Debates of Feb. 16th, 1998

Petitions

[Paul Devillers, Liberal, Simcoe North, ON]

Mr. Speaker, pursuant to the standing orders of the House I present two petitions on behalf of 79 and 75 constituents respectively.

The first petition requests that parliament refrain from any action on the proposed changes to the old age security.

[Paul Devillers, Liberal, Simcoe North, ON]

Mr. Speaker, the second petition requests that parliament review the mandate of the CRTC and direct it to administer a new policy which will encourage the licensing of religious broadcasting.

Questions On The Order Paper

[Peter Adams, Liberal, Parliamentary Secretary to Leader of the Government in the House of Commons]

Mr. Speaker, the following question will be answered today: No. 37. .[Text]

[Gilles Bernier, Progressive Conservative, Tobique—Mactaquac, NB]

What is the gouvernment's estimate of the dollar value of second tier benefits from the contract to purchase EH-101 helicopters as detailed by the Department of National Defence including: the creation of 40,000 person-years of employment, benefits to Canadian businesses involved in the contract, additional tax revenues generated by those businesses and employees, a 10% royalty on all future international sales of EH-101 helicopters' and, in particular, how many EH-101 helicopters have been purchased around the world since 1993 and at what cost?

[Art Eggleton, Liberal, Minister of National Defence]

The two prime contractors, Paramax and E.H. Industries Limited, committed to providing $3.2B, 1992 dollars, in industrial benefits from the contract to pruchase 50 EH-101 helicopters. Since the contract for the acquisition of helicopters was subsequently cancelled, it is not possible to determine the exact value of the indirect industrial benefits out of $3.2B 1992 dollars that would have accrued from this contract.

E.H. Industries Limited advises that there are currently firm orders for 83 aircraft. The date of award of these orders is not known. The cost of the purchases is also unknown as it is priviledged information between E.H. Industries Limited ans its customers.

[Peter Adams, Liberal, Peterborough, ON]

Mr. Speaker, I would ask that the remaining questions be allowed to stand.

[Guy St-Julien, Liberal, Abitibi, QC]

Mr. Speaker, early in December 1997, I had three questions placed in the Order Paper and Notice Paper, namely Questions Nos. 53, 62 and 63, about the construction of some RCMP detachments in Rouyn-Noranda that would cost more than $1 million to accommodate only one secretary.

The 45-day period has expired. When can the people of Abitibi—Témiscamingue expect answers to my questions?

[Peter Adams, Liberal, Peterborough, ON]

Mr. Speaker, I have made a note of the question. I will look into it and get back to the member.

[The Speaker]

Shall the remaining questions stand?

[Some hon. members]

Agreed.

The House resumed consideration of the motion that Bill C-21, an act to amend the Small Business Loans Act, be read the second time and referred to a committee.

Small Business Loans Act

[The Speaker]

The hon. member for St. Catharines has two minutes remaining, followed by questions and comments.

[Walt Lastewka, Liberal, Parliamentary Secretary to Minister of Industry]

Mr. Speaker, I would like to inform you that I am splitting my time with the member for Mississauga West.

Further to comments made on Bill C-22, I would like to point out that by extending the lending period and by raising the loan ceiling period we will be ensuring that more of these businesses will have continued access to the financing they need to grow and create jobs.

The SBLA program compares very favourably with similar programs that have been set up in other countries. A recent study was conducted by Dr. Alan Riding of Carleton University entitled “On the Care and Nurture of Loan Guarantee Programs”. The study examined many international programs similar to the SBLA program. In it Dr. Riding concluded that the SBLA scheme has much to recommend it. Among its more attractive features are its extraordinary low administrative costs and low costs associated with honouring guarantees.

Administrative costs and the costs of default associated with any other national approaches, whether it be U.S., U.K., Japan or Germany, are many times greater than those of the SBLA.

Clearly the SBLA is doing its job in support of Canada's small business sector and doing it well. The bill before us will permit the time needed to review the program as contemplated by Parliament when it provided for the current five year lending period.

I humbly request that the House of Commons pass this bill so that we can get on with the next phase which is a comprehensive review of the SBLA.

[Werner Schmidt, Reform, Kelowna, BC]

Mr. Speaker, I listened with interest to the member's statements about Bill C-21. I think he made a point in the remarks to the effect that this is not a subsidy.

I could not help but think about who it was who might be receiving this subsidy or for whom it was not a subsidy. It could not very well be for the applicant of the small business loan but it could be the bank.

It seems to me that one of the discoveries that the auditor general made was that somewhere between 30% and more recently up to 46% of the loans actually granted under the SBLA program would have been granted without the provisions of the SBLA.

If that is the case, that means 46% of the loans actually granted to business were guaranteed by the Government of Canada, loans that these institutions would have lent to the individuals anyway. Therefore, rather than the bank being on the hook and taking the risk, it is the taxpayer who is taking the risk up to 85% of the principal value of these loans.

I ask the member whether he could please clarify for whom this is not a subsidy.

[Walt Lastewka, Liberal, St. Catharines, ON]

Mr. Speaker, I understand where the hon. member is coming from. Since we made changes in the 1995 proposal, the objective was to make the SBLA program more and more self-sufficient.

The hon. member knows, coming from western Canada, that the four western provinces have used the SBLA to a very high extent, in fact more than any other part of Canada.

By using the SBLA program, what in effect we are doing is more and more new and young businesses are into it and especially under three years. As I mentioned earlier, almost 60% of the SBL applicants are under the three year mark as firms and almost 40% are starting companies.

The objective there is to continue to push the banks, which I know the hon. member does in the industry committee, to loan to small businesses. I think we both have the same objective, more money available for firms, especially the start-up firms, and more jobs created in Canada.

[Werner Schmidt, Reform, Kelowna, BC]

Mr. Speaker, maybe the hon. member did not understand my question. I will put it very simply and very quickly. Is the SBLA a subsidy to the banks?

[Walt Lastewka, Liberal, St. Catharines, ON]

Mr. Speaker, no. I think the SBLA program is an efficient, effective program to help start-up companies, to help young companies and expanding companies to expand.

Yes, we need to review small business loans. The auditor general made some comments. We will have a comprehensive review. However, I do not believe, as the member opposite and his party do, that we should stop it at this time. Comments were made by the member for Saskatoon—Humboldt that the SBLA program should be stopped until we have the review. I do not believe that should be done.

I believe that we should extend it, that the review should continue and that the hon. member will have a chance to come to the industry committee to see whether it is a subsidy. I do not think it is. I think it is part of making things happen in our country.

[Steve Mahoney, Liberal, Mississauga West, ON]

Mr. Speaker, I am pleased to talk about this issue because I have some background in the area of small business. For a year during the late eighties when the Peterson government was in power in Ontario, I had the privilege of being the small business advocate. I travelled around the province and met with small business people. They were men and women starting new small ventures, men and women working on family businesses that had been around for many years but still retained the category and the true definition of small business.

It is interesting that the Reform Party can speak against a small business loan program. This program has existed for 37 years. All parties that have formed a government in this place have supported it. They recognize the importance of the small business sector to real growth and job creation.

When you think about what happens when a loan is arranged under this program, there is truly a snowball effect that sees tremendous benefits not only in the private sector but also for governments at all levels because of the taxes that would be generated from a small business.

What happens when a small business makes an application under this act for a $200,000 loan? That loan cannot be for purposes of debt consolidation. It cannot be for anything where there is no security. It must be for items like real estate or equipment, leasehold improvements, things that are tied directly to the business and that have some asset value.

At the same time, the business person involved in applying for this loan must go through a business plan with the bank. This is not a slam dunk by any stretch of the imagination. The bank will take your business plan into account when it decides whether to approve the loan. The process of filing the business plan alone will help to ensure your business is a success.

With the $200,000 loan the small business will acquire assets. Those assets are in many cases manufactured by other small businesses. There is a snowball effect when a purchase is made for equipment or whatever is needed to assist the small business. This gives business to the producing companies which allows for job creation and the people who work for the producing companies pay taxes.

It is interesting that Reform would try to paint this as a subsidy. If we add up the benefits that the various levels of government would receive for one transaction, it would be quite enormous. Government would benefit from the income tax paid by employees of the producing companies that supply the small business. It would also benefit from the income tax paid by employees of those small businesses. That does not sound like a subsidy to me, especially when we consider that the default level is under 5% for a very strong program with a lot of uptake across Canada.

Think about the benefits to women entrepreneurs. Historically, women, young people and others just starting out get caught in the catch-22 that they do not have the necessary personal assets to qualify for bank loans. We all know how the banks operate. They will lend you money only when you do not need it. This bill says to the banks that we will put in place a business plan that will help the small business entrepreneur, be it a young person, a woman starting a new business or a family starting a new business. We will make sure they have all the data they need.

It is interesting to hear the Conservative Party talk about reducing the size of the loan. Currently the level is $250,000. The average loan is $65,000. In starting a new business with any kind of substantive investment I suggest that $250,000 as a capital investment in the infrastructure of that new business is not a substantial amount of money.

If someone wants to start a business they have to buy equipment. Perhaps it is a trucking business. Perhaps it is a restaurant which requires refrigeration equipment. They do not buy this kind of equipment for $20,000, $30,000 or $50,000. It is highly capital intensive.

In my role as the small business advocate, when I travelled around the province, we asked business people what some of their biggest problems and concerns were. The first one—

[An hon. member]

Taxes.

[Steve Mahoney, Liberal, Mississauga West, ON]

The member says it is taxes. It is to a degree. I do not disagree with that. They are concerned about taxes, but they also want to pay their fair share of taxes. They want to know that they have a government willing to back programs like the SBLA and not simply throw it out amidst a bunch of Reform Party rhetoric as some kind of subsidy.

They want to ensure that the tax money they pay to the government is used properly to generate growth, create jobs and help them succeed.

Anyone in business today in this country would tell us they are doing reasonably well. Can they do better? Absolutely. Can we have lower taxes? We have already heard the Minister of Finance make a commitment that indeed once we have eliminated the deficit we will start to pay down the horrendous debt which the country has been saddled with and at the same time look at selective tax reduction. It would be my hope that it will be directed in some way toward business.

I often tell the story of the mobile sign that I saw in the province of Ontario when I was the small business advocate which was outside Paul's garage. It said “Our price includes the PST, the GST, the EHT, the MBT, the MPT, the UIC, the WCB and the CPP”. At the bottom it said “We would have included profit but we ran out of room”. I have some sympathy for Paul's garage and for small business.

We have to recognize as a government, as a body politic at all levels of government, that it is our responsibility to make sure the taxes we charge or the fees we charge for workers compensation or for employment insurance are used to the benefit of all Canadians. I believe this government is striving to do that.

I would hope that through programs such as the SBLA, which is being extended by one year with this bill, we will see more new businesses being created which will share the tax burden and provide for the safety net that we have, for our health care system, for the quality of education that we enjoy in this country and for the many benefits that we are so blessed with, which we take for granted.

Members opposite rise in the House every day to tear down those particular programs and institutions. It is their own personal ideology. I understand they are in opposition and they feel they simply must oppose for the sake of opposing. However, I find it amazingly strange that members of a party which considers itself on the right wing of the political spectrum would oppose helping small business. What is the matter with them? There are small businesses in western Canada which would benefit from this very positive program.

This program shows the way governments should operate. Indeed it is not a subsidy. It is a program which says to small business if you are prepared to invest, if you are prepared to work hard, we are prepared to make access to capital a reality in this country. We are prepared to work with the banks and the private sector to allow you, the small business person, to create the jobs, to buy the products and to generate the tax revenue which we all need as Canadians to keep this country going and growing.

I support this bill. I am pleased that many members of the House support it. However, I am saddened that some see it as a political opportunity to make hay and simply oppose what indeed is a financially sound and very important program for all Canadians.

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

Mr. Speaker, what we are witnessing here from the previous two speakers from the Liberal Party is typical: out of touch Ottawa politicians who do not have a clue. I on the other hand come from the real world. I am not a career politician and I am here advocating on behalf of ordinary Canadians.

I personally applied for and received a loan from a financial institution under the Small Business Loans Act. What happened to me is despite the fact that I had ample security, the bank required me to put it through the Small Business Loans Act. That is one example of the type of abuse lenders are implementing upon the Small Business Loans Act. Other abuses by borrowers and lenders were illustrated in my speech earlier.

[Steve Mahoney, Liberal, Mississauga West, ON]

Mr. Speaker, I think the myopic viewpoint just put across clearly indicates a lack of understanding. I can appreciate that the hon. member had ample security. My point very simply is that there are thousands of Canadians who do not. They have no opportunity to put up that ample security and this program ensures that they will have access to capital.

I take some exception to being referred to as an Ottawa politician. My roots go very deep in the community, very deep in the small business community and very deep at the municipal level in the city of Mississauga.

The member should speak about the little bit of what he knows and a little less of that nonsensical rhetoric.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Mr. Speaker, today we are debating a bill that will affect the accessibility of small and medium size business to financing from commercial banks.

The proposed merger of the Bank of Montreal and the Royal Bank also threatens to have a huge and negative impact on the accessibility to financing by small business across Canada. I wish to ask the member what he thinks about the three following questions: Does he believe that the merger would benefit small businesses in his riding? Does he agree with the Minister of Finance that the entry of more foreign banks into the Canadian market would make the mega merger acceptable? Does he think the Minister of Finance should say no to the merger right now?

[Steve Mahoney, Liberal, Mississauga West, ON]

Mr. Speaker, I am sure if you were to give a ruling, you would probably say that the questions have nothing to do with this particular bill, but let me just attempt to answer the hon. member.

I believe that the banking industry has not been co-operative with small business and particularly with women and young people attempting to start up a small business which in many cases in our new economy is the only avenue they have available to them.

It is incumbent upon the banking industry to work with small business to make sure that not only is capital accessible, but that the people the banks are making the loans to have done the business plan and understand what they are doing. Often the best loan that you will get is the one that you get turned down on. The banks have a responsibility to make sure that they are doing their homework on this to help people run successful businesses when they make those loans.

[Jason Kenney, Reform, Calgary Southeast, AB]

Mr. Speaker, the hon. member said in his remarks that small businesses do not just want tax relief, they want big government programs and subsidies like this.

For seven years I worked with the Canadian Taxpayers Federation, an organization largely supported by small business. I spoke personally with thousands of small business people across the country, surveyed tens of thousands of them, as have groups like the Canadian Federation of Independent Business. I have never once encountered a small businessman who said to me that they wanted more big government handout loan programs. What I heard again and again from groups like the CFIB is that they want lower taxes. Will the member respond?