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Aztec Camera – Good Morning Britain Lyrics 8 years ago
I can shed some light on parts of this song:

"Twenty years and a loaded gun
Funerals, fear and the war ain't won"

This is referring to the troubles in Ireland where the Republican community fought a guerilla campaign for a united Ireland opposed to being run by Britain. Lots of lives lost on both sides of the conflict. The PIRA campaign had been at a high for ~20 years at the time I believe.
"Paddy's just a figure of fun
It lightens up the danger."

'Paddys' a derogatory term for the Irish. Their are lots of Anti-Irish jokes. The songs saying it's used to hide a fear of the population.

"And a corporal sneers at a catholic boy
And he eyes his gun like a rich man's toy
He's killing more than celtic joy
Death is not a stranger."

Republicans were often from and supported by the catholic community for reasons beyond the scope of this comment. State institutions such as the police (RUC) and the Army had an institutionalised hatred of republicans and there was a lot of anti-catholic prejudice. The song here is saying that the sneer from a corporal is doing more then upsetting an Irish person, it's adding to the cycle of violence. The young boys looking at the gun and remembering the hate towards himself.

"Taffy's time's gonna come one day
It's a loud sweet voice and it won't give way"

Taffy is a derogatory term for the Welsh. Modern Wales hasn't been as active with independence from Britain as Scotland or Ireland, but Aztec Camera is claiming it will happen.

"A house is not a holiday"

One thing that has caused tensions to rise in Wales is holiday homes. Many welsh couldn't and can't buy homes in the areas they grew up while wealthy people by holiday homes in the area that they only stay in for a small portion of the year.

"Your sons are leaving home Neil."

No idea, why I came here. Reply if you know please."

"In the hills and the valleys and far away
You can hear the song of democracy
The echo of eternity
With a Rak-a-Rak-a feel."

Scotland, Wales and Ireland are famous for their valleys and hills. I assume the Rak-a-Rak is the imitation of an automatic weapon, implying democracy via violence.

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