The Department of Social Protection has worked out the cost of running a welfare system in a united Ireland. The Sunday Times reported that a 2023 internal paper calculated a total cost, net of taxes, of between €7 billion and €22 billion under a range of scenarios.
The most expensive would involve applying the highest benefit rates and lowest social protection taxes on each side of the Border across the island. And vice versa with the least expensive.
The paper is fascinating for two reasons – the first of which is that it was produced at all.
Ministers routinely ask officials to produce papers on topical questions – this one reportedly was ordered by Fine Gael’s Heather Humphreys when she was Social Protection minister – and there had been discussion in the media throughout 2023 on what an all-Ireland welfare system might cost.
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Nevertheless, this 53-page draft report went well beyond the usual briefing, although it would still be excessive to describe it as planning for a united Ireland.
The second interesting aspect of the paper is its focus on disability benefits.
Public debate on the cost of a united Ireland has been distracted in recent years by claims that Britain would continue to pay Northern Ireland’s state and public sector pensions.
Few serious people believe this – Leo Varadkar recently called it “fanciful”. However, few republican activists can resist a notion that makes half the North’s British subvention magically disappear. The more cynical among them may also see advantage in stirring up people who wrongly believe they have paid into a pension pot.
Northern Ireland’s pensions bill is large: €4.2 billion for the state pension and another €2.5 billion for unfunded public sector schemes.
But there is a good reason to dismiss it as an obstacle to a united Ireland: systems North and South are identical in concept. The state pension is a benefit paid directly out of current taxation. Most public service pensions are also pay-as-you-go, covered by the contributions of current workers and topped up by the taxpayer.
Merging these systems might be an administrative challenge, but fundamentally it is just a question of money, at a cost that is already bearable and should reduce over time. Northern Ireland only requires more money because it has more public sector workers and fewer taxpayers than the Republic in proportion to its population. Proponents of a united Ireland believe that would improve in an all-island economy.
Disability benefits are a far trickier problem. The bill is also large, at €3.2 billion, but this is remorselessly growing and the Republic’s system is substantially different.
In a united Ireland, entire categories of UK disability benefits would either have to be scrapped, causing enormous contention, or extended across the island at enormous cost.
The Department of Social Protection costed preserving UK disability payments in Northern Ireland alone, while otherwise extending the current southern system across the island. This would require a €15.8 billion subsidy from the new state’s taxpayers, revealing how expensive the UK system has become.
In practice, different benefit rates either side of the Border would have to be transitional if the Border disappeared, especially if everyone was paying the same taxes.
Officially, there are almost no fraudulent claims in the UK disability system. Figures last year for Britain were 0.0 per cent and 0.1 per cent for the two main categories of benefit.
These figures were greeted with incredulity by much of the press and public, reflecting rising scepticism over the system and alarm at its cost. Yet eligibility has been defined so broadly and assessment has become so straightforward that most recipients are receiving their legitimate entitlement.
That only makes it harder to tackle the problem. Its ballooning economic and social costs cannot be wished away with the usual blather about cutting fraud, waste and error. Almost every claimant has been given plenty of reason to believe they are in genuine need and are receiving their due. Large numbers of them will have to be informed otherwise, a task that appears politically impossible. No wonder some people would rather blather about pensions.
It would be pathetic if the cause of a united Ireland was frustrated by benefit costs, yet this would be an equally pathetic reason for the union to persist. Nationalists and unionists should both want to see the bill reduced.
Unfortunately, the odd way benefits are devolved gives Stormont no financial incentive to do so. It administers payments, so it gets the blame if benefits are cut. London pays the benefits bill separately to Stormont’s budget, so it keeps the savings from any cut.
Reforming this arrangement would be an essential first step to reversing the disability benefits bill by offering Stormont a chance to put the money to better use.
It seems highly unlikely any politician would dare make that case within Northern Ireland itself.
