It is 50 years since Ireland joined the European Union in January 1973. Membership has helped transform Ireland for the better in many ways. In particular, it has helped move Ireland from being one of northern Europe’s poorer countries to being one of the richest, with benefits which are shared widely across the population.
One of the highest profile ways that Ireland has benefited from membership has been large transfers from the EU to Ireland. On average over the 50 years, after taking account of Ireland’s contribution to the EU budget, the annual inflow to Ireland amounted to 2.3 per cent of national income.
In the 1972 referendum campaign on membership a key argument on the “yes” side was that the farming community would benefit heavily. Looking back the advantages for Irish agriculture were even greater than expected. As well as higher prices for their output, farmers received EU subsidies that averaged 2.4 per cent of national income a year.
EU transfers to farmers averaged more than 60 per cent of farm incomes over the period of membership, reaching a peak of 75 per cent during the 1990s. Without this support rural Ireland would have been a very different place.
Prior to joining the EU Irish government subsidies to poorer farmers accounted for a significant part of the budget. Their replacement with EU subsidies allowed a redirection of resources for other purposes, including education and a better welfare system.
Although these EU payments were particularly directed at the agricultural sector the rest of the community also gained both from improved public services and the economic impact of farmers’ enhanced spending power.
The EU also supported wider economic development through the Structural and Cohesion Funds, aimed at enhancing economic infrastructure, education and training, particularly in poorer member states.
At the Edinburgh EU summit of December 1992, Taoiseach Albert Reynolds secured agreement to a major increase in these EU resources. Structural Funds transfers peaked at 3.3 per cent of national income in 1993 and they averaged 2.2 per cent a year over the 1990s.
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This support was used to greatly expand infrastructural investment in Ireland. Major infrastructural investments, like our motorway system and essential water and sewerage projects, would have been much slower to materialise without this aid.
While benefiting from EU transfers, Ireland has also paid into the EU budget since joining. Not surprisingly, given our relative poverty on entry, the payments were initially dwarfed by the receipts from the EU. In the first 25 years of membership net payments to Ireland from the EU amounted to 4 per cent a year of national income.
More surprisingly, since the late 1990s, while Ireland has been one of the richest members of the EU, net inflows have amounted to 0.5 per cent of national income. It is only since 2013 that Ireland has become a net contributor to the EU budget, paying a net 1 per cent-plus of national income in 2021. The surprisingly small budgetary contribution from Ireland reflects the continuing major inflow of funds to the agricultural sector.
Having benefited in the past from a substantial EU budget, now that Ireland is rich there could be the temptation to “pull up the drawbridge” and minimise the budget needed to aid poorer member states. However, the Government continues to support a larger EU budget, meaning a larger Irish contribution.
As a net exporter we want to see other EU countries prosper. Another reason is that the bigger the EU budget, the less pressure on agricultural spending from which Ireland continues to benefit. The tighter the EU budget, the more difficult it is to justify this continuing allocation of funds.
Contributions to the EU budget from member states amount to around 1 per cent of GDP. Because Ireland’s GDP figures include huge profits from multinationals, they overestimate how well our real economy is doing. Nevertheless, given the benefits Ireland gets from multinationals, and in particular their very large contribution to our tax revenues, Ireland has wisely chosen not to make a case for using a different measure like GNI* to calculate what we should pay into the EU.
Over the past decade, as the profits of multinationals in Ireland rocketed, so too the Irish contribution to the EU budget has risen rapidly. For every €1 billion increase in multinationals’ profits, Ireland pays an extra €10 million in budgetary contributions.
However, Ireland also collects an extra €50 million in corporate tax revenue. So roughly a fifth of Ireland’s enhanced corporation tax revenue flows directly to EU coffers, and four-fifths to the Irish exchequer.