This fall’s budget provides around € 500 million for new tax measures, with proposals being considered to tie income tax brackets to inflation.

After suggesting in April that the state could run a minimum deficit of 800 million euros by 2025, the SES speaks of a deficit of 7.4 billion euros. The State also plans to borrow an additional € 18.8 billion.

On paper this reads like a 2021 version of Charlie McCreevy’s saying – that “if I have it, I spend it”. This one reads like “if I can borrow it, I will”.

This prolonged increase in borrowing assumes two things. First, it assumes that we can continue to borrow at historically low rates. Second, it assumes that the EU’s Stability Pact, which dictates that eurozone members stick to modest budget deficits, is toast for several years.

On the first question, it largely depends on the ECB’s bond purchase program. On the second point, the government is probably hearing that deficits will occur across Europe beyond the middle of this decade.

There might be a window to get through here. There is an opportunity to try to resolve the housing crisis with massive state intervention, like what has been advocated by ESRI by doubling planned state spending.

There may also be a need to finally fix the health service, as government fears of hospitals overrun during Covid has resulted in additional lockdown restrictions that have cost billions of euros.

All of these spending and borrowing plans are supported by assumptions about the economic recovery that will occur after the pandemic. Exports will remain dynamic. Foreign direct investment will continue to flow. Jobs, increased VAT revenues on spending and strong tax revenues will be the result of all of this.

This appears to be the assumption behind the government’s plan to have current and capital spending at € 93.2 billion by 2025.

To put this in context: before Covid, income tax revenue in 2019 (including USC) was € 22.9bn. The health budget for 2021 is estimated at nearly 21 billion euros.

Last year the national debt was 218 billion euros. This amount is expected to reach 280 billion euros by 2025, reflecting the additional spending related to Covid measures and the additional spending announced for the coming years.

Much of this shift in approach appears to be driven by the need to fix housing and health care, as nervous coalition parties scrutinized their performance in the Dublin Bay South by-election. But there is no guarantee that the money borrowed from these two problems will actually solve either.

Or maybe there is another element to it all. Extraordinary times require extraordinary measures. Every country in the world has been affected by the pandemic.

When Covid-era loans are due to be repaid within a decade, much could well be owed to the ECB. Regardless of borrowing rates when the time comes, it may be extended and implemented on a massive pan-European scale.

In which case the money practically free today could remain practically free. But it’s a hell of a gamble.

Of course, there is another possibility. The Summer Economic Statement will be torn when things don’t go so well. In this case, it is only a press release.

Bord na Móna willingly trades peat for power

The Taoiseach Micheál Martin was down Thursday in Barry Cowen’s country of Offaly, making an important job announcement. Timing is everything in politics.

Bord na Móna presented his job creation plans as he reinvents himself as a champion of climate change and the environment in a post-peat bog era.

The employment figures in the press release have skyrocketed. The crown corporation will create 1,435 jobs over the next five years. It has already created 550 jobs. Add another 250 jobs, plus about 300 from joint venture partnerships and a few hundred from construction – and it ends up at over 1,400 jobs.

This is good news for a region that has been hit hard by the transition to peat. According to the announcement, the jobs will be in areas such as renewable energy, recycling and peatland rehabilitation.

The buzzwords about carbon capture and climate change were everywhere. But where will the money for Bord na Móna come from?

Many peatland rewetting and carbon capture assistance jobs are great, but won’t necessarily bring income to the company – which will still have to foot the bills as a semi-public company.

It will hire people in product innovation and recycling projects, such as the reuse of plastics used on farms. All good things, but these projects could take several years to reach full commercialization. There would be commercial casualties along the way.

The most important business aspect of the plan is renewable energy. Bord na Móna has signed a joint venture agreement with ESB that will allow it to produce enough wind power to power around 660,000 homes by 2030.

It is a good model because it sees Bord na Móna using its land reserve, while the ESB brings its expertise in wind energy. This is quite different from Coillte’s previous model where it developed wind assets and then phased them out in 2018.

Coillte is however continuing to develop wind projects with ESB.

The breadth of Bord na Móna’s ambition is significant. So are the profits to be made. Bord na Móna and ESB have an existing wind farm called Oweninny 1 in Bellacorrick in County Mayo. It was ordered in 2019 and has 23 turbines.

The accounts just filed for Oweninny Power Generation show that as of March 31, 2021, it sold € 25.5 million of electricity to ESB, its joint venture partner. Incredibly, the company made an operating profit of 13.5 million euros on those 25.5 million euros in turnover – an operating margin of 53pc. Pre-tax income amounted to € 9.5 million.

Between datacenters and electric vehicles, demand for electricity will explode. Bord na Móna plans to have 50pc of a business approximately 12 times the size of Oweninny. This would equate to half of a company making a profit of 114 million euros per year.

These margins make you wonder how much we all pay for electricity – but also, building these wind farms is expensive. We also wonder why Bord na Móna did not do it years ago!