Professor John FitzGerald:

Over the past few months, a number of writers have raised questions about comparative standards of living in Ireland, Northern Ireland and the UK so we thought we would say a few words on that. In recent years all official bodies in Ireland have come to use adjusted gross national income, GNI*, when comparing output and income in Ireland with other countries and increasingly this approach is accepted abroad, particularly by international bodies. However, some foreign commentators are still unaware of this measure and its appropriate use. Using this measure, adjusted for price differences, Ireland's standard of living in 2019 was approximately 109% of the EU 15 average, whereas the UK's was around 96%. However, in a recent Central Bank paper, Professor Patrick Honohan has suggested an alternative measure which he calls alternative individual consumption. This measure includes consumption by households and much of Government consumption. Government consumption includes things like education, which is really important. All of this is expressed per person and adjusted for prices. Professor Honohan feels this may be a better comparative measure for some purposes and on this measure Ireland actually ranks below the UK.

In our 2020 paper, we used a variant of the Honohan measure and using this metric for 2016, the standard of living in Ireland was found to be slightly lower than in Northern Ireland and the UK because of public consumption. That is because of the expenditure on education, the health service and so on. Recent developments may have seen a change in this ranking; the data for 2016 are the latest data available on a comparable basis. The metric we used in our paper is appropriate for comparisons of the situation today but it says nothing about the sustainability of that consumption. It does not include the investment needed to maintain the standard of living which is where Northern Ireland is very low, or, as Dr. Adele Bergin and Dr. Seamus McGuinness emphasise in another recent paper, national saving, which could contribute to living standards in the future. One of the problems of the Northern Ireland economy is that it has a very low level of investment in both physical and human capital. Bergin and McGuinness, in a series of papers in 2020 and 2021, have suggested alternative measures including disposable income adjusted for price differences. On this metric Ireland ranks above Northern Ireland. Quite rightly, they highlight the fact that national accounting-type measures take no account of other factors that are hugely important in terms of standard of living, such as life expectancy. In summary, the standard of living measured by national consumption is probably fairly similar North and South but measured by output per head, it is significantly higher in the Republic.

Due to the questions raised at the last meeting we append a note considering the subvention to Northern Ireland under a range of scenarios and that subject came up in a recent article in The Irish Times. I will not attempt to read out the tables. Reading tables into evidence is not a good way for anybody to proceed, although the committee may wish to include them in a record of information provided at this meeting and we are certainly available to discuss the matter. I will leave it at that.