Professor John FitzGerald:

Say the Republic pays 5% more of its national income in taxes to pay for the welfare payments and wage increase in Northern Ireland. If you take money out of the economy, it further reduces tax revenues and increases social welfare expenditure. The Deputy is quite right that in spending the money in Northern Ireland you would get back about a third, on average, in tax revenue. The cost within Northern Ireland would be reduced by a third but the cost in the Republic would be increased by the third. When you are just transferring money from one group to another group, there will be no net effect on national income. It is just making people substantially worse off in the Republic to make people substantially better off in Northern Ireland. The additional tax revenue raised in the North would be offset by tax lost in the Republic. Looking at this in a series of studies done by the ESRI over the years, when you pump money into the economy, the Deputy is quite right that you get back about a third, on average. It could be a quarter or it could be a bit more than a third but it is about a third on average. Remember, however, that you will have to lose that third in the Republic.