Feargal Quinn (Independent)

The Minister of State is welcome. It is an interesting time to have this debate but it is also an essential time. An recent article in The Economist entitled "Grow, dammit, grow!" referred to the need for the world economy to grow. We must be ready for that growth when it happens. By January, when the Government has to start borrowing again, we need to have done enough to convince the bond investors that there is a credible to plan to bring down the deficit to 3% by 2014, and this is the time when we have to do it.

The obvious question concerns the amount of adjustment that will need to be made in the upcoming budget. Deputy Michael Noonan has suggested a figure of €7 billion, and given that the Government has indicated to the European Union that the deficit would hit 10% by the end of next year, that seems a realistic figure. Most of those in the media, however, continue to insist on a lower figure of €5 billion. That does not seem to make much sense if we are to meet the required targets.

We need a straight answer. Will the Government cut the widely circulated figure of €5 billion by December and then cut another, say, €2 billion, a few months later? Given the position with the rising cost of subsidising Anglo Irish Bank, a cynic might say the Government is to some extent hiding the real figures or not being upfront with them. I hope our openness in the past week has done something to correct that and that the debates in the Dáil yesterday and today and this debate will help. Perhaps that makes sense if we are in a much worse situation than most of us know and that we do not further alarm the international markets and the international community in general. People need to know where they stand to allow them better plan for the future.

I was struck by Pat Leahy's comment in last Sunday's edition of The Sunday Business Post to the effect that "within three months, we will know whether the country has a future as a fiscally independent state". That is an horrific term. We have no choice but to take the tough decisions, and we must take them now.

The ESRI says that the an bord snip nua report:

... remains the most comprehensive overview of what might be done. Given the scale of what we now face, it may be necessary to explore whether or not the scope of that exercise is adequate to the current situation.

That report is now 18 months old. The institute warns that: "it is important to recognise that the quality of the decisions we make in relation to the cuts will have a bearing on the rate of our long-term recovery".

We have shown that we are a nation that can avail of the world economy. We can tap into it. We must become an export nation and, listening to previous speakers, including Senator Butler, it is clear we have that opportunity as long as we are able to hold our own in that situation, but the rate of that long-term recovery will be important.

The savings in the an bord snip nua report were related to the cutting of numbers in the public service. Senator Ross and Senator Harris spoke vehemently about that issue. Why are the semi-State companies so immune from significant cuts as well? We must reconsider the Croke Park agreement. We should examine also the sweeping cuts in the United Kingdom where cuts were imposed in every area, including welfare and defence and even the Queen's budget and the BBC. A total of 500,000 public servants will lose their jobs over the next three to four years. How many public servants have lost their jobs here? The only genuine cuts the Government here has made have been to capital spending. Those are my concerns.

Looking at the positives, we are still one of the wealthiest countries in the world. As a percentage of national income our debt was significantly higher back in 1987, interest rates were far higher and our economic base was far less developed than it is now. We are also one of the lowest taxed countries in the developed world. We can get out of this crisis and, one hopes, in the process we can create a much more efficient and equitable society. We must set ourselves on the road to recovery by making the tough decisions, perhaps by increasing our tax income. It was interesting to hear Senator Ross say how we could do that.

A point that cannot be made often enough is that sometimes by reducing the rate of tax the income can be increased. We should not forget that. We have seen it here before. I recall when the then Minister for Finance, Charlie McCreevy, came into this House and said he was reducing betting tax from a rate of 20% to 10%, we all howled and told him he was looking after his friends in County Kildare. He came back the following year and said he made more money from the 10% rate than he did at 20% and that he intended cutting the rate again to 5%. He made more money at the 5% rate than he did at the 10% rate. That is a reminder, and I say this as a grocer, that when one cuts the price one can often make more money than charging a higher price. We must give some consideration to the tax models in future.

I want to talk about reform of the public sector and cite the example of Jack Welch. I met Jack Welch of General Electric three years ago. We spoke at two different conferences and got to know each other quite well. If we were to raise taxes, which realistically we have no choice but to do, and I am not talking about tax rates particularly, we must give the taxpayer the confidence that their taxes will be put to good use, yet there is little sign of the public sector being reformed. Many jobs in the public sector are overpaid. The reward does not match the performance, although I do not want to quote that too frequently.

In that regard I want to talk about Jack Welch of General Electric who had more than 300,000 employees worldwide. In 1981, Jack Welch became the chief executive officer of General Electric and immediately began implementing his philosophy and changing the face of the company. One of the issues Mr. Welch tackled was the dilemma of dealing with underperforming employees. Mr. Welch's idea was to purge the company every year of the bottom 10% of his employees. They did not mean they had to be under-performing but in the bottom 10%. That company was in a comparative market, as we are, and if someone knew they were in the bottom 10%, they had to go. He pushed the managers to perform but he would reward those in the top 20% with generous bonuses and stock options. That notion, however imposing, is an assured way of not only evaluating the company but also motivating the employees to perform better. It works well because it forces employees to work harder in fear that they will lose their jobs. That fear can be incredibly motivating and in turn can increase the productivity of the company as a whole.

Most of us in business did not like the thought of that but we should look to what happened to Jack Welch. Some critics say the system is cruel and that companies should not engage in that approach. However, Mr. Welch's ideas present the argument that it is cruel to keep the bottom 10% around and hold down the company. By only keeping the employees who are driven to perform well, the company will operate at a much higher level. The system is deliberate, straightforward, easy for anyone to understand and provides constant feedback to its employees. No employee is ever left in the dark. He or she always knows the level they are operating at and whether they are in danger of being a part of the bottom 10%. The critical point of that ideology is that it communicates to the remaining employees at the end of every year that they are doing a good job and should continue to do so in the subsequent year.

Another argument against the critics is that those in the bottom 10% who lose their jobs will benefit as well. Employees know that the reason they no longer have a job is because of a lack of performance on their part. Everyone in the bottom 10% understands that they need to perform at a higher level if they are to keep their jobs. That lesson, however hard it may be, is beneficial and will help those employees in the future.

Welch's public philosophy was that a company should be either No. 1 or No. 2 in a particular industry or else leave it completely. General Electric had 411,000 employees at the end of 1980, and 299,000 at the end of 1985, yet its productivity massively increased in the years that followed. In 2010, Forbes ranked General Electric as the second largest company in the world. The company had reduced the number of employees and made more money.

Given that there are so many underperforming employees in the public sector, are there lessons to be learned from Mr. Welch and the experience of the private sector companies like General Electric? I am not saying Mr. Welch's system is right or wrong but would it be objectionable to remove those people from public sector jobs who are not performing? Would that not be beneficial to both parties?

I seem to be tagging on to the same theme used by Senator Harris and Senator Ross earlier but the benefit for the community as a whole is there to be won. We must look at this option. It may be tough and may seem cruel but it is tough love that will help get us out of the problem we face.