Historians have traditionally framed debates over Irish policy in the early 1840s between London and Dublin Castle in sectarian terms. Robert Peel's ‘liberal-minded’ attitudes towards Catholics have been portrayed as conflicting with his lord lieutenant's, which were supposedly anti-Catholic, sectarian and ‘Orange’. Using the Earl de Grey's political papers in addition to Peel's for the first time in historical analysis, this article shows this is a misinterpretation which has concealed the actual nature of the policy debates between Peel and De Grey during the ‘Repeal Year’ period. Conflict arose, not along sectarian or ideological lines, but over the cause of the sudden rise in popular support for the Repeal Association and the nature of public policy which would best counteract this. De Grey thought the ‘Repeal Year’ crisis was the result of economic grievances, while Peel considered it a religious issue. In the resulting disagreement over the most effective policy, De Grey favoured policies based upon economic conciliation, and Peel prioritized religious concessions towards Irish Catholics. This anticipated debates in Irish policy much later in the nineteenth century between constructive unionists, who advocated economic conciliation to combat the rise of Irish nationalism, and those who supported religious and constitutional reforms.