Last week I published a blog based on interviews with Iain Carlisle or the Grand Orange Lodge, and Doug Beattie, MLA. While talking to Iain Carlisle of the Grand Orange Lodge of Ireland, he used a phrase I hadn’t heard before.
“Economic unionists.”
He wasn’t talking about people like himself. For Iain, Britishness is historical, cultural and personal. His attachment to the United Kingdom isn’t something which can be reduced to a spreadsheet. But he recognised another group of people whose attachment to Britain is much more transactional.
They may not be Orangemen. They may not be particularly religious. They may have Catholic and Protestant friends and regard the Troubles as something which happened to their parents.
They support the Union because they think they are economically better off within it. This is a function of Northern Ireland’s public finances.
Britain’s most subsidised region
Northern Ireland receives considerably more from the British state than it pays back in taxation. It has the most favourable relationship between public revenue raised and public expenditure received of any nation or region of the United Kingdom, and the gap runs into many billions of pounds annually.
Public expenditure also represents an extraordinarily large proportion of the Northern Irish economy. That isn’t necessarily something sinister or even particularly unusual. Redistribution is one of the things nation states do.
London and the South East generate fiscal surpluses. Money is transferred towards Wales, Northern Ireland and English regions such as the North East. A pensioner in Sunderland isn’t expected to have paid enough tax personally to finance their pension, hospital and local roads. We pool those costs nationally. Northern Ireland simply benefits from that pooling to an unusually large degree.
The Union’s strongest argument — and its most awkward one
The fiscal transfer is simultaneously one of the strongest economic arguments for the Union and one of the most awkward measures of its economic record.
Unionists can reasonably say:
Look how much Northern Ireland benefits from belonging to the United Kingdom.
Nationalists can reasonably reply:
Why, after more than a century of Union, does Northern Ireland still need that much support?
Both arguments contain some truth. Northern Ireland has a relatively weak private economy, lower productivity than the Republic and a disproportionately large public sector. Britain provides an enormous insurance policy against that weakness.
But dependence upon the insurance policy isn’t necessarily evidence that the underlying economy is healthy. For someone whose British identity is unconditional, none of this necessarily matters. For an economic unionist, it matters enormously. Their support for the Union lasts only for as long as Britain remains the better economic offer.
Which raises the obvious question.
What is the alternative?
Could Dublin afford Northern Ireland?
The starting point is unquestionably difficult. Northern Ireland raises much less in tax than is spent on its residents. The ONS measures exactly this gap as the regional fiscal balance, although it warns that these are allocations of UK-wide revenue and expenditure rather than literal accounts for each region. In 2023 Northern Ireland raised about £21.5bn in public revenue while roughly £36bn was spent for its benefit.
Which gives a gap of somewhere between £14–16bn
A substantial part of that figure consists of UK-wide expenditure allocated statistically to Northern Ireland. It includes things such as a share of UK defence, debt interest and other central-government functions. An Oireachtas committee examining the issue explicitly concluded that the headline “subvention” does not directly equal the deficit that would transfer after reunification; defence expenditure, pensions, UK debt and negotiations over assets and liabilities could change the number dramatically.
That produces two very different schools of estimates.
The pessimistic case comes from John FitzGerald and Edgar Morgenroth at the IIEA. Their 2024 work concluded that simply replacing the existing fiscal transfer and bringing Northern Irish public-sector pay, pensions and welfare towards Republic of Ireland levels could push the annual burden to roughly 10% of Irish national income — around €20bn a year under their assumptions.
That isn’t a silly estimate. One reason unification might actually make the problem larger is something that gets overlooked in nationalist versions of the argument: Irish public-sector wages and many welfare payments are higher. If reunification meant rapidly equalising them upwards, the Republic would acquire new expenditure rather than merely replacing Westminster’s existing spending. The 2024 Oireachtas report explicitly identifies pay and welfare convergence as major determinants of the cost.
At the other end sits work associated with John Doyle of DCU. His argument is that the headline subvention badly exaggerates the transferable cost because Britain would retain its own national debt and could remain liable for pensions built up from UK National Insurance contributions. He also argues that some calculations count the gross cost of increasing Northern Irish public-sector salaries without accounting for the extra income tax, PRSI and pension contributions those salaries would generate.
On those assumptions, Doyle estimated an inherited deficit of only about €1.5bn, with other policy choices bringing the initial first-year fiscal cost to around €2.5bn. His model then assumes faster Northern Irish economic growth, producing fiscal break-even after roughly a decade.
The Irish Government itself currently sits somewhere between those poles. In a Dáil debate the Irish Government cited research suggesting an initial net fiscal cost of about €3bn a year, potentially reaching break-even within five to nine years if Northern Ireland experienced substantial productivity improvement and benefited economically from EU reintegration. But the same minister also explicitly cited the much more pessimistic €20bn estimate and said the difference largely comes down to assumptions.
Rather than accept any of these forecasts I wanted to test this for myself.
There are four things which largely determine where I landed in that range:
- Pensions. This is Would the UK continue paying pensions accrued through UK contributions, or would Dublin assume them? That would be part of any unification negotiations rather than something economics can simply decide. The Oireachtas report specifically identifies pension liability as unresolved.
- Public-sector pay and welfare. Immediate equalisation to southern levels makes unification much more expensive; gradual convergence makes it substantially cheaper.
- UK debt and central-government spending. Dublin would not simply inherit Northern Ireland’s statistically allocated share of Trident, the Foreign Office and Britain’s national debt. What assets and liabilities transferred would have to be negotiated.
- Northern Irish productivity. This is the giant unknown. Northern Ireland considerably underperforms the Republic economically. The ESRI found Ireland’s GNI* per capita was 57% higher than Northern Ireland’s GDP per capita in 2022. If reunification narrowed that gap, tax receipts could rise significantly; assuming convergence, however, is an economic scenario rather than a fact.
I made the following assumptions
1. Dublin takes on responsibility for pension liabilities.
2. Public secor pay equalisation over 3 years. Anything longer than that would cause a huge movement of key staff like Doctors from Belfast to Dublin
3. Dublin would not inherit it’s share of Trident, defence or foreign policy commitments, but it’s own current spending in these areas would increase relative to the increase in surface area and popluation.
4. Productivity would take 20 years to equalise. Increasing productivity is hard and slow. Productivity in eastern Germany has still not fully reached the levels of western Germany 30+ years after reunification, although the gap was bigger between East and West Germany than between Northern Ireland and the Irish Republic . While initial convergence was rapid in the 1990s, eastern labor productivity has stagnated at roughly 80% to 85% of the western level
On the assumptions you’ve set, I get a plausible transitional fiscal bill of roughly €50–60bn over 20 years before any inherited UK debt. If Dublin also accepted a population share of UK public debt, the numbers become dramatically less attractive: roughly £83bn of debt, around €95bn at an illustrative £1=€1.15, plus several billion euros a year in interest.
Our reunification scenario
Northern Ireland currently has about 1.93 million people, against about 5.46 million in the Republic. Unification would therefore increase the state’s population by roughly 35%.
Northern Ireland’s state-pension system isn’t a separate funded pension pot, but if you look at the NI National Insurance Fund on a current receipts-versus-payments basis, it has been broadly close to balance. NI workers and employers are already paying National Insurance contributions which finance a substantial part of current pension and contributory-benefit expenditure. Depending on the settlement and exactly which liabilities Dublin assumed, the additional annual fiscal burden was more plausibly around £1–2 billion a year rather than the full gross pension expenditure.
Public-sector pay is more expensive. FitzGerald/Morgenroth’s gross estimate for immediate equalisation was about €4.2bn annually. Doyle argues that once extra income tax, PRSI and pension contributions are returned to the Exchequer, the direct net cost is closer to €2.0–2.2bn. My three-year transition therefore gives approximately:
Year 1: +€0.73bn Year 2: +€1.47bn Year 3 onwards: +€2.2bn
That is far faster — and consequently more expensive initially — than Doyle’s suggested 15-year convergence.
Ireland’s 2026 defence budget is approximately €1.5bn. Increasing that mechanically by the 35.3% population increase gives another €530m annually. If we similarly scale the roughly €810m Irish Aid programme, that’s another €286m. I’d therefore put an indicative €0.8bn a year into the model for the additional defence, diplomatic and overseas obligations of a substantially larger state.
That’s still considerably cheaper than assuming Northern Ireland carries its present statistical share of British defence spending. FitzGerald himself estimates that Irish-style defence arrangements reduce the cost by more than €1bn compared with the current UK allocation.
So by year three we have approximately:
| Cost | Annual amount |
|---|---|
| Underlying transferred fiscal deficit | €1.5bn |
| Net pension burden/equalisation | €0.75bn |
| Public-sector pay equalisation | €2.2bn |
| Extra defence/foreign commitments | €0.8bn |
| Total | ~€5.25bn |
Then give productivity 20 years
This is where any calculation becomes necessarily hypothetical. ESRI research shows a substantial productivity gap; one comparison puts output per worker in Ireland roughly 40% above Northern Ireland. FitzGerald argues that education and productivity reforms could take 20–30 years to work fully through the Northern Irish economy, which makes your 20-year assumption quite reasonable rather than wildly optimistic. The productivity gap between East and West Germany still hasn’t closed after 30 years.
For a transparent model, I assumed the fiscal gap declines broadly linearly as productivity converges, rather than Doyle’s much more bullish assumption that an extra 2% annual growth could eliminate the deficit in about ten years. Doyle explicitly makes that faster-growth assumption in his model.
That gives us roughly:
Year 1: €3.8bn Year 2: €4.4–4.5bn Year 3: peak at about €5.2bn Years 4–20: progressively falling as productivity converges Year 20: broadly fiscal neutrality on this simplifying assumption
The cumulative transfer over those twenty years comes out at approximately €55bn.
Given the uncertainty of these projections I would put the cost at €45–65bn, because pensions, welfare alignment, public-sector pay, tax receipts and the precise speed with which productivity feeds into fiscal revenues aren’t remotely precise enough to justify quoting €54.6bn as though I’ve discovered a missing invoice.
That sounds enormous. But spread over twenty years it averages roughly €2.7bn a year. Ireland’s total government expenditure in 2026 is about €133bn, so we’re talking about an average additional expenditure burden of roughly 2% of today’s Irish government spending, although it would be significantly higher in the first few years.
That’s uncomfortable, but nowhere near the proposition that reunification necessarily costs Dublin €20bn every year forever.
Now add UK debt — and everything changes
This deserves treating separately because debt is a balance-sheet allocation, not the annual cost of running Northern Ireland.
UK public-sector net debt stood at approximately £2.99 trillion in June 2026. Northern Ireland represents about 2.77% of the UK population.
Simply allocating debt by population therefore produces:
2.77% × £2.99tn = approximately £83bn, around €95bn.
That’s considerably bigger than our entire estimated twenty-year transitional fiscal bill. And the servicing burden isn’t trivial either. If the effective cost of carrying that debt were:
4% → £3.3bn a year 5% → £4.15bn a year or roughly €5bn annually.
That could effectively double the early fiscal cost of reunification. But there’s an enormous caveat.
UK debt was incurred by the sovereign UK government. There is no Northern Ireland gilt account sitting somewhere in Whitehall. Doyle makes precisely this objection: if London stopped paying Northern Irish pensions, it would be particularly difficult to argue that Dublin should nevertheless volunteer to take a pro-rata slice of Britain’s sovereign debt.
FitzGerald and Morgenroth take the opposite view, arguing that historical precedents — including Irish independence in 1922 — suggest some allocation of debt might form part of the settlement.
The debt matters because as part of reunification the Republic would get some assets. If Northern Ireland leaves the UK the British Government would remove some movable assets. But not everything. You can’t sensibly hand Ireland 2.8% of Britain’s liabilities while Westminster keeps 100% of the corresponding financial and physical assets. Military property, government property, pension assets where applicable, reserves and other balance-sheet items would all become negotiating issues. You can’t take the assets without the liabilities, and you can’t force the other party to accept the liabilities with giving them some assets.
This reveals the truth of this The cost of Irish unity isn’t a number. It is a negotiation. And just like the Brexit negotiation one party holds the upper hand. The UK Government had to leave and ultimately would have to accept whatever offer the EU put forward no matter how terrible. The Irish Government would be in the same position. HMG could offer them a terrible deal, but the politics of the vote means that they would have to take it. It is notable that there is a lot of Irish politicians who don’t want a vote on unification. No surprise why.
Under what I think are reasonably cautious assumptions — Dublin taking responsibility for pensions, public-sector pay equalised over three years, Irish rather than British defence commitments, and Northern Irish productivity taking twenty years to converge — a transitional fiscal cost of around €50–60bn spread across twenty years looks plausible.
That is substantial, but probably affordable for the Republic. But if Dublin also accepted Northern Ireland’s population share of UK public debt, however, it could add another £83bn — roughly €95bn — to the state’s balance sheet, potentially costing €4bn or so annually in debt service alone.
And that is where Iain’s “economic unionist” becomes formidable.
The economic unionist isn’t merely asking whether the Republic is richer than Northern Ireland. It plainly is. They’re asking:
On the morning after reunification, who guarantees my pension, my hospital, my salary and the public services upon which Northern Ireland unusually depends — and on what terms?
Nationalists can produce perfectly credible answers to that question. But they cannot simply answer “the Republic is richer now, so it’ll be fine.” Equally, unionists can’t simply quote today’s £10–15bn subvention and claim Dublin would have to find the same sum forever. A large part of that figure is an artefact of being inside the UK state, and productivity growth would progressively change the calculation.
During the Brexit vote both sides waved around numbers. For a lot of Brexit voters these had no impact. They knew that there would be a cost to Brexit, they just didn’t think that they would pay it, the bill would fall in someone else. It might be that a reunification debate goes the same way.
But what these number show is that just like Brexit reunification is a negotiation, one where the costs are incredibly uncertain and risky.