 Gwdaeth hyn, dweudstech yn ysgol yn mi. Rydyn ni'n nhw'n rwy'n 15 o 20 y bydd yn gyfnodd y gwed i'w ysgol i'r pethau'y gydag. D er fawr yn gydigon, a awnodd dynon ac wedi'u cynu mewn cyfnodd a'i fu omdau. Nid yw yw'r gwrthwy flanker, dyw'r ddechrau ar gyfer oedd yr hyn yn gweithio'r gwybod. Dyma'r hyn yn ddweud o'r Tyfrasol yma, äddyn ni'n gwneud i gweithio'r You've had I was looking at the program, and if I didn't have to be here, this would be the one that I've missed this week personally. and I've come to the others, so it is remarkable to the Institute and I want to give credit to the Institute for, again, putting on such a stimulating group at such a really interesting time. I guess to start with, maybe get myself in trouble given my day job, is I want to put forward the thought that perhaps Mae'r cyfhysgau ymmwneud yn ymddangos gwyfodol yn ddoch gael o'r cyfosiwn. Rwy'n cael ei wneud yn gweithio at yw'r cyfrannu. Ta'r bywydau yn yma'r ymddangos, rydych yn y cyfrannu yn ymddangos i'r cyfosiwn yn ymddangos i'r cyfosiwn ymddangos, yn ymddangos i'r cyfrannu. Yn gyfosiwn roedd yn ymddangos i ddau. I think what's happened to us is an incredible fortuitous opportunity that other generations of Irish people would not believe how this generation finds itself right now in terms of the scale of affluence that is right throughout our society. And I can see some of you bristle already and saying it's not for everybody, but run with me for a while and then we can do it in the Q&A, the violent objection to the charge of affluence that Irish people seem to bristle at. Love the austerity cascade, but affluence is far too high. But yet the statistics on which I will draw upon will suggest that this is an affluent society, a fairly significant proportion, and that a lot of this has happened rather fast. And then when you look at the scale of the business community, which I have the honour of being a representative of, never in our history. And in fact I would argue geographically never in the history of many jurisdictions has a society moved as dramatically as Ireland on the scale of the resources that come in here in the last five years. So that's kind of what I'd like to do in the next 15 to 20 minutes and then open it up. So first of all, and I said this before, on the debate about whether GDP is a good measure or a bad measure or an accurate measure, I've always firmly been off the view is while I know GDP is not accurate, I believe it to be right. And so it's an imprecise way of measuring economies, lots of things left out, lots of things include that you might want to be in there, et cetera, et cetera. But the notion that the 2015 numbers, the leprechaun economics jibes, somehow was an aberration that has no tangible substance into our society is demonstrably false. And let me try to talk about why I think that is so. Why this generation is lucky, but the problem about luck is you've got to be mature enough to make sure that luck doesn't become a winner's curse and actually destroy your society. So think of a family that wins the lottery. Two types of families, those who can cope with it and that good fortune that while it arrives in this generation, if used by that generation can make that family better off for generations to come, or the family that wins the lottery and has a great time for a short time but actually destroys quite a lot of the fabric that is the family with generational consequences of both regret and so on. And that's kind of the narrative I want to bring forward as a society right now. So what was our lottery win? Well, the lottery win is we happen to be alive at a moment where in business, to use that example, the world has very firmly changed from situation where value is particularly as reported in corporate balance sheets is now very heavily dominated by intangible assets as opposed to tangible assets. So if you go back to 1975, just as a year I happened to have the data for, it basically was an 80-20 rule, top 200, 500, 800, 1000 companies is pretty much consistent. Balance sheets will be 80% tangible assets and 20% intangible assets. And those of you who didn't have the benefit of some first year accountancy, the intangible assets are called good will. And even though today we call them brands or patents or copyrights or whatever, it's still actually good will. Because to be able to enforce your intellectual property, you need the good will of a social contract and a construct that people allow you to actually do that and you're protected by the law and society. So good will is pretty much driving a lot of the balance sheets now because we have the reverse. Today the situation is that it's the 80-20 has flipped around. But it's even been more dramatic than that. You don't have to go back to 1975, I just lent on that as a data point. 10 years ago or 12 years ago, the top 10 companies in the world were increasingly tangible companies in the sense of tangible assets being their driving balance sheet force. So these were oil and gas companies, four of the top 10 companies in the world would be oil and gas. If Exxon are still knocking around there just about, General Electric, a phenomenal company and still a phenomenal company is no longer in the top 10. It's not even in the Dow Jones industrial average anymore because they've been replaced by companies that have intangible assets being their primary drivers. You know the Google's, Apple's, Amazon's, etc. But it would be a mistake to think that this is a phenomenon of tech companies because increasingly when you look around and see other types of companies and substance companies, you will see that as well. The Glambia has been an example that I've had for some time in my head. I remember Siobhan, Talba told me I think in the year 2000, Glambia had exactly 1 million euros, an M, not a B, 1 million euros of goodwill on the balance sheet at that particular point. And about 12 months out of date perhaps, but it had reached 1.6 billion of goodwill on the Glambia balance sheet in the last 12 months. So it's not just tech companies. This phenomenon of intangible assets being a driver of a vast majority of companies is a very significant part. That trend then meeting the world changing and the need to try to tax corporations gave rise to a situation where we now have the OECD looking at in this new world of intangibility, how do we tax intangible versus tangible and where is the nexus on which to tax? And evocatively the word that comes out is substance, which is often why we have a campaign in eBay called the model of substance. And again this idea, particularly for a predominantly Catholic society, transubstantiation is not a new idea. The idea of moving between tangible and intangible in trending is conceptually at least something that we can cope with. And so the substance idea here is that you must have your corporate tax strategy aligned with where the substance is. And of course in the world of oil fields then the tax strategy would have to move to where the oil is evocatively, but in an intangible world the intangible assets can move to where the tax strategy is. And so I don't need to repeat what Ireland is to this audience. So we clearly had a well defined corporate tax strategy branded 12.5% etc. But we're also part of the European Union which gave that stability. And so the tournament as people started to move their corporate balance sheets away from the Caribbean islands because they couldn't show substance in those jurisdictions. They wanted to move to Europe which had substance. And then the choice within Europe was to land in a member state that was favourable. And the favourability that's often discounted or not taken account of is common law legal systems. Common law legal systems are much easier to deal with intangibility and fast moving, shift shaping events than codified law which needs to know what something exists to go through codified etc. Common law can be much more fluid. And so Ireland and the UK were the big beneficiaries in 2012, 2013 of this big nascent move of intangible assets. So companies moving to Ireland in 12 and 13 but also Britain were experiencing that as well. So for instance Pfizer, that great company and still a top 10 company in the world has attempted to become European twice in the last seven years. First by becoming British through the Asterix-Zeneca deal and then in 2000 that was blocked and then in 2016 attempted to become European again by becoming Irish through inverting through allergen. And again that was a change of tax code in the UK they backed off from that. But here is a top 10 company moving into a jurisdiction as a result of this trend. So in 2015, this very significant year for Ireland, the corporate balance sheet in Ireland tells the story of the leprechaun economics jibe and the fact that it wasn't taken account of I think has given rise to a kind of a misinterpretation. The rights or wrongs of it are a different issue that we can discuss the equity and the ethics and all of that kind of issues. Although I do find it offensive sometimes taking lessons from generations who have colonised the world for tangible assets in the past and certainly now have quite po-faced about totting. But in the same in the same regard what we're looking at is that the corporate balance sheet in Ireland increased by 40% in 2015 alone. And the reason is that Ireland was the winner takes all because Britain, which had been our competitor at the start, aggression of Osborne and Cameron around the corporate tax like the patent income box, 10% knowledge box, knowledge development box was our reaction to that etc. The torment was between the two jurisdictions really for capturing this moving corporate balance sheets. So Ireland wins because Britain made uncertainty and it wasn't even Brexit. It was the uncertainty about the break up with the United Kingdom at that point that gave Ireland its vantage. It was a Scottish independence referendum that created the uncertainty. So a 40% balance sheet increase for a sophisticated audience means that the P&L extraction from those balance sheets, which is a flow concept, is broadly similar to the GDP concept. They're not perfect, but they're proxy. And so what you see from the increase in the balance sheet was that the transaction, the P&L, the type of GDP activity was a 60 billion flow. And that 60 billion flow captured by GDP meant that our GDP increased by 34% in money terms in 2015. We're perfectly explainable from the balance sheet. But what the balance sheet movement was an incredible step up, so it's the equivalent of finding oil because the new oil is intellectual property and Ireland's been in the vanguard of frontier economy in that regard. And so Ireland is both a frontier economy and a resource economy in modern terms. This is the lottery win. And to give you a sense of the scale of that is that the 2015, the corporate tax returns were already revealing the phenomenon long before the CSO in July of 16 brought out the numbers. The expectation from the Department of Finance was for a 4.2 billion return on corporate taxes in 2015, but it came in at 6.9 billion. So there's nothing wrong in getting the forecast wrong. All I want to make the point is that the change was 2.9 billion of a surprise in corporate tax revenue. But 2.9 billion, whilst it's a fair bit of money in and of itself, is actually the end of the pipe. It is the money that you get from the profits that were in the balance sheets that were in your society in that year. So in other words, in an effect of 10%, just to keep my numbers easy, there was a 29 billion euro miss in our company accounts, as I mean the nation's company accounts in that particular year. So in other words, it was the equivalent of missing 29 Ryanair's. If you think of Ryanair doing a billion euro of profits, or CRH, or a carry, or whatever it might be. So it was a very significant miss. But that's just grown over the last number of years. Then there's the point and conscious of time, then there's the point to say, well, that's just all funny money and it's only just in balance sheets. And yes, that's a spin-off to the society. But what has it done for the individuals in that society? Well, what we've observed, and we're into the sixth year now in a row, so this is not temporary. It's not one year off. It may be a once-off epoch in a generation, and I do believe it to be. And that is all the issues about sustainability and how you use the resources. Let me just make another statement here. It is now the case that it has actually given Irish households a huge surge in income. And in fact, it is very clear that Irish households are clearly living within their means. Irish households are living within their means in spectacular fashion. Irish households have now more money on deposit in our banking system than they have borrowings from the banking system. In a phase of zero interest rates. It's perverse. The reason they may have that is because they're rationed from getting the things that they might actually want, which is family formation and housing units. So they're ready to pounce in terms of having the cash ready to go if the opportunity arises. So maybe a symbol not of something positive, but perhaps of something negative, being rich but rationed. Not being able to get your hands on the assets that they require. But it's also the case that disposable income over that six-year period is now increased by 25%. But when you say percentages like economists do, it's generally baseless. So have you ever had a conversation with economists? We told about 5% growth, but nobody knows what 5% of what. What does it mean? So I was on with Ivan Yates actually on Monday. It feels like a month ago already. And there are 2020. What's going to happen in the new year? What's your forecast? I guess the forecast is, if you look out there, in money terms, because economists will be a bad medic, because they don't tell you about your respiratory system. You say, how am I in my respiratory system? You're fine. But your blood system is actually poisoned. You're only half the story. So if you're only talking about volume and you don't know about the price, you say, well, we seem to be fine. So whatever it is, 3.5% volume growth, maybe 1.5% price growth, 5% next year, this year. It's not necessarily forecast. It's an exercise I want to go through. If it is 5%, that means that GDP in Ireland will increase by 15 billion euros. And there's 5 million of us now, which is 3,000 euros of an increase for the year. In those terms, if some family member wrote a cheque for 3,000 euros and gave it to each member of the family over Christmas, we'd say, it could be a good year. It's quite a nice gift to get. So that forecast, which is now kind of presented as an economy slowing down in Ireland, so it's only going to be 3.5%, it's beginning to slow and cool off. But actually, in reality, that's the type of a generation of activity measurement as a 3,000 per person delta in there. This is getting reflected in the incomes. So Irish households have self-reported through the household budget survey what they spend and what they earn. So the average Irish household has now income of over 70,000 euros. There's 2.9 persons or three persons per household. Their disposable income is pretty much the same level because the actual share of the average Irish household in terms of income tax is still in so low single digit. So we don't, not a high taxed household. The households have the money and they're spending it. But they're not able to spend enough to actually stop their savings going up, the point they're living with their means. But what's supplementing their means if the state is trying to go in an investment? Well, it's actually the largest coming from the corporate tax revenue is supplementing what the households should be paying in terms of the delivery of the public services which they profess to want. So it's going to be rather uncomfortable in an election cycle knocking on the door and saying, you've got the money. We want it to actually deliver the things that you say you want like better public services and more GPs and more teachers and more security for the state. The Irish households have the money. They choose not to give it up willingly and they choose to spend in consumption patterns that are very dramatic. And while there might be anecdotal, we see commentary about our criminal gangs are moving out of Ireland because the market is saturated in illicit drugs. Can't get price recovery given the scale to which the phenomenon is in our society. Markets work and economies work even in illicit markets. I don't know if it's true or not, but it's a proposition. In that regard, we're seeing this conspicuous consumption is reflected in the airport numbers. Dublin airport's gone from 18 million passengers to 32 million passengers. Think about the conversations you over here in coffee shops and people where they've been and where they've been away over Christmas. I'm not a killjoy. I'm just expressing where people are spending their money, but they're not putting it back into the public infrastructure and sufficient away. The other feature that we've observed in the last number of years is that the scarce construction resources are getting sucked up by corporates as well, which is a positive thing because there are going to be firms invest to put down productive assets, which themselves will have recurring income into the future. They're not spending an investment just to get the money spent the year. They're putting something into the ground, machinery equipment, building construction, the intellectual property, so they'll have recurring income over the next number of years. And the investment in Ireland right now is absolutely gargantuan. Gargantuan, the SRI in their latest forecast suggests that investment in Ireland by firms this year will be 120 billion euros. Now think about that. That's 2 billion euros or so a week. The iconic and spectacular investment that is Intel in the west of Dublin, which again is an expansion mode, has taken 30 years to invest 15 billion. And we're talking about society that's now churning 2 billion euros a week. So in eight weeks we'll have done the equivalent of an Intel lifetime in Ireland type investment. That is spectacular, but it also has huge crowding out effects in a society that's trying to cope with this scale. And so what we observed then is that we've spent 3 billion euros on refurbishment of existing housing stock in 2018, and we spent exactly the same amount on new dwellings. So the scale of refurbishment both from the commercial but also then into the private sector, those with the money and so on as well, we're seeing that there's a crowding out effect into the capacity to deliver on the housing stock for an increasing population. I just put these forwards on either good or bad, it's up to you to determine whether these are good or bad things, but they're explainable stories as what's going on. The last feature maybe to finish Michael on this one is that if we are a resource economy and if we are a frontier economy and if we're the family that is possibly the ones that want to have a good time for half a generation as the ones that might be wanting to put down the long term. So in other words we found oil or gas, are we going to be in Norway or are we going to be a Middle Eastern country, let's put it that way. What would you might observe? Well one thing you might observe is the labour market responses. So stereotypically, and this may be unfair, but stereotypically to the oil rich Middle Eastern societies, one of the phenomenon that they've observed over time is the indigenous population stops working and dabbles. Not that they're not doing anything, but they don't have to work. In fact they supplement the society by bringing in people at both ends of the spectrum for low paid work and then specialists for teaching and medicine and sport stars and so on. There's a solution for the FAI. So in that regard we see that the participation rate starts to fall dramatically. So while Ireland is now at 2.3 million people at work and about 100,000 are so unemployed in that ILO measure, so we've got 2.4 million people in the labour force, that 2.4 million is actually only 62% of the population in the age bracket 18 to 65. 65 may no longer be politically correct, but just for the sake of the number. That means 38% of the population are not participating. And then the question is, are they not participating because of why? So we've got the same amount of sick people and people who physically can't work, disproportionately I'm sure, in other societies. So we also have much more children, more care responsibilities, childcare being expensive, getting to work being expensive, hard to get two buses, taxation system is punishing at the margin, etc. These are all reasons why, but they're affluent reasons. Now you might like the word affluent about that because people say it's a legitimate reason I'm not doing it. I'm not saying you're workshop, I'm just saying if you really had to work for the household and if there's jobs there, then you would. And there's plenty of jobs there and you're not doing it, so therefore you made a choice not to work because of reasons why you felt you weren't going to do it. This is not a moral judgement, I'm just explaining why we are experiencing this affluence. We're also seeing in the younger age cohorts, they're dabbling a lot more as we would describe in the past in finding themselves. So staying longer in education or staying longer in going away and coming back and beginning to postpone the start line. And again, that's great. That's a great choice to have, but it's an affluent choice. It's not an austerity choice. And so in that regard, the very last point I want to make, which is probably the most serious one, is all of this large S and it's great. People don't believe it, of course. They say, I don't feel it. And also I can see why the market found me and rewarded me, but I just can't explain my neighbour. They're real dumbasses. I don't know how they're doing the same living standard as me. But in that regard, you're seeing this kind of relativity piece that people legitimately have, they're disconcerted. So proves that money can't make you happy. But what we're then trying to figure out is where are we in this regard? Well, first of all, the median Irish household now has 50%, 50% more income than the UK equivalent. It's that dramatic what's been occurring here. And again, people say, I don't believe that. But what's your term of reference? Well, in rural Ireland, people compared to Dublin, but actually just think of Ballsbridge. They take account of the whole of the city and the various areas of the city. In fact, rural Ireland actually has a higher disposable income than urban Ireland through the household budget survey again. We see that. Very often, people will go to the urban to make the money and bring it back to the parish to live in, et cetera. But this imbalance is not actually as apparent as those describe it. So the imbalances in our society are sure there, but they're not as dramatic and the absolute level is very high. But the bit that I worry about most, and this caused consternation to some of the more right-wing fellow travellers as they might have seen me as, is that the state is potentially getting too small for the scale of the resources that are now in our society. And I think the labour market is probably the part that I would put forward as a proposition on this. My numbers are not going to be precise, but they're roughly correct. Off the 2.3 million at work, 0.3 is the public sector. It's 350,000, but run with me at the 0.3. When we were 1.5 million, we had 0.3 public sector workers as well. So in other words, what we've observed is the private sector has gone from 1.2 million workers to 2 million workers. We've got 800,000 more private sector workers and no extra public sector workers. As I said, I've been imprecise, but just for effect. A rich society, I don't know what the answer is in the ratios, but it seems suspicious to me that we're in this scenario of what a rich society actually wants in terms of public sector infrastructure and public sector delivery that would allow that ratio imbalance to get so low because rich societies want better public services, but they are provided through people very often, whether they are planners or teachers or medics or crucially security. If you use a tawt experiment that I've put forward before, if it is the case that our primary schools have a ratio of 28 to 1, again, I don't know if that's a correct number or not, it's a tawt experiment, why as a rich society don't we go for 14 to 1? Of course, in that sentence, I've doubled the teachers. But why stop at 14 to 1? You might say, well, I've lost a run of myself now. But by reveal preference, this society actually likes to have an Oxbridge tutorial system when it comes to the education of their children, it's called Grines. And Irish households have been doing Grines in my lifetime, time immemorial. Even when I was in short pants, the words Grines was familiar to me, even in working class household. So we have a reveal preference actually just in that one item to more. So it seems stunning that we're allowing this ratio to go without any commentary, but it has huge manifestations, and the last one is clearly on security. I can think of no worse labour market story than about our defence forces. On both ends of the command chain, the capacity to earn a living to be able to be there to defend us in the defence forces, and particularly in the navy on the ships that can't go out because they can't crew them, and that some of the navy who are living on the ships because they can't get accommodation, and at the end of the officer class, the phenomenon has been observed in the air corps for years of people being bought out by the private sector. We're now seeing it in cyber security and so on. The real issue we have to confront is given that we're now rich and in charge of so many assets, those two billion euros a week are building up into massive assets that we can physically see all around us. Are we certain that we actually have the critical mass of public infrastructure and public service capacity to ensure that we can keep this golden goose that we have, and that we can actually be the family that makes future generations better off? Thank you.