£1.5bn: annual cost of the enduring sectarianism in Northern Ireland

Sectarianism and the deep divisions within Northern Ireland could be costing the Exchequer up to £1.5bn a year, according to an official report. Although this extraordinary figure is tentatively advanced, the report lays bare the workings of a society cut down the middle by the religious and political divide.

The report has been obtained by The Independent in advance of its consideration by the fledgling Belfast power-sharing executive headed jointly by the DUP and Sinn Fein. It shows that the new administration faces mountainous challenges.

The report demonstrates that policy and practice in health, education, security and other vital fields have been skewed by the need to cope with unionist and nationalist communities which are in many ways starkly segregated. The report sums up: "The divide has led to duplication or even multiplication of service delivery for the communities as they live side-by-side but do not integrate or share easily."

The document was drawn up by the authorities from consultants Deloitte, with input from local government departments, Whitehall and the police.

Its authors had difficulty disentangling the costs of division from other costs, saying that these were embedded within the overall public spending system and cannot be specified exactly without much more research.

They say, however, that they have already found "significant evidence that issues of segregation and conflict continue to influence policy decisions, public service provision and hence resource allocations".

Their view is that changing the established patterns in housing, education and employment will not be easily achieved.

While accepting that efforts have been made to improve the situation, the report warns: "Implementation of a 'joined-up' interagency strategic approach to the achievement of peace and reconciliation objectives across all public service areas is complex.

"In many sectors it will require a significant change in existing service delivery models."

In reaching their estimated figure of up to £1.5bn, the authors take into account the huge security expense of the Troubles as well as lost economic opportunities that they calculate has cost up to 30,000 jobs. But in addition they give a wealth of detail on the generally invisible costs of running a divided society.

In one tiny but illuminating example, the report found that 165 extra school bus runs take place daily because it is not considered prudent to mix Protestant and Catholic schoolchildren. The bus authorities class about half of their runs as "additional". In many cases the buses take circuitous routes to avoid potentially problem areas. In one instance, Catholic schoolchildren from the Short Strand area are driven to school in a wide loop so as to avoid the loyalist lower Ravenhill district.

The duplication, which means more money has to be spent on vehicles and salaries, is estimated at costing £2.5m annually. Damage to buses - a favourable target during civil unrest - adds almost another million a year.

While attention is usually focused on security costs, the report's authors also factor in such less obvious items of expenditure, which they class as "arising from the need to provide services separately to meet the needs of the two communities".

They count in other expenditure such as community relations work, the difficulties of promoting Northern Ireland as a tourist destination and as a location for inward investment.

It found that Northern Ireland spent nearly three times as much per capita on industrial development as the United Kingdom average, recently spending an additional £144m in a single year.

The divisions also have implications for health. Research shows that three-quarters of those interviewed in a survey said they refused to use their closest health centre if it was located in a place dominated by the "other" community. And more than half of those interviewed travelled twice as far as they needed to, at least twice a week, in order to locate two or more private sector services that they needed.

In housing terms many homes lie empty - and some have to be demolished - because although there is housing need in various districts those allocated to them refuse them on the grounds of safety. This means that some areas, often divided by "peacelines", are overcrowded on one side of the wall but have spare space on the other.

The report says: "It is striking that while houses are being knocked down, the housing authorities are faced with a significant waiting list for houses in other areas. This highlights how the segregated nature of the housing market creates significant inefficiencies within public housing."

Houses and apartments in problem areas can also cost more because of additional security measures deemed necessary. The report details that these can include window grills, solid doors and measures to protect oil tanks. Houses in some interface areas have even been fitted with bulletproof glass and steel roof tiles.

In terms of the past, the report points out that the public inquiry into the Bloody Sunday shootings of 1972 has to date cost £172m, while a number of other inquiries - which will be more limited in scope - are in the pipeline.

In addition, the government spends millions each year to support victims' groups. Money is also spent on a number of community relations initiatives designed to improve co-operation.

Forecasting that the problems will not be easily remedied, the report concludes: "While we recognise the potential to respond positively to the challenge of a shared figure and to re- define service delivery, it must be recognised that the timeline for change and benefit realisation is not insignificant."