Some claims about the cost of a united Ireland don’t stack up

Northerners in a united Ireland would pay the same taxes as everyone else, yet they would receive lower benefits and public-sector wages for 15 years. That was the claim made by Prof John Doyle of Dublin City University at an Oireachtas committee last week.

Prof Doyle had been invited to respond to last month’s report by the Institute of International and European Affairs (IIEA), which claimed the cost of a united Ireland would be up to €20 billion a year over 20 years. He was accompanied by two other academics from ARINS (Analysing and Researching Ireland North and South), a project supported by The Irish Times.

The IIEA report’s authors, economists Prof John FitzGerald and Prof Edgar Morgenroth, had assumed immediate equalisation of benefits and public-sector wages, with the latter alone costing €4.2 billion per annum. As Doyle pointed out, they had not subtracted the share of those higher wages that would come straight back to the exchequer in tax.

However, Doyle put this share at the Republic’s current rate of 54 per cent – 40 per cent marginal income tax in nearly all cases, plus 4 per cent PRSI, plus 10 per cent pension contributions. The equivalent UK rate for most public-sector workers is 36 per cent. Doyle went on to claim that no future government would equalise pay and benefits on “day one” of a united Ireland “for all sorts of reasons, not least that the cost of living would not increase the following morning”.

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Northern Ireland’s lower cost of living is substantially due to its lower taxes, which Doyle apparently envisages equalising on day one. He added: “There will be many negotiations to be had with trades unions about terms and conditions, which will inevitably differ on a North-South basis.”

This is a courageous assumption. Public-sector unions are more likely to erect a shrine to Margaret Thatcher than to meekly accept higher taxes and pension levies without higher pay, under any circumstances, let alone spread unequally either side of a vanished border.

“Negotiation” has become something of a black box on the cost of a united Ireland, for nationalists and unionists alike. Awkward questions are passed into it and pleasing figures come out as if there was no objective way to study what might happen inside. Glaring examples include the £3.4 billion for state pension benefits and the same again for unfunded public-sector pensions (minus employee contributions).

If Brexit is analogous to the break-up of a state, it makes the opposite case to that which Doyle intended: each part splits the bill

Doyle conceded these are pay-as-you-go systems and Britain would have no obligation to continue paying them to a united Ireland. He said it might do so anyway to protect its reputation, citing the UK’s pensions settlement with the European Union.

The EU’s argument for that was to pay retired British officials, primarily in Britain. If Brexit is analogous to the break-up of a state, it makes the opposite case to that which Doyle intended: each part splits the bill.

The most pertinent example is the negotiation that preceded the 2014 Scottish independence referendum. The Scottish government agreed to take on full responsibility for Scotland’s state pensions, public-service pensions and share of the UK’s national debt.

Many of the politicians and officials who took part in that negotiation are available for interview, as are other present and former incumbents of their offices. They could be surveyed on how a united Ireland negotiation might proceed, even in terms of process rather than outcome. The institutions in London, Dublin and beyond that would negotiate a united Ireland could be approached by researchers today. This scarcely appears to be happening, raising concerns about the seriousness of some research on the issue. The IIEA’s tax oversight would almost certainly have been spotted under normal academic peer review, although it did not claim the report was of that standard.

ARINS has published claims that also fail to pass muster. It seems particularly wedded to the so-called ‘expat fallacy’ – the belief that because British state pensions are paid to people retired abroad, London would still pay pensions to a departed UK region, despite also losing that region’s taxpayers. Similar claims by nationalists in Wales and Scotland have been met with ridicule, as it is obvious English taxpayers would never stand for it. Why is this not obvious in Ireland? Is it because unionists have left nationalists to negotiate with themselves?

Discussions on unification are frequently justified to avoid the mistakes of Brexit, yet many proponents promise Ireland would hold all the cards in the easiest negotiation in history. Does that not sound familiar? The negotiation fallacy has a disturbing cost. It is fostering suspicions that Britain misrepresents the cost of unification and might obstruct it by withholding money people wrongly believe they have paid into pensions. These are not harmless notions to drop into public discourse from the top of an ivory tower. Everyone involved should take more care.