Government isn’t offering Northern Ireland money just to annoy DUP or Sinn Féin. But that may be a bonus

The Government will be “happy to contribute” to any financial package to restore Stormont, Leo Varadkar has said. The Taoiseach was speaking at Fine Gael’s special conference on Sunday. He added there was a “real possibility” of devolution returning by the new year.

Monday’s front pages in Belfast led with Varadkar’s offer but there was relatively little coverage in the Republic. For the moment, at least, southern money is a much bigger story for recipients in the North than for its donors across the Border.

By far, the largest such sum ever pledged was for half the £800 million cost of the A5 dual-carriageway to Derry, in a deal linked to the 2006 St Andrews Agreement. This was unilaterally cancelled in 2011 by Varadkar, then a minister for transport a few months into his first Cabinet post. The estimated cost of the A5 has since doubled. It could be said the Taoiseach has a long way to go to make up for a broken promise but he appears to have got away with it. Unionists are too busy pretending Dublin’s money does not matter at all, while nationalists pretend it is a river of gold driving constitutional change.

Naturally, the truth lies somewhere in between. In the 2020 New Decade, New Approach deal to restore devolution the Government promised £75 million (€86 million) for the A5 alongside vaguer commitments on cross-Border investment. Those commitments were firmed up in the Coalition agreement five months later under the new shared island initiative, with its £1 billion budget up to 2030, perhaps one-tenth of which might be spent directly in Northern Ireland.

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Although this is a drop in the ocean compared to Stormont’s budget, it is a solid fraction of a typical Stormont rescue package. London claimed its contribution to New Decade, New Approach was £2 billion but only one-third of that was new money, also spread over five years.

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Paschal Donohoe, the Minister for Public Expenditure, confirmed on Monday the Government would “help in any way economically” with a Stormont deal, explaining support would be delivered through the shared island initiative. The economic outline of any new deal is already known, thanks to assessments by Stormont’s independent Fiscal Council. It will require two parts: a £1 billion one-off payment to fix urgent problems and a new budget settlement for long-term stability, guaranteeing public services in Northern Ireland can be provided to the same standard as in England. Wales secured a similar deal a decade ago.

Southern money is a much bigger story for recipients in the North than for its donors across the Border

The new budget settlement is beyond Ireland’s remit, let alone its willingness to contribute. The one-off payment is another matter. Much of it is only necessary because London has manufactured financial problems to pressurise the Democratic Unionist Party. Half the £1 billion might be described as real need and Dublin could comfortably provide one-fifth or one-quarter of that, say £100 million. The political impact of this could be substantial, if assertively presented. When the Government announced €44.5 million in June for a new university building in Derry, it garnered headlines around the world. Stormont’s collapse and Westminster’s dysfunction have created an audience for a story of the Republic stepping in.

The UK government has now added to its pressure on the DUP by withholding the latest round of regional “levelling up” funds from Northern Ireland. London is blaming this on the absence of Stormont, a ruse so blatant its transparency must be intentional. The fund is designed to operate outside devolution, with councils making most of the bids and ministers in Whitehall making all the decisions. The latest round does not even require new bids, as only unsuccessful bids from the previous round are being considered.

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Cancellation seems to have been decided overnight, literally. The UK government has been promoting the latest round in Northern Ireland and advertisements for it continued appearing this week in Belfast’s newspapers. It is not beyond the bounds of possibility that ministers in London heard of Varadkar’s conference comments and thought the combination of Ireland offering money and Britain withholding money would put the DUP in a vice.

The DUP’s hardline wing is furious, something the party’s leadership might not find entirely unhelpful. This has been achieved by withholding a relatively minor £30 million, almost certainly temporarily. While the ploy may not work, it has generated enormous attention for no major or irreversible harm.

Ireland is not offering Northern Ireland money to annoy the DUP, of course. Earlier this month, Tánaiste Micheál Martin once again dismissed unionist complaints that the shared island initiative – very much his creation – is a nationalist “Trojan horse”.

Any nationalist expectations raised to the contrary are an interesting challenge for Sinn Féin. Does the Opposition party praise the Government? Can it say more money is needed without upsetting southern voters? The Taoiseach might consider this conundrum a little bonus.