THE financial cost of a united Ireland could be between €8bn and €20bn a year, according to a new study.
Researchers at the Institute of International and European Affairs (IIEA) have published a paper which focuses on subvention – meaning the shortfall between what a nation raises in taxes and what it spends on public service.
This particular study examines what would happen in a united Ireland scenario based on Northern Ireland’s financial history.
Authors Professor John Fitzgerald and Professor Edgar Morgenroth argue that the Republic of Ireland would be put under “huge financial pressure” by absorbing Northern Ireland.
However, the authors do suggest that in the long-term the cost of unification could be substantially reduced if Northern Ireland made major changes in its economy in order to raise its productivity.
“While the very low productivity of Northern Ireland’s economy continues to leave it among the poorest regions in the UK, it will have a very large fiscal deficit,’ the report states.
“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,” it adds.
The report goes on to suggest a more positive outlook could be achieved under unification.
“If, instead, Northern Ireland made major changes in its economy designed to dramatically raise productivity, over time this would narrow the gap in living standards between Northern Ireland, the rest of the UK and Ireland.
“In turn, this would reduce the Northern Ireland deficit and also reduce the cost of applying similar standards in Northern Ireland to those in Ireland.
“This could substantially reduce the cost of unification.”
The findings also warn that economic changes are vital to preserve the future of Northern Ireland regardless of whether it remains in the UK or reunites with the Republic.
“If Northern Ireland chose to remain in the UK indefinitely, by reforming its economy it would also greatly enhance its economic position within the UK, realising a substantial improvement in its relative standard of living,” the authors state.
“However, even under the most favourable circumstances with optimal policies, it is likely to be at least two decades before the productivity gap could be substantially narrowed,” they add.
“Nonetheless, the sooner such changes are implemented, the sooner the benefits will accrue to the people of Northern Ireland whether they remain in the UK or eventually join in a united Ireland.”
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