disruption effects on the economy. Whatever economic benefits followed from unity from the Republic these would have to be weighed against a level of disruption even greater than that associated with the so-called ‘Irish Sea Border’. To place Doyle’s claims into context, in mid 2024 the Office for National Statistics (ONS) published the latest figures about Northern Ireland’s net fiscal balance: the extent to which the UK government puts extra money into Northern Ireland (NI) beyond the taxes raised here. That regional fiscal deficit had been extremely large in 2020-21: £17.5bn. As the regional economy and society recovered from Covid the deficit fell to £13.85bn in 2021-22 but then increased to £14.2bn in 2022-23. The subvention increased by about £400m in cash terms in 2022-23 compared to the previous year. This confirms that Covid did indeed have long lasting effects on the extent to which NI was dependent on the UK Exchequer. Even when we allow for inflation and estimate the scale of the subvention in real terms, any return back to the pre-Covid (ie pre 2020-21 levels) has been very slow. The size of the subvention in 2022-23 prices, ie inflation adjusted, throughout the period since 1999, show that the net fiscal balance rose from £12 billion to £14 billion from 2020 to 2023 (peaking at £18 billion). And remember that the latest figures, for 2023-24, do not include the impact of the £3.3bn package which accompanied restoration of devolution at the start of 2024. These figures suggest, and it is something Doyle’s report does not really engage with, is the tenacity of the scale of Northern Ireland fiscal transfer from the rest of the UK. It has been growing over time. That growth in the transfer (subvention) has complex impacts on the Northern Ireland both good and bad but for sure it is not something that is going to be suddenly reduced to a few billion pounds under any constitutional scenario. l Dr Esmond Birnie is senior economist at Ulster University Business School