Debates of Nov. 17th, 1998

Presence In Gallery

[Some hon. members]

Hear, hear.

The House resumed consideration of Bill C-53, an act to increase the availability of financing for the establishment, expansion, modernization and improvement of small businesses, as reported (with amendments) from the committee; and of Motion No. 1.

Canada Small Business Financing Act

[Grant McNally, Reform, Dewdney—Alouette, BC]

Mr. Speaker, it is a pleasure to speak to this amendment.

In this bill the government is taking a look at small business. It wants to provide more funds for small business. We would argue on this side of the House that what the government should do is provide the economic climate for small businesses to flourish and prosper in Canada.

I visit businesses in my riding. I talk to employers who work very hard at their businesses and who employ a small number of employees. They do not mention that they need a subsidy.

It is the government's responsibility to provide an economic climate that would help to foster a positive economy for our country. We know small business is the engine of job creation in Canada; it is not government but small business.

Subsidies can have the effect of rewarding one small business in competition with another with the other company's own tax dollars. That does not seem to make sense. It would make better sense for the government to focus on the things it can take care of, such as high payroll taxes.

There are very high EI taxes in Canada. Today in question period we heard the finance minister openly defy the auditor general's report. The auditor general said that the accounting practices the minister is employing are not proper and that he would not sign off on those government estimates. Yet the finance minister stands in his place and says that it is okay, that the Liberals can do this, that they are the government so they can do this.

That is exactly the kind of thing small businesses would like to see changed. They would like to see payroll taxes decreased.

[The Acting Speaker (Mr. McClelland)]

I know the hon. member for Dewdney—Alouette is having a bit of a difficult time but I can assure the hon. member for Dewdney—Alouette that he has the undivided attention of the Speaker if that of no one else.

[An hon. member]

Does he read well?

[Grant McNally, Reform, Dewdney—Alouette, BC]

Mr. Speaker, thank you. I appreciate that.

The Minister of Transport indicates that I am reading my speech well. I have no notes before me. I am simply telling him and the government what the people of my riding are telling me. They are telling me that they are sick and tired of high payroll taxes. Those payroll taxes are the taxes that are stopping them from hiring more employees. It is those payroll taxes, which the Minister of Transport seems not to be aware of, that are causing employers in his riding and in my riding to work very long hours because they cannot afford to hire more staff to do the job. I have talked to a number of such employers in my riding. If he had any interest in the small businesses in his riding, he might do the same.

The government is currently overcharging employees by $350 on their EI premiums. Businesses are paying a whopping $500 more for each employee than they need to. That means in a company with 10 employees, each are paying $350 too much. If they could keep that money they could spend it in the local economy and stimulate that economy even further. With the current premiums and the 10 employees, the employer is paying an extra $5,000 per year. If it were a larger company with 100 employees, the government would be overcharging it by $50,000. That is wrong. It kills jobs.

We know, and the Minister of Finance has said this himself, that high payroll taxes are a cancer on job creation in Canada. Yet he goes ahead with these policies. He barges ahead. He defies the auditor general who has said that these accounting practices are not ones that he can agree with.

There is also the issue of high CPP premiums. We know that those premiums have had to be increased because of the government's mismanagement of the CPP fund. We know that those payroll taxes are also increasing. They are going to increase by 73% over the life of those increases, over the six years that this government has implemented its plan of grabbing back more money from Canadians.

What this government could do is take note of these types of payroll taxes and work to lower them. It could do that. It has the power and the ability to do that. We see other bills being brought forward by the government. However, issues that Canadians and small business people are talking about in lowering their taxes are being ignored. It is quite unbelievable.

We saw that again today in question period when the Minister of Finance said that it is okay for the government to do that kind of thing, that it is well within the government's purview to do that. The Minister of Finance is saying to Canadians and small business people that it is okay for him to extract extra cash from them, which is not needed for the EI surplus because there is already a large surplus there. He is saying that to working Canadians. He is saying that to small business people in Canada.

Those are the kinds of things the government should be addressing. We would encourage it to address those issues. Those are the things that really strike at the heart of working Canadians and small business.

If the government were really concerned about small businesses it would go about making changes and implementing policies and plans that would get the bureaucracy and red tape out of small businesses and allow them to flourish.

When I was talking to small business owners in my riding I was quite surprised by the number who told me that they would like to hire more employees. I know I mentioned this earlier but I do not think the government was listening. They would like to hire more employees but they have such an incredible amount of red tape right now and are paying such high payroll taxes that they just cannot do it. A number of them told me something very shocking and surprising. They were on the verge of selling their businesses and going back to work for someone else. They simply cannot put in the long 18 hour days any more. It is beyond their capability to do that.

That is sad because what that means is that those individuals who are creating the jobs are being saddled with such high taxes that the government is providing them with a disincentive to do better. Of course the better they do, the higher their taxes are. The more employees they hire, the more payroll taxes they pay. In fact they are overcharged for every employee, as I mentioned earlier. That is hurting them. It is simply not an effective policy. It is the kind of thing we and small business have been asking the government to address for a very long time.

We do not see responses from the government. We do not see it moving in this direction. We see it moving in other areas that are not effective. We have to assume then that the Liberal government is devoid of any new ideas, of any practical implementation of things within its power to put in place. It would be very simple for the government to do that. It is a shame it has not taken the time to put those policies in place.

It is for that reason I cannot support the amendment or the bill. I would encourage the government to focus on lowering payroll taxes and making life easier for small businesses because they generate the jobs in this country.

[Jocelyne Girard-Bujold, Bloc, Jonquière, QC]

Mr. Speaker, I am pleased to rise in the House today to speak to Bill C-53 and to support the amendments brought forward by the member for Mercier. These amendments are aimed at making the act more responsive to the real needs of small and medium size businesses.

Even though the Bloc Quebecois is extremely disappointed with this so-called review of the Small Business Loans Act, we do not for one minute think that the SBLA should disappear. On the contrary. However, we want the government to be more attentive to the needs of small and medium size businesses in reviewing the act.

The truth is that small businesses are extremely important. Statistics reveal that large businesses no longer are and will no longer be the main creators of jobs. Small businesses will give opportunities to those who want to become their own boss and to succeed in a field in which they chose to specialize to create their own job and to create other jobs for people who may join their small business.

With my colleague from Mercier and several members of the Bloc Quebecois, I took part in a poll of small and medium size businesses in my riding because we know how important this act can be for them. It is a matter of life and death. We asked the interviewees very specific questions and the response rate shows beyond any doubt that the amendment put forward by the hon. member for Mercier indicates exactly where the small businesses stand right now and what they need in order to survive and if possible expand, and hence create jobs.

In answer to the first question, 90% of the small businesses responding stated that they find it very hard to get financing at a reasonable cost. Several of them added, and I quote:

More and more often, we have to put up not only our own assets but those of our spouse. Our own recognizance is not enough. Banks often charge small businesses higher fees. Since the banks do not make a lot of profit on personal loans, they hike up the service fees that are not legislated. To increase the term of a loan from five to eight years does not make any sense.

Not enough financing is in some ways worse than no financing at all, because the business cannot develop and expand as it could or as it should.

The second question was used to find out if the Small Business Loans Act was well known. And 55% of the respondents indicated that they did not know the legislation very well and 45% knew about it, but the vast majority, more than 90% of the respondents, thought the legislation could be enhanced. I would like to quote some of the comments made most frequently: get rid of capital tax; there are so many criteria to have access to financing and to qualify that, in the end, we would not need it.

On the fourth question, 95% of respondents felt that loans should be given for working capital and not only for equipment and assets and real property. The pilot projects will provide a good opportunity to establish the options in this area.

The last question for heads of SMBs read “From your experience and according to your staff, would it be easier to develop SMBs if they had ready access at reasonable cost to management advice?” The answer was 98% affirmative. Also “In your experience, would there be fewer bankruptcies?” Ninety-five per cent said yes.

For these very eloquent reasons supported by a very enlightening poll in addition to arguments my colleagues have made, we tabled the amendments to improve Bill C-53 for SMBs, that is, to make it serve them, employment and productivity better.

We want the good news for these businesses to be not just the extension of the small business loans program, but its extension and its improvement. The aim of our amendments is to respond to the shortcomings we and the SMB managers have noted.

[Howard Hilstrom, Reform, Selkirk—Interlake, MB]

Mr. Speaker, the Canada small business financing act deserves more scrutiny than what it will get and more critical comment that may not be listened to by the government as the bill proceeds through the House of Commons.

The motion we are discussing today by the member for Mercier is that Bill C-53 be amended on page 2 by adding in a new clause. Clause 2.1 states:

The purpose of this act is to increase the availability of financing of small businesses—

Where I start to wonder what is really meant by this amendment is when it states:

—which would not otherwise have access to financing.

What is a small business? A small business is simply an individual, a man or a woman, who has an entrepreneurial spirit, a spirit of being able to say “I don't really want to work for someone else, I want to work for myself and, as a result, I want to start up my own business”.

Small business is the backbone of a lot of our communities. As a result, we need these kinds of people, these entrepreneurs who will stand up say they can make it work.

There is no doubt that an entrepreneur who comes forth with a better widget, a better product, a new product that has never been thought of before, a service or an idea that needs promotion and development will need to access capital.

However, in accessing that investment capital his idea, his service, what he is thinking of, the job he may be wanting to put forward to create employment may not be good. As a result, when the entrepreneur goes in for financing from the normal sources or even from relatives or their own investment sock they may have put away, they may find that the financial institution or the independent lender says their idea is not good enough and they are not willing to finance it. What the financial institution may say to the entrepreneur is that their idea has little or zero chance of success.

It would seem to me this amendment is then going to state that where an entrepreneur has no chance of success maybe the government will step in and kind of make sure they do get financing.

The country is littered with empty plants, both small and large, where government has stepped in and said it is great to be producing this bottled water in Saskatchewan. There are magnificent magnesium processing plants in Alberta. Manitoba has certainly had its share of plants that started up, ran for a couple of years and then shut down because they were not viable.

We therefore have to be concerned when we see amendments like this which state that financing should be provided to businesses and entrepreneurs which otherwise have no access to financing.

When there are amendments and clauses in acts like that it is an open invitation to the government of the day to use the financing and guarantees of loans that are not economically viable or financially stable. It simply uses these special little sections to provide money to people who in lots of cases are looking to the government for support, and in return the government expects to get votes. That is why I have a problem supporting this amendment to Bill C-53.

We know that any time the government starts passing legislation it will cost money. Every act costs money. If it is not necessary or will not do the job it is meant to do then it should not be passed.

In this case financing a small business idea that is not economically viable and will not work is not where government should be priorizing its funding, or in the case where it does not put the money out directly where it guarantees the loan and ultimately ends up paying it off.

The cost of legislation can be seen in all manner of things that have been passed in the House in the last five years, probably even longer. I refer to the Firearms Act which this year is in the neighbourhood of $130 million plus the $200 million the RCMP is expected to come up with for a computer system.

The purpose of the Canada small business financing act is certainly not to support money losing businesses and ideas. The effect it has is to demoralize those business entrepreneurs who are making a go of it with a good idea and they see someone else have an unfair competitive advantage through government support.

The cost of government applies across the whole sector. At present we see small businesses near agricultural communities suffering because of the cost of government on the agricultural sector. Certainly it would help if the cost of government on agriculture were reduced.

I mentioned to the agriculture minister today that many of the user fees and cost recovery programs the government has instituted over the years could well be set aside, either suspended and/or terminated. That would leave more money in the hands of small businessmen like farmers. In essence they are small businessmen. As they spend and the money flows through the economy everyone would have more capital with which to start small businesses.

The costs to small business are the same as in agriculture. One could think of a hardware store or whatever in a small town. Some of the costs are applied to all business such as the GST and the employment insurance premiums that are taken off. In this case there is a lot more paid in than is needed to keep the fund going.

We see Canada pension plan premiums rising all the time and we end up in 20 or 30 years with a pension that is so small compared to what we invested that we should have just saved our money in the first place.

We see business and personal taxes so high they are killing investment. They kill the idea of a small business man or woman trying to get ahead. It may be financed to get the business started but if it is killed after it gets going with taxes, employment insurance, GST and all these onerous taxes, why bother starting it in the first place?

I do not support the amendment to Bill C-53. I suggest to the government that it look at getting out and reducing the cost of small business. That would have a lot more benefit than trying to finance some business that does not have a chance in the first place.

[Jake Hoeppner, Reform, Portage—Lisgar, MB]

Mr. Speaker, it is a pleasure to speak to Bill C-53, an act to increase the availability of financing for small businesses which would not otherwise have access to financing.

You are aware, Mr. Speaker, of what small business is about if I gauge it right. You have been involved in small business and know what is needed to run a small business: financing and capital. I started thinking in layman's terms as far as a farmer is concerned. If you ain't going to make it, why borrow more money and do it? That seems to be the intent of the bill.

There is a saying on the farm that if government helps once we will survive. If it helps twice we will get very sick and if it helps another time we will die. That is possibly what is happening here. If a businessman does not deserve or cannot be provided with financing by somebody, maybe death will be there in the long run anyway.

I do not want to take anything away from entrepreneurs. I give the example of a gentleman that I have known for a number of years. He had some financial problems in his business venture and had to shut it down. He got another idea which he felt was a deserving idea. He required some financing from financial institutions but was turned down time and time again.

I did not realize that this had been going on, but when I saw him he had started a business and was doing fairly well. I asked him where he finally found an institution that would give him financing. He said he never found one but had asked a couple of friends whether they would be part of what he was doing. He found some private money and got started. He was very successful.

I asked him what he had to do to persuade somebody that he was stable enough or entrepreneurial enough to start a business. He said he had to pay 18% interest for the money. That was what he had to do.

He was honest, worked hard and made it. If the money had come easily and he thought if he did not make it the government would back him up, I wonder if he would have put in the same effort and asked other people to advise him or to help him. This is what I am talking about when I say that perhaps government helps too much. It helps us to die, not to survive.

I thought a very interesting comment was made in the House the other day when we were debating the farm crisis on a motion the Reform put forward. A question was asked of the agriculture minister who said that no farmer should be able to farm without getting a job on the outside. That is the type of help the government wants to give to the farming industry. Does it realize it is a small business compared to large manufacturing? That was a rather discouraging answer.

We just heard the hon. member for Selkirk—Interlake talk about some of the fees assessed against farmers. I will point out a very simple illustration on my farm in the last month or so. We grow some very desirable durum which the U.S. likes in its milling industry as far as pasta manufacturing is concerned. As it happened we thrashed the durum and took it into the elevator. It was graded a number 3CW durum which is a fairly good grade for the pasta industry. When we started hauling the durum to the elevator a few pieces of ergot were found in it, which is not desirable at all. It was downgraded it to No. 5 durum. This was a setback to my boys on the farm. It reduced the price of the product and probably would result in their bottom line being even more in the red. They took a sample into the U.S. to be analysed and to see what the Americans would pay for very high quality durum with a bit of ergot in it.

The Americans took a look at it and said they did not mind, that they would take the durum. It was a good idea. We could go to the wheat board and get a buyback. The wheat board would accommodate us and help us get a better price for the durum. The Americans offered us $4.55 for the durum within the same distance of our farm as the Canadian elevator. The initial price is $1.57 for No. 5 durum.

This meant we could triple our income if we could get a licence to export it to the U.S. When we asked the wheat board for that export licence, it wanted to charge us $5.12 for durum which they said was rotten and no good.

This is the way government helps industry and small business. It gets them on their feet then taxes them to death. If our small business had the same type of tax relief as other industries in other countries they would be very viable.

American farmers get a $6 billion tax write-off just because of depressed prices. That would help every farmer in Canada. Not only would it help farmers, but they would have money to spend in rural communities where other small business people would benefit. As well, more taxes would be earned.

This is what we have come to. The government gives the perception that it is doing something that is good for the country when actually it is destroying it with overtaxation, with trying to keep viable industries that probably should never be operating.

I want to be very fair. I would like all businessmen or constituents with the idea of starting their own business to have that opportunity. The best teacher they could have in life is running their own business and being their own boss. It gives them the idea of how many sleepless nights it sometimes takes to earn a feeble living that is maybe less than they would get from the payment of wages in another profession.

A level playing field, an opportunity to work within a system that treats everybody fairly and equally, is a must in democracy. That is why I urge the government to look at tax reduction and to look at creating level playing fields rather than giving handouts which we have seen do not work.

[John Cummins, Reform, Delta—South Richmond, BC]

Mr. Speaker, it gives me a great deal of pleasure to address the issue of the availability of financing for small business which would otherwise not have access to financing.

The reason I am pleased to speak to the issue is that it gives me an opportunity to advance the notion, as my colleagues have done, that the problem facing business today is not so much the availability of financing as it is the management of business and the high taxes that businesses must endure.

I will give an example of what I mean to talk about. About a year ago I received a phone call from a fisherman back home, a gentleman whom I did not know at that time. He had been a long time participant in the fishing industry but was concerned about his ability to pay his bills that year, especially the mortgage on his boat. He had suffered from a poor catch and poor prices in the 1997 season. To his knowledge he had tried every opportunity or every avenue for financing that he could. Some help was needed. He wanted to know if I had any advice for him.

I gave him some directions on some of the lenders of last resort I know, some of which were government agencies. I suggested that he try his luck at finding alternate financing for his vessel. He phoned me back a few weeks later and said that he had been successful. He had managed to renegotiate a loan and felt that he would be off the hook and able to survive another year. He was quite pleased with that.

I obtained a call from that same gentleman a couple of months ago after the conclusion of the 1998 fishing season, which was a disaster in British Columbia. Again the request from this individual was for help. He needed alternate financing for his vessel. Otherwise he would lose it. I told him that I had given him the best information last year. If he cannot survive on that there is not much I can do. The problem is not in the fishery itself but in the management of the fishery.

Let us take a look at what happened last summer and consider some of the causes for the concern of the gentleman. On June 19, 1998 the Department of Fisheries and Oceans issued a backgrounder on the management of the fishery in British Columbia.

The problem last year which the minister expressed endlessly and with some accuracy was a concern about the viability of coho salmon, in particular coho salmon on the upper Skeena River and on the Thompson River. In an effort to minimize catch opportunities, the minister proposed dividing the coast into yellow zones and red zones. I will just read what he said on yellow zones in the backgrounder:

In the yellow zones, recreational fishing will proceed as usual except all coho must be released.... Barbless hooks must be used when salmon fishing.

Fishing opportunities will be available in the areas they gave.

Red zones were described as areas where there would be no fishing. Let me read what he said about red zones:

—red zones are areas where upper Skeena and Thompson coho are expected to be prevalent.

In red zone areas salmon fishing will be restricted but opportunities will remain for all other finfish and shellfish harvesting. Within the red zone small nearshore areas will be open to carefully monitor fishing salmon in order to determine if selective fishing for salmon other than coho can be conducted with the objective of zero mortality for the stocks of concern. Monitoring by independent observers will be employed to evaluate the ability to avoid encounters of coho. If coho are encountered in these small experimental areas, the fishery will be moved or closed. The location and times of experimental fisheries were set out.

The backgrounder went on to identify area one on the north coast including offshore areas. From June 16 to August 26 the waters of area one were closed to salmon fishing except for the nearshore areas from the entrance of Masset Inlet to Langara Island and a three-quarter mile ribbon around the island.

According to the original documents presented by DFO scientists that whole area on the north coast was considered a red zone. It is an area where coho were prevalent.

In fact, in one area just off the northern part of the Queen Charlotte Islands there is a point called Coho Point. That point was not named because of a lack of coho. It was called Coho Point because that was an area of some coho prevalence when the fish were running. That area in the rejigged management scheme allowed for sport fishing only. It is an area, interestingly enough, where the Oak Bay Marine Group operates a large fishing lodge. There are a couple of other lodges that operate in that area as well.

It seems to me and it seems to many other people that the big problem here was not a matter of trying to protect coho, but a matter of trying to provide some sport fishing opportunity for those people who are rich enough to be able to afford to attend these lodges. It had nothing to do with protecting fish.

This preference did not stop there. The department decided that it would promote sport fishing in that area. It says in this same release that Fisheries and Oceans Canada is working with the Canadian Tourism Commission, the Sport Fishing Institute and Tourism B.C. to develop tourism and a marketing campaign aimed at encouraging recreational fishermen to come to British Columbia. It says that the CTC, the Canadian Tourism Commission, has already committed funding of $350,000 for this project and further federal support is expected shortly. That further federal support did come and it was in the amount of several million dollars.

In a sense we should not complain too much. It is federal money that is designed to help promote British Columbia business. But let us go back a minute. How is that money going to help the small boat owner who came to me in 1997 and said he could not afford to make the mortgage payments on his boat? How is it going to help that fellow one year later when he came to me and said “Can you help me? Can you find funding for me again?” It will not to do him any good.

The fishing records in that area show that the interception of coho by the commercial fleet in 1997 was minimal. It was something like 1,000 fish for the whole season. But we have on record that day after day probably close to 900 coho were killed in this barbless hook sport fishery in that area. To me that is a great problem.

It points to another shortcoming of the federal government. The British Columbia job protection commissioner, in talking about the problems facing the commercial industry, recommended to fisheries management that some effort be made to promote the marketing of B.C. salmon. That is most appropriate because this fall there were opportunities to fish chum salmon, but there were no buyers. Fishermen were prepared to go fishing, but nobody was prepared to buy the fish. That is pretty sad because that is a top quality food product which was allowed to go unharvested because there were no markets.

In fact the federal government has made no effort to market commercially caught salmon in British Columbia. That has to be seen as a huge problem for the fishing industry and it is one problem that is not going to be addressed simply by making more loans available. Making more loans available in the commercial industry at this time is only going to drive people into the poorhouse further and faster.

[Grant Hill, Reform, Macleod, AB]

Mr. Speaker, I get little chance to talk about small business, which of course is the backbone of our country, and it is a privilege to do that.

It has been fascinating to watch the Ottawa idea about how to help small business. I think that people in Ottawa say that small business needs helps and their idea is to organize a government program for small business.

That is not what I think small business in this country requires. In fact, in my own community when I ask small business people what they need they say “The best thing for us would be to get government out of our way”. I agree with that.

I look for help for small business by getting government out of the way, by reducing red tape, by removing a lot of the barricades and barriers to their success.

I will use an example of exactly what I think happens to small business when government gets in the way. I am using a provincial example. It has little to do with the federal government, but it is an example close to my own home and one that I think illustrates very well the issue of government interference in the marketplace.

The Alberta government decided that primary resources were not sufficient, that we should branch out. That, on the surface, sounds very positive. In looking for secondary industry a fabulous idea came to the Alberta government.

The idea came from a fellow with a good intellect. He came up with a concept for smelting magnesium by a very high temperature electrical process. This was proven by a very, very small experimental process in a laboratory. It never had any large scale testing, but he convinced government officials that this was an extremely useful thing for Alberta.

Alberta had cheap electricity. We had good railroad access to a community close to my home of Okotoks. There was magnesium ore not so far away. This would be an absolutely perfect way to advance the fact that Alberta needed a magnesium industry.

That magnesium, of course, was in use in the automotive industry for tire rims. It is a light metal, so it is useful for the automotive industry.

They built what I would charitably call an edifice, the MagCan plant, halfway between Okotoks and High River in a little community called Aldersyde, right on the railroad line.

Millions of dollars of taxpayer funds were spent on the MagCan plant. Charitably speaking, it was a white elephant. I suppose that if I stood inside the building it would be difficult in the MagCan plant to take a softball and toss it to the roof. That is how tall this building was. It was full of expensive equipment.

They brought magnesium ore all the way from British Columbia and piled it up. It was quite a sight, glistening in the sun. They brought in huge amounts of electricity, more electricity than is needed for a large city. There were huge transformers.

When it came time to put the ore in the smelting process and flip the switch, it fizzled. It flopped. Zip. Nothing. That MagCan plant stands today with pigeons flying around this beautiful edifice of taxpayer funds all because some distant bureaucrat decided that this kind of process had a good chance of success. It did not.

Had that individual gone for private resources, they would have said “Do you think that little experiment on the lab table is really going to generate the kind of magnesium that we require? Don't you think we should have a pilot project that might be big enough to fit into a garage? Don't you think maybe we should spend $30,000 proving this? Don't you think you should come up with $30,000 out of your own jeans?”

That is the way successful small business gets organized. This individual put up not a nickel, not a penny.

I had another person come to me in my riding not so long ago, a fellow who had a great idea. This idea was to put winglets on aircraft instead of de-icing fluid. It was a fabulous idea. De-icing fluid is toxic. These winglets would cover the wings. When the plane is ready to leave they take them off and there is no ice, no snow and no need for toxic chemicals.

He said to me “Doc, where do you think I should go for funding? Is there a government program?” I said “Is there what? You wouldn't dream of going to a government program with this. Taxpayers' money should not go into this. This is an investment opportunity. That is where you should go. I know three individuals”.

He went to those three individuals and they said to him “The tax system in this country is so tough that we have taken all of our speculative funds offshore”. Where did he get his money? Offshore, away from Canada, away from a fair taxation system which we do not have, away from the entrepreneurial spirit in Canada which we do not have. This is a sad story of a young man with a fabulous idea who had to leave this country. He lived here, he breathed here, he wanted to pay taxes here, but he had to leave.

I want to give another example of how Canadian small business is treated here. We are moving now into an area that is closer to home for me. We have spent a lot of time going through the natural health products area over the last while. My personal philosophy on this issue has been that the public should have access to natural health products if there is not proven harm, not proven side effects and not proven contamination. People who want to look after their health with preventive measures should be allowed to do that.

To my surprise, I found that the health protection branch, when it decides for sometimes very arbitrary reasons to stop making a product available in Canada—it cannot be marketed, sold, distributed by wholesale or retail and cannot be used—allows the Canadian consumer a three month personal supply by mail order or by going to another jurisdiction, in particular the United States. That is illogical to me. If a product is not safe, it should say no, ban it and not allow it into the country. If a product is safe, surely it would allow a Canadian retailer to market the product.

I have an example of a little pill called Stevia which has just been taken off the market in Canada. It is a herbal sweetener. It has nothing to do with anything toxic. People can pop it into their drinks to sweeten them. But it does compete with another sweetener. I suspect that might be the reason it would be taken off the market.

Government getting out of the way of small business and providing an environment for small business is what we expect. That is what we look for. That is what small business hopes for.

We do not need more government programs. We do not need individuals who will tell us to use taxpayers' money in a speculative manner. That is the last thing Canadians want. It is the last thing that small business wants. And it is the last thing that I will vote for.

[Diane Ablonczy, Reform, Calgary Nose Hill, AB]

Mr. Speaker, today we are debating Bill C-53, the Small Business Loans Act.

Right now we are debating an amendment at report stage. The bill has been examined by the committee, has come back to the House and some amendments have been proposed. This is Motion No. 1. It is an amendment to restate the purpose of the the act. It states:

The purpose of this Act is to increase the availability of financing of small businesses, which would not otherwise have access to financing.

I think that what motivates this bill and this amendment is a recognition of the fact that capital is in short supply for small businesses in this country. Of course, capital is what allows businesses to put infrastructure in place, to put inventory in place, to have proper computerization, to hire qualified people and to succeed.

It has long been a concern in this country that for a variety of reasons small businesses have had difficulty in obtaining the kind of financing they need. Some people point to the fact that the big bad banks refuse to a large degree to take a chance on small businesses. Unless a small business can secure a loan or prove it does not really need it, a bank will turn down the loan application. There have been cases that would give merit to that concern.

The banks have made some strenuous efforts over the last while to try to address that problem. Many banks have ombudsmen who re-examine loan application turndowns which are felt to be unfair and too harsh by small business applicants. There has been some action on the part of the banks to be more proactive in this area and to be more responsive to the concerns of small businesses. The proof of how serious banks are about being more open and more responsive to the concerns of small business in their need for financing to some degree remains to be seen but the problem has been recognized.

This amendment proposes to essentially force banks and lending institutions to provide loans to small businesses. It states that the purpose of the act is to increase the availability of financing of small businesses which would not otherwise have access to financing. I assume that means banks would have to make financing available to small businesses that would not be a good credit risk in the ordinary prudent course of business. We have to question whether that is a fair and reasonable requirement to place on the banks. If lending institutions are forced to provide financing to dubious or shaky business ventures then everybody will pay the price.

Banks are not some enormous monster in a cave. The banks are us. Banks are people who own bank stocks. Banks are unions. Unions have a huge amount of their pension funds invested in bank stocks. They are pensioners in this country. They are all kinds of people who have bank stocks. If banks have to essentially give away money in the form of bad loans or unwarranted loans, we will all have to pay the price. I do not think a lot of us, our pensions or our RRSP investments can take that kind of hit.

While I am sympathetic to the plight of small businesses and their need for financing, the answer is not to have a forced draw or confiscation of bank moneys in order to finance small businesses with no ability to convince a reasonable lender of the merit or soundness of their enterprise or of their ability to repay loans. Most reasonable Canadians would probably agree with that.

The question remains of what we should do for our small businesses that are obviously struggling, that do not have the necessary resources to keep up with technology or to rent good premises where they can do booming business. There is a line in real estate that location is everything. Another is hire the top people. We all struggle with that almost every day in one way or another.

My suggestion to this House and to the proposer of this amendment is that other factors can be addressed to assist small businesses in this dearth of capital and financing which is a real problem and a fact rather than forcing private institutions to cough up money against their better business judgment.

As other speakers have, I suggest that the biggest problem for our small businesses is that government stands by hovering over their profits, ready to pounce on them and confiscate a huge chunk of them as soon as they appear. It is pretty hard for small businesses to pay the freight when government is sucking away their proceeds. A large part of the answer is for the government to examine why small businesses do not have the capital and finances they need to succeed. A large part of it is that government is taking too much in taxes.

I would like to concentrate on two taxes which are sucking the life out of small businesses. These are two payroll taxes, the CPP payroll tax and the EI payroll tax. Those are the two taxes the finance minister when he was younger and more objective said were a cancer on job creation. All of a sudden when the finance minister wants to look good and wants to look like he is getting out the red, he decides that putting small businesses in the red is better than him being in the red. So he takes money from small businesses partly in the form of payroll taxes to make his books look good.

Let us look at the facts. By the time the CPP payroll tax is phased in will cost every business roughly $700 more per employee. That is in addition to what it will cost the employee. Let us look at the EI payroll tax. The business will pay $500 per worker more than is required to meet the benefit claims of the system. In other words, the employer does not pay only the $500 per worker, but $500 of that is an overcharge necessary to meet the requirements of the program.

What does the finance minister do? He wants to keep that money. Why does he want to keep that money? He wants to make his books look good. He wants to hoard it against an election so he can dole out to Canadians some nice goodies and say “Are we not wonderful? Vote for us we will give you everything you want”. That is the way politics works. What does this do to small businesses? It sucks the lifeblood out of them. They are paying $500 per worker more for EI than they ought to. They pay $700 per worker for CPP premiums which may or may not keep a shaky system in place. Those charges discourage businesses from doing business. They take money from businesses.

One of my colleagues talked about how his house building business would lose 25% of its profit because of the CPP payroll increase alone.

We have small businesses starved for cashflow and starved for finances. What does the government do? It sucks more money out of them.

I challenge the government. Rather than put some piece of legislation in place that has a hearts and flowers approach to helping small business financing, let small businesses pay reasonable taxes, keep a lot more of their profits and prosper as will everybody else. That would be a dimension of this debate which should be seriously considered by the House.

[Rahim Jaffer, Reform, Edmonton Strathcona, AB]

Mr. Speaker, I am pleased to rise to speak on Bill C-53. I will be restricting my comments to Group No. 1 amendments put forward by my hon. colleague for Mercier.

Bill C-53, an act to increase the availability of financing for the establishment, expansion, modernization and improvement of small business, is this government's attempt to put a band-aid solution on a problem of access to financing for small business.

The Liberal government has helped to create that problem.

The mandate of the Small Business Loans Act is to facilitate debt financing for small, young businesses that would not likely obtain that financing under the current banking oligarchy in Canada. This mandate, which will be maintained under Bill C-53, essentially dictates that the government and therefore the taxpayer should take on more risk than private lenders are prepared to incur.

The only reason the taxpayer is forced to incur that risk is the Liberal government has mismanaged and over regulated the banking industry.

Even with the changes contained within Bill C-53, the taxpayer still covers 85% of any small business loan defaults. One of the amendments put forward by my hon. colleague calls on this taxpayer liability to be reduced to 50%. I am sure members of this House have enough respect for the average Canadian working to support this proposal.

Whether the members chose to support or oppose this bill, it must be remembered that the essential aspect of Bill C-53 is to provide high risk loans that the private sector cannot or will not provide.

If members of the House believe this is a fair risk to place on the shoulders of Canadian families they should support the bill. If they believe it is an unfair risk to place on the taxpayer they should oppose the bill. Furthermore, if members believe the private sector can and should provide small business financing they should oppose the bill and force the government to make fundamental changes to the financial services sector.

Two questions immediately came to mind after reviewing this bill. Why should the taxpayers take on more risk than the banks and is there no other way to ensure that small businesses have access to much needed investment capital?

The intervention by the government maintained by Bill C-53 will remove important market forces from the lending process and will lead to the funding of less viable business ventures. This may help to garner political support for the Liberals but will do nothing to foster a healthy economy.

This government seems to have no concern for average Canadian families struggling every day under the highest tax burden in the G-7. Clause 5.1 of Bill C-53 illustrates the government's indifference to the fact that it is playing politics with the paycheques of Canadian people.

This section refers to the minister's liability should a loan not be repaid. However, it is clear that the liability is that of the Canadian taxpayer. It is not the industry minister's problem if high risk loans are defaulted on. It is the taxpayers'.

For this reason I fully support the amendment and would include reference to the taxpayers in the legislation so that it is transparent to legislators just who is ultimately responsible should the loans under this act fall to default.

I think the issue of risk should be examined more closely. Risk is a key element in the proper functioning of a free market. If it is artificially lessened or eliminated from market interactions it leads to a misallocation of scare resources. That is, lending institutions will be less inclined, despite the provisions for due diligence contained in Bill C-53, to evaluate the long term viability of a business venture.

This situation will lend itself to the financing of unsustainable market ventures and it is the taxpayers under this regime who will inevitably be the losers.

This is supported by the government's own statistics which show that the default rate under the Small Business Loans Act was about 5% while the private sector was at approximately 1%. This is substantial when one considers the amount of money at stake.

The industry department proudly claims that the taxpayer has only a $1.5 billion liability. This is not an insignificant amount of money. Canadian taxpayers are at their breaking point. Someone has to say enough is enough.

Everyone in this House understands the vital role that small businesses play in the Canadian economy. Many of my colleagues from the official opposition are small business operators. We understand the difficulties small business owners face.

I remind the House that high taxes and regulations come first to mind when I think of how tough it is survive in a small business climate. If payroll and income taxes were lower, life would be easier for small business owners. However, the government does not care enough to do anything about these problems.

If members of the House wish to stand and talk about their commitment to small businesses, then they should first return every cent of the EI surplus. Until that time they have no right to speak on behalf of small business.

The impact of small business on the Canadian economy is substantial and Reformers have always supported the needs of small businesses. However, Bill C-53 is not a debate about whether small business is valuable, it is a question of whether small businesses can get access to financing without the government intervening in the economy.

High risk small business ventures can be financed in a competitive banking system, provided the lenders are not unnecessarily restricted from conducting their affairs in a manner that allows them to incur risk without incurring losses. It is really that simple.

The Reform Party is committed to getting the government out of the business of business and out of the pockets of average Canadian families, but this bill further entrenches the government's role in the banking industry. We must push aggressively to change the industry so that small businesses can get access to financing without the government setting the terms of that financing.

Bill C-53 and its predecessor the Small Business Loans Act allow the government to ignore the real obstacles to small business financing. No more taxpayer dollars should be placed at risk until the government has made substantial changes to the banking industry to create real competition.

At this point small businesses' access to finance can be reviewed and new legislation can be tabled if the government can demonstrate a legitimate market failure.

The government just cannot seem to get the fundamentals right. Bill C-53 plays politics with the taxpayers' paycheques. It demands that the taxpayer take on more risk than the banks by guaranteeing loans. Let us get the government out of the business of business and off the backs of the Canadian taxpayers.

[The Acting Speaker (Mr. McClelland)]

Is the House ready for the question?

[Some hon. members]

Question.

[The Acting Speaker (Mr. McClelland)]

The question is on Motion No. 1. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Acting Speaker (Mr. McClelland)]

All those in favour will please say yea.

[Some hon. members]

Yea.

[The Acting Speaker (Mr. McClelland)]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Acting Speaker (Mr. McClelland)]

In my opinion the nays have it.

And more than five members having risen:

[The Acting Speaker (Mr. McClelland)]

Pursuant to Standing Order 76(8), the recorded division on the motion stands deferred.

[Jim Pankiw, Reform, Saskatoon—Humboldt, SK]

moved:

Motion No. 2

That Bill C-53, in Clause 4, be amended by replacing line 26 on page 3 with the following:

“limits; and e ) the loan must not be in addition to other loans made under this Act to reasons related to the borrower for the operation of the same small business.”

Motion No. 3

That Bill C-53, in Clause 4, be amended by replacing line 33 on page 3 with the following:

“to the borrower does not exceed $100,000”