The year one cost of Northern Ireland in a United Ireland would be €3 billion, a report published by Dublin City University and Ulster University on Thursday, July 3, has claimed.
The cost, however, would break even within years five and nine, according to the report entitled "The Projected Public Finances of the Early Years of a United Ireland, and the Northern Ireland Subvention."
The figure of €3 billion takes into account the remaining ‘subvention’ that would transfer from the UK, additional public spending, and the cost of wage and pension convergence.
The deficit in public finances would last for between five and nine years, depending on economic growth, gradually declining over that time.
For context, the current tax / PRSI revenues are approximately €138 billion per annum in the Republic of Ireland and €26 billion per annum in Northern Ireland.
The report is the first peer-reviewed report to calculate the cost of unity over the first ten years which takes account not only of the subvention, but necessary investment and gradual economic convergence with the rest of the island.
The study models three different economic growth scenarios under which convergence with the South would take place, factoring in the remaining subvention and a recommended additional £1 billion in public spending to deal with needs in health education, welfare and infrastructure.
It also includes a gradual equalisation of public sector wages and a gradual transfer of pension costs in the calculation.
"No obvious reason why Northern Ireland would remain so much poorer"
“Much commentary on the Northern Ireland subvention fails to look at the detail of how it is constructed. It also fails to factor in growth," the report's author Professor John Doyle, Vice President for Research in Dublin City University said,
"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.
"Convergence with the more productive and wealthier Southern economy will take time, but the deficit will close much more quickly.
"An annual borrowing requirement of just over three quarters of one per cent of the GNI of a united Ireland, to cover a deficit for between five and nine years, or an increase in taxation revenues (based on economic growth or tax changes) of 1.8% above current combined revenue levels, or the creation of a future fund for unity at this scale is certainly affordable for the economy of a united Ireland.”
"A guide as to where we might get to"
Dr. Eoin Magennis, Project lead from Ulster University Economic Policy Centre of the UUEPC, added: “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.
"These scenarios offer a guide as to where we might get to. How to do that – through improving educational outcomes in NI or adopting different infrastructural choices – will mean a fresh set of choices needing to be made.”
The report - which can be read here - was produced under the All-Island Economy, a joint research programme between Dublin City University and the Ulster University Economic Policy Centre (UUEPC). The work is partly funded by the Ireland Funds.
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