Brexit negotiations: exploring special status for Northern Ireland

Written by Alan Bermingham on 20 June 2017 in Analysis
Analysis

All sides in the Brexit talks want an early agreement on the status of Northern Ireland. At a time when the Northern Ireland Civil Service gets new interim head, what will that mean in practice? CIPFA's Alan Bermingham explores one possible solution to the unique challenges in this region

Very few commentators are in doubt that the position of Northern Ireland in Britain’s exit from the EU requires special consideration and presents clear challenges. There are significant reasons why this is the case and these can easily be reviewed through a little research. Economic modelling commissioned by the Department of Enterprise, Trade and Investment and conducted by Oxford Economics indicates that Northern Ireland as a region will likely be more vulnerable to the type of structural changes caused by Brexit than the rest of the UK. Factors directly effecting this are the border with the Republic of Ireland, and the close trading and commerce relationships that exist across that border. The level of foreign direct investment in Northern Ireland – and its relative impact on the overall economy and its agri-food and farming industries – could also be at particular risk.


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In terms of overall government funding and provision of public services, Northern Ireland also has been, and will be, in receipt of a range of EU grants and funding at least until 2020. Research shows that between EU CAP payments and structural funds, Northern Ireland is in receipt of more EU funding per head than any other part of the UK. A significant proportion of the EU structural funds spent in Northern Ireland has been allocated specifically to support cross-border co-operation between the two parts of Ireland. Thus loss of such funding, even though it may be small in relation to overall public spending, could have disproportionate impacts in certain areas and sectors.

Aside from the funding and trade issues to consider, public services are also organised and delivered in key areas to take account of the border. For example health services being delivered on a cross border basis for certain specialist services and for general border areas. There is also the impact that potential immigration controls might have on services such as health and social care where EU and non-EU staff work.

Many politicians both locally and nationally have recognised Northern Ireland’s particular circumstances and do not want to see any deterioration in the progress that has been made in following the Good Friday Agreement and power sharing arrangements within the local assembly. Both the EU and the UK have specifically outlined the need for consideration of the Irish issue within their negotiating positions. The problem is not so much an understanding of why there is a need to give Ireland special consideration, but more that the outline of what exactly special status might mean has not been articulated.

There are perhaps two elements to consider in any special status settlement. Firstly the status of Northern Ireland in relation to the EU post Brexit and secondly, reaching a settlement that takes account of the constitutional position of Northern Ireland within the UK. On the first point, it is clear that the EU has a number of membership and associate membership models that could be explored. These range from retaining full EU membership, or membership of the European Economic Area (EEA) similar to the so called Norwegian model, through to having a negotiated free trade agreement through the UK with the EU post Brexit.

Could Northern Ireland opt for a different model to the UK? There are also examples of that with Denmark and Greenland, so it could be possible to come up with an agreement that would allow Northern Ireland to remain part of the EU, i.e. within the single market and customs union, but remain part of the UK. This would cover the second element on the constitutional position within the UK.

It is worthwhile taking a look at what the implications of such an arrangement might be. On the border issue, it would eliminate the need for any internal border within the Island of Ireland. However, it may move the border issues to being between Ireland as a whole and the UK mainland, which will likely exist post Brexit in any case. It solves particular issues in regard to trade, for example in relation to the differentiation in food standards between the US and the EU should the UK complete a trade deal with the US post Brexit. It would allow Northern Ireland to maintain EU food standards and continue trade with its nearest neighbours on the same basis.

In many respects this type of solution, i.e. where Northern Ireland constitutionally sits as part of the UK, but is a member of the EU potentially allows for the local executive and assembly to avail of the best of both worlds. It maintains its trade and public service links across Ireland and also allows access to the best of what the UK might negotiate with the rest of the world after Brexit. An important factor to consider is what devolved authority would need to rest with the local executive and assembly in Northern Ireland. To make this type of special status really work, I would suggest that it requires further devolution of powers to Northern Ireland. These should include the majority of revenue raising powers and increased fiscal powers over borrowing within a suitable fiscal framework. If Northern Ireland were to raise a larger proportion of its income to pay for public services locally, then it would need to agree revisions to its current funding mechanism. There would still be a need for some form of redistribution of national taxation to Northern Ireland to balance the books, however this type of special status involving increased devolved powers would make the Barnett funding arrangements even more obsolete. So a revised funding mechanism based on need would be more appropriate.

The best of both worlds scenario would also put Northern Ireland in a strong position regarding foreign direct investment opportunities. This is a central plank of the local assembly’s plans to re-balance the economy in Northern Ireland away from its dependence on the public sector. Northern Ireland with its current corporation tax powers and being an English speaking, relative lower cost location for multinational organisations wishing to access the EU and UK markets could become highly attractive.

To summarise, special status could be a big winner for Northern Ireland, if our local politicians agree the outline of what it means and push hard enough for a deal that all parties involved in the negotiations seem to be open to hearing about.

About the author

Alan Bermingham is CIPFA's devolved administrations policy lead.

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