House of Commons Hansard #202 of the 35th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was dairy.

Topics

Canada Post Corporation Act
Routine Proceedings

10 a.m.

Bloc

Paul Crête Kamouraska—Rivière-Du-Loup, QC

moved for leave to introduce Bill C-326, an act to amend the Canada Post Corporation Act (membership of board of management).

Mr. Speaker, the purpose of this bill is simply to ensure that, in the future, Canada Post Corporation will consider regional development in fulfilling its mandate. We realized that this corporation was very focused on production and did not necessarily take into account the development of each part of the country.

Changing the membership of the board of management would ensure representation from every province and territory in Canada. This would also prevent the concentration that may occur when the people sitting on Canada Post's board of management look after their own interests instead of those of people from the various provinces. That is the purpose of this bill.

(Motions deemed adopted, bill read the first time and printed.)

Committees Of The House
Routine Proceedings

10 a.m.

Reform

Werner Schmidt Okanagan Centre, BC

Mr. Speaker, I move that the second report of the Standing Committee on Industry presented to the House on Tuesday, October 18, 1994 be concurred in.

It is with considerable pleasure that I rise to debate this motion. The committee had a very successful time in debating various parts of the access to capital for small business. Many of the things we talked about had to do with the lending institutions, in particular the chartered banks, trust companies, credit unions and groups of that sort.

The committee came up with 22 distinct recommendations. This is what we are talking about. The recommendations that the committee came forth with are the ones that ought to be concurred in. It is a pleasure for me to say that the banks have already moved in some of those directions.

Take for example recommendation No. 3. The committee recommends that the joint Industry Canada committee in consultation with the Canadian Bankers Association draft a code of conduct. It would explain to customers in plain language the information a loan applicant must disclose. There would be a clear explanation of reasons for refusing a loan, a commitment to guide customers to alternative sources of financing, and a commitment to provide an internal complaints handling mechanism.

The Canadian Bankers Association met with the committee in the earlier part of this year. It indicated clearly to us that it had established that kind of code of conduct. At first the association said it would be very difficult if not impossible to bring about some kind of standard of behaviour as far as treating the customers and the banks were concerned.

A lot of information is available now. It has been exchanged among the various branches of the banks. In addition to that, what is called an ADR which is a dispute resolution mechanism has been brought into being. It is an alternate dispute resolution mechanism that has been brought into being.

The committee also suggested that perhaps this was not good enough. It thought that probably there ought to be an independent ombudsman established. Recommendation No. 5 reads as follows:

The committee recommends that the government establish an independent office of the bank ombudsman to investigate complaints of breach of duty or maladministration by the banks. As in the United Kingdom, the ombudsman should have the power to require banks to pay compensation to complainants for financial loss, inconvenience and stress.

The experience of the banks in Britain where this independent ombudsman has been operating for a number of years has been very salutary. It has helped small business people. It has helped various other people in the business world to deal with their

banks more successfully. It has also made the banks a little more humane in the way they deal with their customers.

When we brought this to the attention of the Canadian Bankers Association, it thought that perhaps there should not be an independent ombudsman who is outside the banking community but rather it should appoint its own ombudsman.

The Toronto-Dominion Bank has one of those people who was the leader in the Canadian chartered banking industry to do just that. It is apparently working very well.

It is interesting to note that the Canadian Imperial Bank of Commerce now has this kind of person on a full salary at the senior vice-president level. This person deals with complaints that various business people have with regard to their loans or other operations with regard to the bank.

There are other recommendations from the committee as well. We need to recognize that the committee proposes to continue monitoring small business access to capital by calling one or more banks as witnesses every quarter to review their performance in lending to small businesses. That process has begun.

The banks have indicated that indeed their performance with regard to lending money to small businesses has improved. At least they are prepared to tell the committee what exactly their operation is with regard to these activities.

We go beyond that. We have asked the superintendent of financial institutions together with Statistics Canada and the Bank of Canada to develop a new format for the collection, compilation and publication of statistics on bank lending to small business. These statistics should be based not only on the size and type of loan but also on the nature of the borrower, including gender, employment, sales, major sector of operations and municipality. These statistics should be reported quarterly.

It was very interesting to watch the reaction of the banks to this recommendation. They first said: "That is impossible. We cannot give you those kinds of numbers. We do not have those kinds of numbers. It would be a horrendous expenditure in order to give you these kinds of numbers. It cannot be done".

It is a great pleasure for me to report that in the quarterly review at the end of April the banks not only said they have the information, they are prepared to give it to the office of the superintendent of financial institutions and to the committee. That is a great move forward. It shows the kind of concurrence that we see in the industry which the committee had in mind in the first place.

It is not so much what the government does, it is what industry does which makes business run better. In the final analysis business makes this country run. Government provides the opportunity, the environment and the parameters within which business can operate more easily, more fluidly, more efficiently, more effectively and more successfully.

We need to recognize it is not government that creates employment, it is not government that makes the economy grow, it is business that makes the economy grow. In particular, it is small business that makes the economy grow. In the last five years 85 per cent of new jobs created in Canada were created by small business. Let us recognize the significance that small business has in the Canadian economy.

The committee goes on to suggest leasing should be encouraged. It urges the government to ensure that tax measures and other programs do not discriminate against this method of financing. There are situations in which the government through its income tax policy has discouraged this form of financing small business.

Often small businesses do not have the capital resources to expend huge amounts of money for the financing of capital expenditures. Very often, if they can lease the equipment, it is far more salutary and allows them to get on with their business. The money would be available for the operation, rather than having it tied up in capital expenditures or equity.

The committee goes on to recommend that the federal government establish a limited working capital guarantee for small and medium sized business exporters. Such a program should be self-financing and priced in a manner that is commensurate with the risk. Too often it seems to have been the philosophy or the modus operandi of governments that in order to help business they should give them something.

The committee does not agree that is what should happen. The government should create the environment which we talked about a moment ago and allow them to finance their businesses. If businesses need seed capital, that should be returned at a rate of interest which is commensurate with the risk involved in that particular situation.

We also need to recognize that the reference is to exporters, particularly small business exporters. Today most exports are by a very small number of businesses. I believe that approximately 100 businesses control 85 per cent of the export market. In other words, small business has not had as large a portion of the export market as it should have. If it did it would help the Canadian economy to grow. It would increase the global participation and competition of Canadian business in the world marketplace.

The report goes on to suggest that the government review the Small Businesses Loans Act. To the credit of the government, that is exactly what it has done. It ought to be commended for that. It has begun to concur with the recommendations of the report. If I remember correctly, the Small Businesses Loans Act ceiling was moved from $3 billion to $12 billion. The only difficulty is that in the past the government has had to write off about $100 million in bad loans. Does that mean that with a ceiling of $12 billion the bad loans will increase to four times that amount?

There have been, from the small business associations and also from the bankers, some concern that some of the provisions of the new small loans act amendments create an additional charge which may discourage some of the small businesses from taking advantage of the provisions of the small loans act as it has been amended.

Therefore we need to be very careful that when one moves to concur in these kinds of recommendations that one not move in such a way that the operation of implementing that recommendation mitigates against the purpose, intent and spirit of that recommendation.

The committee recommends further that the mandate of the Federal Business Development Bank be confirmed and refocused as a complementary lender to small and medium sized businesses and that it be authorized to use new financial instruments to fulfil its mandate.

I am sure members of the House noticed that yesterday the Minister of Industry introduced Bill C-91. The effect of that bill is to do precisely what this recommendation suggests be done. That makes a committee feel its work is very significant and has not been ignored. The government has recognized the hard work of the committee.

We need to recognize in detail exactly how the business development bank, under the new name of the business development bank of Canada, will operate. Will the operations of that bank become an extension of the Canadian federal treasury or, as the minister implied yesterday, will the capital used for loans come from private sources of one kind or another.

The new sources of capital that the Business Development Bank of Canada needs to look at is that money that exists in the private sector today and money that can be patient, particularly for new, innovative ventures. It should also include the high tech areas where the science and technology involved in those businesses is very far reaching, very expensive and does not create an immediate return. It requires a lot of seed capital for the intellectual background, the experimentation, the building of prototypes and things of that sort before it actually goes into active and profitable production.

The Federal Business Development Bank, or under the new name of the business development bank of Canada, could form and fill a particular niche in our economy.

The difficulty we need to guard against is it not becoming another crown corporation that is a drain on the taxpayer. It should be a self-sufficient, self-financing organization. To date, the operation of the Federal Business Development Bank has been a profitable venture and that needs to be continued in the future. I hope that the kinds of things that Bill C-91 envisages will indeed take place in that regard.

However, we are not done yet. This committee did a lot of very hard work. It dealt not only with the chartered banks which it said are doing a reasonably good job. It could do a lot better in some places but is that not true of all of us? We can all improve. We would like to get the banks to take their responsibilities and carry out their mandates a little bit better.

I now want to move outside the banks and into the trust and loan companies. The committee recommends that the trust and loan companies act be amended to remove the arbitrary capital requirements for the establishment of a trust company and the acquisition of full commercial lending powers. The superintendent of financial institutions should instead establish guidelines setting out conditions for the establishment of new federally chartered trust companies and for the acquisition of full commercial lending powers. Institutions meeting these guidelines would be able to operate in Canada and make commercial loans using the prudent portfolio approach.

It is precisely on the last phrase "using the prudent portfolio approach" that I wish to spend a few moments. In the last number of years we have seen the collapse of some very major financial institutions, one of which was Confederation Life, that probably everyone in the House remembers only too well.

I remember the appearance before the committee of the superintendent of financial institutions and the questions the committee members asked this individual. How was it possible that a major financial institution like this could collapse in Canada? It is very serious when such an institution collapses.

The superintendent of financial institutions has come under the scrutiny of the auditor general. On Friday of this week he was reported as saying in the Financial Post : ``The auditor general and Ottawa's financial institutions watchdog are at odds''. We have the auditor general on the one hand and the superintendent of financial institutions on the other at odds over when federal regulators should intervene to deal with troubled Canadian trust and insurance companies.

The superintendent of financial institutions has been given the responsibility by Parliament on behalf of the people of

Canada to assure the financial soundness of banking institutions, insurance companies, credit unions and various other financial institutions.

The auditor general has been given the responsibility to investigate how successfully the office of the superintendent is doing its job. The superintendent specifically says: "I and the auditor general do not agree what my job is". Who is going to do the job, the auditor general or the superintendent of financial institutions?

The article goes on to explain what some of the issues might be. For example, the auditor general portrayed OSFI as sometimes being too slow to intervene with financial companies in trouble. The superintendent of financial institutions, John Palmer, who assumed the post last September, disputed the regulatory approach and said: "Your officials appear to favour a more mechanical system in which specific regulatory intervention would be required when specific numerical thresholds are violated. In our view it is essential to preserve the role of judgment in determining how and when to intervene".

If the Superintendent of Financial Institutions is to exercise judgment without looking at the numbers, there is no question that can put us into a lot of potential difficulty. This is a good example of where an individual needs a very hard head to understand the numbers and to make sure that the balance statements, the equity position and the financial situation of financial institutions are sound.

However, he needs to show a compassion that recognizes when situations have developed, when conditions have changed. He needs to be somewhat kind and give them some time to balance the sheet again if there is an indication a change can take place and the institution can become financially solvent if he had a little patience. It should never be done without a very hard headed look at the dollars and cents and to make sure the institution is sound and that management is capable of turning the institution around.

In the last little while we have seen financial institutions which were on the brink of bankruptcy long before anything was done to call them to account.

It is to the credit of some of the other people who are coming back now and saying that the confederation life policy holders are to get back 70 cents on the dollar and that perhaps in some cases they will get back substantially more. It is absolutely tremendous that this can happen in Canada. The critical situation is that this should never have been be allowed to happen in the first place. That is why we need to concur in the recommendations this committee has brought forward.

Committees Of The House
Routine Proceedings

10:30 a.m.

Reform

Randy White Fraser Valley West, BC

Mr. Speaker, I would like to ask my colleague for a point of clarification regarding his reference to FBDB.

Many times in the House we hear discussions with regard to regional development grants from the Atlantic Canada Opportunities Agency, FORD-Quebec, and western economic diversification. What is his feeling about the role of these regional economic development agencies and that of FBDB? Could they be rolled into one or is there a role for each in this country?

Committees Of The House
Routine Proceedings

10:30 a.m.

Reform

Werner Schmidt Okanagan Centre, BC

The whole concept behind regional development has evolved to some degree. We need to recognize that the implementation of the regional economic development agencies has subsidized businesses that could not make it on their own. It has created artificial competition between businesses that were in existence and new ones created across the street so that neither of them could succeed profitably. It has given industries an artificial cushion, because it has not required that the money that was given to them be paid back.

If we are to have regional development it should be done in a fair and open marketplace with competition. It ought to be done in manner such that all businesses know what is going on and they are all on a level playing field and competing fairly with one another and whatever money is given ought to be paid back with a reasonable rate of return.

These are precisely the kinds of things the Federal Business Development Bank was supposed to be doing in the past when it was the lender of last resort. If that kind of thing continues, if regional development agencies develop a flat playing field, create competition, and require the money to be paid back, then there is no reason they could not be rolled into one. The bankers' criteria of lending money could be applied and the whole business would run a lot better than it does at the present time. I suppose the end result of that statement is they could be rolled into one, but under certain conditions.

Committees Of The House
Routine Proceedings

10:30 a.m.

Reform

Elwin Hermanson Kindersley—Lloydminster, SK

Mr. Speaker, I thank the member for Okanagan Centre for his concern about small business and for bringing this to the attention of the House, despite the fact that we thought the government would be bringing forward debate on Bill C-88, a bill that would deal with internal trade barriers and hopefully remove some of those.

I wonder if the member would expound on whether the report deals with the harm caused to small business because of the trade barriers we have in Canada between provinces. It has been

determined that these trade barriers cost our country $6 billion to $8 billion every year, and I suspect the brunt of that cost is borne by small business.

I would like the hon. member to relate to the House what the harm of these trade barriers is to small business and whether the report does make any recommendations, and also whether Bill C-88 does go far enough in bringing an end to these trade barriers, which are so harmful to Canadians.

Committees Of The House
Routine Proceedings

10:35 a.m.

Reform

Werner Schmidt Okanagan Centre, BC

Mr. Speaker, the hon. member certainly knows how to ask complicated questions, but they are very significant questions.

The important thing is that one of the greatest hindrances to small businesses developing is the existence of trade barriers across Canada. They are a multitude in number. I believe at the last count there were somewhere between 500 and 750 of these trade barriers.

Estimates vary as to how much they actually cost. In some cases people argue that it is about $5 billion a year to the Canadian economy, in other cases they will say that it is $7 billion, depending on which set of figures is used. That means the average family in Canada spends $1,000 or $3,500 per year more than it would pay for the same goods and services if the trade barriers did not exist.

One of the embarrassing things for us as Canadians and parliamentarians is that it is often easier to trade with other countries, in particular our neighbour to the south, than it is to trade across Canada. How do we bring these kinds of things together? It seems so stupid to tell someone it is easier to trade, for example, between Vancouver and Spokane. It is wide open. There is an organization called Cascadia, which promotes this kind of economic development. It is so easy to do, because the trade barriers between Canada and the United States have virtually been eliminated. And now with NAFTA that goes all over the place.

There was a principle announced in the red book that states that Canada should be unified. By not dealing with the internal trade barriers we are in fact disunifying Canada and creating a situation where trade is now north and south but not east and west.

That is one of the great barriers for small business. We would like to be strong at home first before we go abroad, but that is not an opportunity today. We have to become strong internationally and then we can perhaps afford to go over these trade barriers within Canada. It is a reverse, backwards kind of thing. It hurts our feelings of patriotism. It frustrates our feelings of economic unity as well as political unity. It is those kinds of things that we have to tear down so that we can help each other and feel important as Canadians-as important in Nova Scotia as we are in British Columbia, as we are in Ontario, as we are in Quebec, as we are in Manitoba, Saskatchewan, Alberta, and so on across Canada.

The hon. member asked a very good question with regard to those things. Does the federal trade agreement that is now before the House and is supposed to be implemented through Bill C-88 do that? It does not.

We will hear from various members on this side of the House who will say clearly where this trade agreement falls short. It does not deal with the very basic issues.

The idea is a very good one. Let us recognize this right off the top. Recognizing that internal trade barriers in Canada are a significant problem is very important. All our premiers have now recognized that is a problem. The issue, however, is that although they have recognized there is a problem they have not solved the problem. When we get to the dispute resolution mechanism, what do we get? We get the opportunity that if they cannot resolve the conflict then they can retaliate. That is exactly where we are today. What have we achieved?

The agreement has to have some teeth in it. I submit that it does not have those teeth.

In answer to my hon. colleague's question of whether the trade agreement does those things, it moves in the right direction but it does not go anywhere near far enough. Does it help build the unity of Canada? No, it does not. Does it hurt small business? Yes, it does. It is an embarrassment to many of us because we can trade more easily north and south than we can east and west.

Committees Of The House
Routine Proceedings

10:35 a.m.

Kingston and the Islands
Ontario

Liberal

Peter Milliken Parliamentary Secretary to Leader of the Government in the House of Commons

Mr. Speaker, I am very sorry that the Reform Party has decided to waste the time of this House with a debate on a motion for concurrence in a committee report.

It is a real waste of time, since a bill to continue the Federal Business Development Bank under the name of Business Development Bank of Canada is already listed in the Order Paper . We may pass this bill this afternoon without wasting the time of the House, as was the case this morning.

I am sorry the Reform Party feels it has to take up time debating a report that was tabled in this House last October when there are bills waiting to be passed that could deal with the issue.

To avoid any further waste of the House's time and cost to the Canadian taxpayers, I move:

That the House do now proceed to Orders of the Day.

Committees Of The House
Routine Proceedings

10:40 a.m.

The Acting Speaker (Mr. Kilger)

Is it the pleasure of the House to adopt the motion?

Committees Of The House
Routine Proceedings

10:40 a.m.

Some hon. members

Agreed.

Committees Of The House
Routine Proceedings

10:40 a.m.

Some hon. members

No.

Committees Of The House
Routine Proceedings

10:40 a.m.

The Acting Speaker (Mr. Kilger)

All those in favour of the motion will please say yea.

Committees Of The House
Routine Proceedings

10:40 a.m.

Some hon. members

Yea.

Committees Of The House
Routine Proceedings

10:40 a.m.

The Acting Speaker (Mr. Kilger)

All those opposed will please say nay.

Committees Of The House
Routine Proceedings

10:40 a.m.

Some hon. members

Nay.

Committees Of The House
Routine Proceedings

10:40 a.m.

The Acting Speaker (Mr. Kilger)

In my opinion the yeas have it.

Call in the members.

(The House divided on the motion, which was agreed to on the following division:)