Newton Emerson: What’s the real significance of Irish Government funding for Northern Ireland?

The importance of the Government’s new funding to Northern Ireland is being simultaneously overstated and understated.

The Taoiseach’s Shared Island Unit has announced €44.5 million for a teaching and student services building at Ulster University’s Magee campus in Derry.

Two weeks ago, The Irish Times revealed the Government is to spend €10 million next year on 250 student nursing places at Ulster and Queen’s University Belfast.

Without wishing to appear ungrateful, these are trivial sums compared to the reaction they have provoked. Nationalists have heralded the start of All-Ireland health and education systems and an inevitable united Ireland. Their hopes are clearly matched by unionist fears. Paul Givan, the DUP former first minister, said the British government should be “embarrassed” by the nursing places announcement, as it is “undermining” the union.

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If so, it is undermining it with a small shovel. Northern Ireland’s UK subvention is £14 billion a year – the £10 billion figure of common parlance is long out of date.

Stormont’s budget is also £14 billion, largely by coincidence. Health consumes half and education one-fifth. Although the Republic could afford a united Ireland, getting there at a rate of around £50 million a year would take three centuries, by which point there may well have been other developments.

There is no guarantee Ireland’s current generosity will increase, or even be sustained. The nursing funding is for next year only and Magee is a one-off project. The Shared Island Unit has a budget of £1 billion up to 2030 but most of it will be spent south of the Border.

Yet for small sums, this month’s announcements have genuine political significance. The Republic has never spent any real money in Northern Ireland. It pledged £400 million for the A5 dual-carriageway after the St Andrews agreement but Leo Varadkar, as transport minister, unilaterally cancelled the deal in 2011.

If all this has frayed unionists’ nerves, they have the consolation of knowing there should be fewer such announcements once the DUP returns to work

Although capital funding has been provided for cross-Border infrastructure – roads, railways, canals and bridges – Stormont has invariably met the costs on the northern side. Putting up university buildings inside Northern Ireland, even to facilitate cross-Border students, is unprecedented. The nursing funding is believed to be the first time the Republic has contributed to current spending, as opposed to capital spending. Setting precedents in rapid succession has created a sense of momentum; setting in the absence of Stormont has created a perception of Dublin stepping in where unionism has failed. Following in the wake of the Republic’s extraordinary budget surplus invites the conclusion that small beginnings can easily grow.

The funding announcements are transparent rebukes to the DUP from London and Dublin for collapsing devolution. Ireland’s investment in Magee was agreed under the 2020 New Decade, New Approach deal and should have been co-ordinated through Stormont. Instead, it was unveiled by the British-Irish Intergovernmental Conference – in other words, over the DUP’s head.

The nursing funding was presented as plugging a budget gap caused by DUP dereliction of duty.

If all this has frayed unionists’ nerves, they have the consolation of knowing there should be fewer such announcements once the DUP returns to work.

Perversely, Sinn Féin might have more long-term trouble with the precedents just established.

The party’s usual response to any financial constraint at Stormont is to accuse the British Government of not providing enough money. For the first time in Northern Ireland’s history, this may have the distinction of being true.

Devolved funding is determined by the Barnett formula, an overly simplistic Treasury calculation. It tends to equalise public spending per head across the UK, an effect known as the Barnett squeeze. Public spending in Northern Ireland needs a 24 per cent per head premium above England to maintain the same standard of services, due to geography, demography and economies of scale. This is an authoritative figure, assessed by the Independent Fiscal Council, a body established under New Decade, New Approach to advise Stormont on its finances.

The premium has always been high: it was 40 per cent as recently as 2019. This has allowed Stormont to afford so-called ‘super-parity’ – better services than in England, such as lower university tuition fees and no domestic water charging. But it will be squeezed to 23 per cent next year and 20 per cent by the end of the decade. A key DUP demand for reviving Stormont is negotiating a new needs-based Barnett formula, as Wales did in 2016. However, that took the Welsh seven years.

In much less time, Sinn Féin could be leading a northern executive with a new funding arrangement still not agreed, or agreed below super-parity.

It could also be leading a Government in the Republic. Northern nationalists, and indeed unionists, may have come to expect Dublin to dip into its coffers to cover any disappointing disbursement from London.

Who does Sinn Féin complain about then?