Let me cut to the chase: the report into the financial consequences of Irish unity from Professors John Fitzgerald and Edgar Morgenroth for the Institute of International and European Affairs in Dublin, published yesterday, is a farrago of nonsense.
Nevertheless, it has dominated a slow news week, with the good professors offering a series of contentious assumptions about the costs of Irish unification, speculatingthat it could be as much as €20 billion a year – for twenty years!
Wow, it’s almost enough to make me think twice.
I should clarify that it’s not really a report in the strictest sense. It’s set out like one, granted, but measures only eleven pages. Take out the front cover and back page and a series of charts and you are left with around four pages of text, amounting to just over 3,000 words.
In essence, it’s a glorified blogpost, rehearsing the academics’ now familiar position that Irish unity is wildly unaffordable and will drive southern Irish voters into penury.
I paraphrase, but only slightly.
Fair enough, there are costs to reunification, but the professors are seriously wrong in two important regards.
First, they base their calculations on a gigantic assumption, namely, that the full amount of the current subvention from the British exchequer that helps keeps Northern Ireland solvent (around €10 billion a year) is passed straight across to the new, unified Irish state.
For instance, they assume that a united Ireland will inherit a share of UK debt obligations, citing the example of Scotland back in 2014 which was threatened with this parting gift during the independence referendum campaign, or ‘Project Fear’ as it became known.
‘This is likely to set a precedent for any eventual departures from the UK, whether it is Scotland or Northern Ireland,’ they argue. Unconvincingly, I might add.
Westminster regards Scotland as an asset to maintain – hence the threat. Northern Ireland is viewed quite differently and is subject to a treaty (the Good Friday Agreement) that guarantees a smooth transition of sovereignty, if that is what the public votes for.
Trust me, no British government will want to hold up this process for the sake of an issue as ultimately trifling as a debt payment.
The professors also calculate that Northern Ireland’s €3.5 billion state pension costs will be immediately transferred to Dublin. Now it is true, as some commentators assert, that British pensions are paid out of current UK government expenditure, but this ignores the fact that entitlement to a state pension is actually based on an individual’s previous contributions. (This is why 1.2 million British pensioners living abroad are eligible).
There is no reason to suggest people in Northern Ireland transferring into a new Irish state would be treated differently. (New pensioners in a united Ireland would, of course, need to be paid by the new Irish state). The upshot is that if there is a financial black hole about who pays for Northern Irish pensions, then it seems logical that in the first instance it will be Britain’s, not Ireland’s to address.
Perhaps the best way of viewing Fitzgerld and Morgenroth’s analysis is to imagine going to a restaurant, eating a meal and then being given a bill that also includes the costs of the plate, cutlery, table and chair.
So, ten billion to replace the British contribution, like for like, with another ten billionor so to bring Northern public sector pay up to southern levels. There may well be some uprating needed, but this is tied to a host of other considerations, such as what shape this new Irish state will take, including its future healthcare model, and the impacts of deduplicating civil service and local government functions. The overall cost figure is a known unknown.
To simply bolt theoretical costs together like Lego bricks and arrive at big, dramatic figures – without showing awareness of some of the complex changes to the Irish economic and policy landscape that will take place – is plain silly.
Professor John Doyle from Dublin City University is also an authority on the matter, albeit his calculations draw very different conclusions. In a paper for the Royal Irish Academy in 2021, he argued that the transfer costs amounted to €2.8 billion a year, which, given the performance of the Irish economy in recent years, would be easily absorbed.
Fitzgerald and Morgenroth’s second flaw is to ignore the effects of all-islandintegration, which, as economic modelling from Dr Kurt Hübner has previously shown, would throw out tens of billions of added wealth for the newly unified country over the first few years.
Indeed, it is likely that the benefits of Irish unity – predicted to break 2:1 in the North’s favour – would see the equivalent of an economic adrenalin shot administered, with immediate, positive effects in terms of productivity, investment, jobs and tax receipts.
After all, Northern and southern Ireland are bedevilled by equal and opposite problems. The former is overheating, with a lack of land, housing and labour. The latter is underperforming, with an abundance of the same variables.
Irish unity is an economic match made in heaven.
But their paper ignores all this.
In fact, it states quite baldly that ‘[t]hroughout this note no account is taken of the wider economic effects of Irish unification, effects which would themselves have major implications for the public finances…’
This is an extraordinary admission and renders the professors findings about the overall costs deeply problematic, to put it politely.
Still, we should be grateful. Four years ago, these economic Cassandras produced a similar calculation, estimating the cost of Irish unity was actually €30 billion and would lead to ‘calamitous unemployment and emigration.’
Who knows, on current trends, perhaps they will have whittled-down the bill to €10 billion by 2028?
The essential truth, however, is that you cannot estimate future financial liabilities between states with any precision before a negotiation between Dublin and London takes place about what is and is not in-scope for a newly reunified island of Ireland.
In which respect, Fitzgerald and Mongroth put the cart before the horse with their authoritative sounding, but ultimately flawed speculations.
The politics must come before the economics.
But here’s a prediction.
The British government of the day, mindful of its responsibilities under the Good Friday Agreement, will approach the discussion not in a state of animus as the academics seem to believe, but with an eye on making this transition a success.
Southern Ireland is already Britain’s fourth largest export market. It would be the height of folly to do anything that damaged that relationship.
Frankly, Britain will be glad to be shot of Northern Ireland (as polls of the British public repeatedly suggest), and, whatever the transitional costs, will be eyeing up the massive long-term savings that will be realised once it is finally off the books.
Kevin Meagher is the author of ‘A United Ireland: Why Unification is Inevitable and How it Will Come About’
Let me cut to the chase: the report into the financial consequences of Irish unity from Professors John Fitzgerald and Edgar Morgenroth for the Institute of International and European Affairs in Dublin, published yesterday, is a farrago of nonsense.
Nevertheless, it has dominated a slow news week, with the good professors offering a series of contentious assumptions about the costs of Irish unification, speculatingthat it could be as much as €20 billion a year – for twenty years!
Wow, it’s almost enough to make me think twice.
I should clarify that it’s not really a report in the strictest sense. It’s set out like one, granted, but measures only eleven pages. Take out the front cover and back page and a series of charts and you are left with around four pages of text, amounting to just over 3,000 words.
In essence, it’s a glorified blogpost, rehearsing the academics’ now familiar position that Irish unity is wildly unaffordable and will drive southern Irish voters into penury.
I paraphrase, but only slightly.
Fair enough, there are costs to reunification, but the professors are seriously wrong in two important regards.
First, they base their calculations on a gigantic assumption, namely, that the full amount of the current subvention from the British exchequer that helps keeps Northern Ireland solvent (around €10 billion a year) is passed straight across to the new, unified Irish state.
For instance, they assume that a united Ireland will inherit a share of UK debt obligations, citing the example of Scotland back in 2014 which was threatened with this parting gift during the independence referendum campaign, or ‘Project Fear’ as it became known.
‘This is likely to set a precedent for any eventual departures from the UK, whether it is Scotland or Northern Ireland,’ they argue. Unconvincingly, I might add.
Westminster regards Scotland as an asset to maintain – hence the threat. Northern Ireland is viewed quite differently and is subject to a treaty (the Good Friday Agreement) that guarantees a smooth transition of sovereignty, if that is what the public votes for.
Trust me, no British government will want to hold up this process for the sake of an issue as ultimately trifling as a debt payment.
The professors also calculate that Northern Ireland’s €3.5 billion state pension costs will be immediately transferred to Dublin. Now it is true, as some commentators assert, that British pensions are paid out of current UK government expenditure, but this ignores the fact that entitlement to a state pension is actually based on an individual’s previous contributions. (This is why 1.2 million British pensioners living abroad are eligible).
There is no reason to suggest people in Northern Ireland transferring into a new Irish state would be treated differently. (New pensioners in a united Ireland would, of course, need to be paid by the new Irish state). The upshot is that if there is a financial black hole about who pays for Northern Irish pensions, then it seems logical that in the first instance it will be Britain’s, not Ireland’s to address.
Perhaps the best way of viewing Fitzgerld and Morgenroth’s analysis is to imagine going to a restaurant, eating a meal and then being given a bill that also includes the costs of the plate, cutlery, table and chair.
So, ten billion to replace the British contribution, like for like, with another ten billionor so to bring Northern public sector pay up to southern levels. There may well be some uprating needed, but this is tied to a host of other considerations, such as what shape this new Irish state will take, including its future healthcare model, and the impacts of deduplicating civil service and local government functions. The overall cost figure is a known unknown.
To simply bolt theoretical costs together like Lego bricks and arrive at big, dramatic figures – without showing awareness of some of the complex changes to the Irish economic and policy landscape that will take place – is plain silly.
Professor John Doyle from Dublin City University is also an authority on the matter, albeit his calculations draw very different conclusions. In a paper for the Royal Irish Academy in 2021, he argued that the transfer costs amounted to €2.8 billion a year, which, given the performance of the Irish economy in recent years, would be easily absorbed.
Fitzgerald and Morgenroth’s second flaw is to ignore the effects of all-islandintegration, which, as economic modelling from Dr Kurt Hübner has previously shown, would throw out tens of billions of added wealth for the newly unified country over the first few years.
Indeed, it is likely that the benefits of Irish unity – predicted to break 2:1 in the North’s favour – would see the equivalent of an economic adrenalin shot administered, with immediate, positive effects in terms of productivity, investment, jobs and tax receipts.
After all, Northern and southern Ireland are bedevilled by equal and opposite problems. The former is overheating, with a lack of land, housing and labour. The latter is underperforming, with an abundance of the same variables.
Irish unity is an economic match made in heaven.
But their paper ignores all this.
In fact, it states quite baldly that ‘[t]hroughout this note no account is taken of the wider economic effects of Irish unification, effects which would themselves have major implications for the public finances…’
This is an extraordinary admission and renders the professors findings about the overall costs deeply problematic, to put it politely.
Still, we should be grateful. Four years ago, these economic Cassandras produced a similar calculation, estimating the cost of Irish unity was actually €30 billion and would lead to ‘calamitous unemployment and emigration.’
Who knows, on current trends, perhaps they will have whittled-down the bill to €10 billion by 2028?
The essential truth, however, is that you cannot estimate future financial liabilities between states with any precision before a negotiation between Dublin and London takes place about what is and is not in-scope for a newly reunified island of Ireland.
In which respect, Fitzgerald and Mongroth put the cart before the horse with their authoritative sounding, but ultimately flawed speculations.
The politics must come before the economics.
But here’s a prediction.
The British government of the day, mindful of its responsibilities under the Good Friday Agreement, will approach the discussion not in a state of animus as the academics seem to believe, but with an eye on making this transition a success.
Southern Ireland is already Britain’s fourth largest export market. It would be the height of folly to do anything that damaged that relationship.
Frankly, Britain will be glad to be shot of Northern Ireland (as polls of the British public repeatedly suggest), and, whatever the transitional costs, will be eyeing up the massive long-term savings that will be realised once it is finally off the books.
Kevin Meagher is the author of ‘A United Ireland: Why Unification is Inevitable and How it Will Come About’