A united Ireland would cost €20 billion every year for 20 years, a new study suggests.
The report, by the Institute of International and European Affairs, said such an expense would require an increase in taxation of around 25% and/or a significant reduction in expenditure.
The costs are based on pre-pandemic 2019 figures and would be higher based on today’s figures.
Unification would add around 5% of modified Gross National Income (GNI) to the Irish Government’s deficit, according to the study.
If rerating of welfare payments and public sector pay rates in Northern Ireland (to align them with those in Ireland) were included, the cost would be almost 10% of modified GNI.
This would add a quarter to public expenditure in Ireland (total Government expenditure in Ireland currently amounts to around 40% of GNI), while producing a very limited increase in revenue.
To deal with the resulting deficit, which would be likely to persist for many years after unification, there would have to be a dramatic increase in taxation and/or a major reduction in expenditure south of the border.
“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,” report co-author and Co-Chair of the Institute of International and European Affairs Economists Group John FitzGerald said.
The authors argue that the cost of unification could be substantially reduced if Northern Ireland made major changes in its economy in order to raise its productivity.
If Northern Ireland chose to remain in the UK indefinitely, by reforming its economy it would greatly enhance its economic position within the UK.
This would result in a substantial improvement in its relative standard of living, the authors said.
Reform would reduce the Northern Irish deficit and, therefore, also substantially cut the costs associated with potential unification.
Under the most favourable circumstances, it is likely to be at least two decades before the productivity gap could be substantially narrowed, report authors said.
