Sinn Fein activists got excited last week at a report from academics which suggested that Irish unification could boost the Irish economy by €35.6 billion. Of course, that was the headline – like any headline, it was not a totally fair representation of what the report said. It also failed to mention exactly who was behind it.
The report says that if Northern Ireland were to be incorporated into the Republic of Ireland – taxes, benefits and all – it could find its productivity increase to a similar level (i.e. from roughly 90% of the EU average to 130% – taking GDP figures from Eurostat) in 15 years. I am doing it a slight disservice there by slightly overstating and simplifying the figures, but that is the basic premise of the report and the subsequent commentary.
To be clear, the report is not without merit. If Northern Ireland became more like the Republic – considerably less reliant on welfare and public spending, in other words – it would indeed become more entrepreneurial and, in all likelihood, its GDP would rise. This is indisputable, and has been argued frequently on these pages. There are three pretty hefty problems here, however.
The first problem is that, far from being “independent” and “academic”, the report was in fact commissioned by friends of Sinn Féin in California and has not been peer-reviewed. Put simply, it is therefore neither independent nor academic.
The second problem – one raised frequently on these pages – is that neither Sinn Fein nor the SDLP actually offer the favourable scenario it purports to offer! In fact, since they first attained Ministerial office, they have very specifically sought to make Northern Ireland more reliant on public spending on welfare (and so it has become). Only the other day, an SDLP Minister specifically opened a grant programme to include only not-for-profit organisations; Sinn Fein is busily trying to deny it is decreasing the size of Northern Ireland’s public sector and introducing a lower level of corporation (ahem, profits) tax. This is the precise opposite of the route recommended in the report to generate this extra “unification” bonus they were getting so excited about.
The third problem is that we cannot know what the outcome of the adoption of the Republic’s economic and financial policies in Northern Ireland would be, but we can say with reasonable certainty it would not be as pretty as the report suggests (and indeed, even the authors say “could”, not “would”). The report is remarkably reliant on the suggestion that Northern Ireland would gain from adopting the apparently weaker (and actually less stable) euro currency, when in practice we have no idea what the medium-term exchange rates would be or how useful they are. We should also not forget that the tax regime it proposes this would actually mean:
- abolition of a Health Service free at point of access (as it would no longer be affordable from the lower tax take);
- additional to that, introduction of various other charges to align with the Republic (for roads, bins, fire call outs, etc);
- lower income tax bands (thus the average earner and average professional would pay more income tax);
- higher VAT (by three points, on current levels);
- 100,000 public sector job losses…
Hold on, 100,000…?!
Well, of course. The Republic of Ireland employs around 280,000 public sector workers for a population of 4.5 million; Northern Ireland currently has 210,000 for 1.8 million. Proportionately, therefore, Northern Ireland has almost twice as many as it would have when matching the Republic’s policies as the scenario presented in the report suggests it would – and that is before you get to potential additional job losses or transfers to Dublin (the capital, presumably) and of course the alleged efficiency savings of doing things on an all-island basis (if those exist at all and are to be realised, they must involve the removal of bureaucracy and, thus, of bureaucrats – public sector workers, in other words).
On top of this, we have the obvious problem with the assumption that adoption of the same policies purely on the financial/economic side would immediately have the same outcome despite differing educational systems and training priorities (and historical government structures, and legacy of conflict, and infrastructure…). Even if it magically did, we then have to ask where the global companies are which are going to invest in Northern Ireland because it has adopted the same policies as the Republic of Ireland, but have not already invested in the Republic of Ireland. And then we have to recognise that if Northern Ireland wished to reach the same GDP/head levels as the Republic of Ireland, from the date of unification it would not just need a fair share of that investment on to the island, but in fact the comfortable majority (to make up the gap with the likes of Google, Intel and Apple already safely ensconced in the Republic). So for “could”, we should probably read “could theoretically in miraculous circumstances”…
That is not to say Sinn Fein activists should ignore what is, in effect, their own think tank’s report. On the contrary, they should read it carefully. It says what I have always said – the practical case for a United Ireland can only be made from the economic Right, not the Left.
But Sinn Fein, of course, isn’t really serious about a United Ireland. Indeed, the very first thing Sinn Fein said after the “Fresh Start” deal was that it did not commit them to supporting lower corporation tax. The very first thing the report says is that the generation of extra wealth for Northern Ireland depends on, er, lowering corporation tax. I don’t quite buy that myself. But then, I wasn’t the one commissioning a report and then getting excited about it on the pretence it was independent…