When the economy took second place

County View

County View
John Healy

In the handover of power to a new Irish government a hundred years ago, it is remarkable that economic issues were almost an afterthought. The Treaty negotiations had been primarily about the extent of our sovereignty, much less about the practical matter of the cost of uncoupling Ireland from the British yoke.
So it was that, under the Treaty, we had accepted our share of the UK national debt, a burden which only became fully apparent as we struggled to put our own country on its feet. The financial challenges were huge; the country’s infrastructure had been destroyed after years of war, and social issues such as housing and health demanded urgent investment. To have taken on the burden of recouping a substantial part of the British national debt seemed not to fully register until the Treaty was signed and delivered.
Luckily for the new government, a trump card came its way with the impending report of the Boundary Commission, the body set up to delineate where the separation between the Free State and Ulster should be drawn. All sides – but especially London – realised the potential for a renewed war which the Commission report, once it became known, would provide. So, in a further deal brokered in 1925, Britain agreed to cancel our share of its national debt in return for the permanent shelving of the Boundary Commission report.
This was a good result for Dublin, but there would be a sting in the tail. Although the Free State was now free of its obligation for part of London’s debts, both sides agreed that the payment of land annuities would continue as before. The annuities arose from loans granted by the British government to enable Irish tenant farmers to purchase their lands under the various pre-independence Land Acts. The annuities amounted to some £3 million per year and, under the Treaty terms, would be collected by the Irish Government and transmitted to London.
In spite of growing resentment to the arrangement, and the criticism of the annuities by figures such as Colonel Maurice Moore, the payments continued to be honoured until 1932, when Fianna Fáil took office. De Valera let it be known that in his view the annuities were part of the 1925 deal and, as such, were also exempt from payment to Britain. From now on, he declared, the annuity monies would be kept at home, to be put towards Irish local government projects.
Thus started the six years economic war in which the country was reduced to penury and civil unrest would again raise its unwelcome head. In a retaliatory action, the British Government imposed a 20 percent levy on Irish cattle and agricultural imports, crippling an Irish economy which was almost totally dependent on the British market. The Irish response was a levy on British coal, a measure which was far less damaging to the UK as the corresponding levy was to us.
To the disappointment of many, the de Valera declaration that no annuities would be paid to London did not necessarily mean that no annuities would be collected. Unable to sell their cattle on a collapsed market, farmers pleaded inability to pay the annuities. The Government responded by seizing cattle and other assets of defaulters, and auctioning them off at reduced value. There were clashes with the Gardaí, violent demonstrations and a number of fatalities.
The folly of mutual damage to both economies led to the Coal-Cattle pact of 1935, leading in turn to the 1938 agreement whereby, in return for a once-off payment of £10 million, Ireland would be relieved of any further payment of land annuities.