Mr. Michael Burke:

I thank the Chairman and members for inviting me. I will spend the brief time I have talking about the impact of the economic fundamentals in relation to Irish reunification and the unification of the economy. It is quite often portrayed that people advocating Irish reunification do so from some sort of romantic rather than sober-headed perspective. I would argue the contrary that the continued division of the island, particularly economically, is based on romantic ideals and is not attuned to the economic needs of the population of the whole island.

My starting point is the starting point of economics, the division of labour, which is the fundamental driving force of economic prosperity going back to Adam Smith. Within that, a key element is the size of the home market. The size of the home market in both cases is limited by separate jurisdictions. If we take the relationship between the Northern economy and this economy in terms of relative size and using purchasing power parity estimates from the OECD, we find the Northern economy is about 25% of this economy. Leaving other practical issues aside, the simple reunification of the island economically would provide a 25% increase in the home market for businesses and all public and private sector enterprises operating in this jurisdiction. Given the difficult economic circumstances pertaining on both sides of the Border, it is not insignificant. The history of the economy in the Republic of Ireland is such that the separation of the Northern economy from Britain would lead to the Northern economy growing more rapidly than this economy. The reason is that it would be in a position to catch up with living standards and productivity here.

My second point relates to the relationship between the two economies as they are composed. An appendix at the back of the paper I produced identifies some of the key components of the two economies relative to overall. To compare on a like-for-like basis, I have used gross value added as the proxy for GDP as there is no GDP estimate for the North. We see significant similarities, such as the role of agriculture, which is almost exactly the same. There are significant potential synergies and productive new elements of competition that could be introduced. It might surprise people that the output of the agriculture sector is as low as it is in both economies. Food processing is inordinately high and it might be to the advantage of small farmers in both jurisdictions to have a greater weight to countervail the dominant food processing companies, which are close to monopolistic.

Taking the two economies as a whole, we might regard the economy here as having a dynamic private sector and the Northern economy as having a highly efficient public sector and clear synergy between the two. There are two caveats to the assessment, the first being that very little of the private sector, in its dominant sectors, is indigenous. The growth of a home market would aid it. In the Northern economy, there is a somewhat greater degree of indigenous industry. The public sector in the Northern economy is quite efficient, with one important exception. The comparative sizes of the civil service and defence sectors account for 5% of output here and 10% of output in the North. That relates to another important debate about the so-called size of the subvention the North receives from Westminster.

It relates to the outsized civil service and defence sectors. In the absence of that, and in a unified, and, one would hope, peaceful, economy, that would be wholly unnecessary, and such output could go to productive investments.

There are also specific sectors, which I only touched on in the paper, where definite synergies can be identified, such as aerospace. In the South, there is a highly developed sector related to financial, engineering, advisory and legal work regarding aerospace and in the North there is a productive aerospace sector, so there is a clear synergy. There is a similar situation with medical supplies. An indigenous industry exists here which is highly advanced and internationally competitive, and the NHS or a public health service - whichever one prefers to call it - is an efficient buyer of health services, so clear synergies exist.

My last point is that this is not abstract in the sense that it is something that is unfeasible. This is something that there is a tendency towards naturally. The tendency arises mainly from the private sector. For example, the ESB is now the main energy provider on the island - all of it. As a result of the financial crisis, NAMA, which is a public sector body in the South, became a very large property owner in the North. One can see that a former public sector monopoly for letter delivery, the Royal Mail, is now close to a private sector monopoly for letter delivery. I speculate that the Royal Mail, in the private sector, will not want to keep its outposts in the North and, therefore, there is a clear synergy. These things happen naturally, but it is policy that gets in the way.