United Ireland “would lead to dramatic increase in taxes”: report

If social welfare payments and rates of public-sector pay in Northern Ireland were aligned with those in the south, the cost would be almost 10pc of modified GNI.

This would add a quarter to public expenditure in Ireland, where total government spending currently amounts to about 40pc of GNI*, while producing only a limited increase in revenue, according to the authors.

“To deal with the resulting deficit, which would be likely to persist for many years after unification, there would have to be a dramatic increase in taxation and/or a major reduction in expenditure south of the border,” they say.

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The calculations, which take Northern Ireland deficit figures for 2019 as their basis, are contained in a paper published by the Institute of International and European Affairs (IIEA).

Entitled “Northern Ireland Subvention: Possible Unification Effects”, it was authored by John FitzGerald from the Department of Economics in Trinity College Dublin and Edgar Morgenroth of DCU.

Mr Fitzgerald said: “Even though Ireland has a much higher national income, funding the needs of the people of Northern Ireland in a united Ireland would put huge financial pressure on the people of Ireland, resulting in an immediate major reduction in their living standards.”

The paper argues that the cost of a united Ireland could be substantially reduced if the north made major changes in its economy in order to raise productivity.

Reforms would reduce the Northern Ireland deficit, thereby cutting the costs associated with unification. But even in the most favourable circumstances and with the best policies, the paper says that it is likely to be “at least two decades before the productivity gap could be substantially narrowed”.

The paper, which examines the subvention from the UK government that is needed to support the Northern Ireland budget, is a follow-up from previous research in 2019. It updates figures on the subvention and how it might be affected in a 32-county state.

The authors stress that they take account of the wider economic effects of Irish unification, which could have implications for public finances both north and south.

Professor Morgenroth said: “Given the very detailed integration of the Northern Ireland economy into that of the UK, separating the two economies, as would occur under a united Ireland, would involve major costs for Northern Ireland.

"While some of these costs would eventually be offset by the wider benefits of integration into the wider EU economy, this would take some considerable time. Also, under the Windsor Framework, Northern Ireland currently enjoys some of the benefits of EU membership insofar as it affects goods produced in Northern Ireland.”