In 1921 when the British partitioned Ireland they retained control of the six north east counties. This gave them an influence over the entire island. It also provided their unionist allies with what they thought would be a permanent in built majority. At that time Belfast and its hinterland was the economic power house of this island. Just over £21 million was generated by the Irish economy. Of this £19 million came from the North. The territory was a net contributor to the Empire and British economy. It was financially worth holding on to.
In the years after direct rule was imposed in 1972 there has been a focus on the so-called British subvention. This is the additional money – beyond that raised in taxes in the north – that unionists and the British claim is needed to run the six counties. The figure of £10 billion is usually peddled in this context. Some advance this as a reason why Irish Unity is impossible. How could the southern economy financially accommodate the northern state?
Let’s be clear. The issue of Irish Unity is primarily a political argument. Not an economic one. However, in recent months Sinn Féin’s Finance spokesperson Pearse Doherty TD and his team have been systematically demolishing this argument based on figures produced by the British government’s Office for National Statistics (ONS).
Their first conclusion was that there is no £10bn subvention. This was always only an estimate. When you take the money generated by tax in the North (£17.3bn) away from the £26.463bn that is allocated, the real subvention figure is just over £9bn. An immediate saving of almost one billion.
There are then a number of expenditure categories. These are:
Total Identifiable Expenditure
Total Outside the UK Expenditure
Total Non-identifiable Expenditure
Total Identifiable Expenditure is the amount spent directly in our locally elected institutions (Assembly/Executive and local Councils). In other words, this is money spent on our local services. In 2017-18 it was £20,934 bn.
Included in this figure is £3.4bn that is spent on pensions. This derives from national insurance contributions which citizens in the North have paid throughout their lives. When this issue was raised during the Scottish independence referendum the London government accepted that in the event of independence it would continue to have responsibility for this. The North would be no different.
Total Non-identifiable Expenditure is money spent by the British government centrally in Westminster, on British priorities. 85% of this is spent on two issues. Maintaining the British military machine costs the people of the North £1.1bn annually. This £1.1bn to fund British Forces will end after people in Ireland vote to end the union. Clearly any amount paid by the North toward defence in a new Ireland would be substantially less. The other big spender is payments of £1.3bn toward the British national debt. In any negotiation on Unity any responsibility that the North might have for the debt would also mean that we would have a share in British assets.
Other amounts fund the British Royal Family and Palaces, the Civil List, international diplomacy, Military Museums and other items. This would end also.
Total Outside the UK expenditure is exactly that. It is money the British government spends on its international priorities outside of the North and Britain. This amounts to £679 million. These costs would not be applicable in the event of Unity.
Accounting adjustments of two and a half billion are a statistical exercise by London to accommodate the depreciation in value of its public infrastructure most of which is in Britain. There would be a significant saving for Ireland following Unity.
Finally, current British estimates for taxes raised in the North are much lower than the reality. For example, many companies with branches in the North have their HQs in Britain. Corporate taxes are paid from the HQ and as a result the north’s tax take is under-estimated. Using other methods to calculate corporation tax, the amount of corporate tax collected in the north appears to be underestimated by around £500million.
So, the exchequer books for the North are not as bleak as presented by those who oppose Unity. It is clear that the subvention is significantly less than half of what is claimed. While this still remains a significant amount we know from a variety of reputable economic sources that Irish Unity will bring with it significant benefits. The Hubner report concluded that a single island economy would grow €23.5 bn over eight years. David McWilliams believes that talk about the South not being able to afford the North “is just that – talk.”
The economics of Irish Unity – the subvention – the comparative stats – all of these are just part of the conversation that we need to have to plan for the future. They are part of the conversation that the Irish government needs to stop running away from. It’s a conversation that is already well advanced. Just look at the weekend opinion poll for Amárach/Claire Byrne Live/ TheJournal.ie which found that 51% people would like to see the referendum take place in the next five years. Less than 30% opposed the proposal. Significantly of those aged between 18-24, approximately 70% were for a referendum. Irish Unity is no longer an aspiration. It is a winnable, doable, achievable project.