Unification would unleash full potential of all-island economy

The issue of Irish unity is now a matter of almost daily conversation. This is in no small part due to the chaotic Brexit brinkmanship advanced by the DUP and the Tories in Westminster.

It is also down to the calls by academics, economists and political leaders north and south to urgently prepare for a referendum on Irish unity. The call was repeated again a fortnight ago by the head of the ESRI, the Irish government’s own research council.

However, there is no doubt that concerns exist among many about the so-called £9bn ‘subvention’ in the north. They want to know, is

Irish unity economically viable?

The answer is yes. Each year the British Office of National Statistics (ONS) publishes their ‘Country and Regional Public Sector Finances’, and of late Sinn Fein have engaged with the ONS to break down the finances in the north of Ireland. For 2017-18, the ONS state that £26.463bn was spent in the north of Ireland, while £17.3bn was raised in taxes.

The difference between these two figures (about £9bn) is what people believe to be the subvention — this simply isn’t the case.

To start, the total £26.463bn is broken down into grimly jargonistic categories of ‘Total Identifiable Expenditure’, ‘Total Non-identifiable Expenditure’, ‘Total Outside the UK Expenditure’ and ‘Accounting Adjustments’. So let’s put plain English to this.

‘Total Identifiable Expenditure’ is money we know for certain is spent in the north of Ireland, by the Assembly, local councils and on pensions, directly on public services and benefits. In 2017-18 it was £20.934bn. Importantly, £3.4bn of this figure is paid out in pensions each year.

This would remain the responsibility of the British government in the event of Irish unity, and is already the case for many people living in the south of Ireland who receive a British pension, having paid national insurance contributions during their working life.

Then there is about £2.7bn of ‘Total Non-Identifiable Expenditure’. Here the subvention figure begins to come apart. This is money spent directly by the British government in Westminster, and the North receives a bill based on population share.

Some £1.1bn of this spending is the cost the North is made to pay to service the British military. To put this in context, the total Defence spending of the

Irish state, with three times the northern population, is just €900m (around £775m). A further £1.27bn of ‘non-identifiable’ spending is attributed to the North to service Britain’s colossal £1.8trn national debt.

This cost would be subject to post-unity negotiations, and when it is, a firm principle must be followed — if the North is made to retain liability for British debt, then it must gain the exact same proportion of British-owned assets.

Next is £679m in ‘Total Outside the UK’ spending, spent by Westminster on British embassies and political activities abroad.

These are services that already exist in Ireland, and as such this spending wouldn’t apply in a united Ireland.

A portion also goes towards social protection payments for British citizens living abroad, and none of this spending would be applicable post-unity. Then we look at £2.7bn in what are called ‘Accounting Adjustments’, a statistical exercise that is beyond the scope of this article.

Suffice to say, this is another inflated spending item.

Finally, on the taxation side, researchers estimate that corporation tax in the North is underestimated to the tune of £500m.

This is due to the fact that companies in North pay tax directly to Britain, and it is reattributed to the North on the basis of population share, as opposed to the actual profits gained there.

So what does all of this mean? In the event of Irish unity, £1.1bn of spending on the British military wouldn’t exist, and almost all of the £679m ‘Outside the UK’ spending would vanish.

Furthermore, when £3.4bn of pension payments are removed, and additional corporation tax is factored in, the mythical subvention figure of £9bn could be slashed by at least £5bn. The remaining £4bn could easily be subsumed into the public finances of the Irish state over time.

In recent years, Ireland has been among the fastest growing economies in the world.

Moreover, two economic reports by Dr Kurt Hubner model an Irish unity dividend, one of which points to an additional €23.5bn for the island economy in a post-Brexit scenario.

The economic case for Irish unity is evidence based and clear-cut.

The £9bn subvention figure is a myth designed to paralyse debate on Irish unity, and few people who use the figure actually understand it.

Irish unity will reduce costs in the north and unleash the potential of the all-island economy within the European Union.