John McKay

[Finance, February 1st, 1999]

Madam Speaker, I do not know whether within a minute I can deal with the simple-minded correlation between the issue of tax cuts and proper management of the economy.

It is true that Ontario at this point is experiencing something of a renaissance and that there is a great deal of job creation. However, there is not a correlation with tax cuts. I respectfully submit to the hon. member that that is about as simple-minded a correlation as he is going to find.

In fact Ontario's economy is booming because of a great deal of investment in a knowledge based economy and a great deal of investment in other areas of the economy and its location vis-à-vis the United States. The tax cuts do not necessarily correlate as the hon. member thinks they would.

All that it has done over the course of the period of the premiership of Mr. Harris has been to ratchet up the debt by $20 billion to $30 billion. That $20 billion to $30 billion has to be serviced on an annual basis. Even at the minimal interest rates that we have now achieved by the good management of the federal government, that is still going to add about $1.5 billion in service costs on to the taxpayers of Ontario.

[Finance, February 1st, 1999]

Madam Speaker, I cannot speak with any authority on the numbers with respect to Saskatchewan. However, the hon. member forgets, as does Mr. Harris of Ontario, as does almost every premier of Canada, that the CHST, which is the big block transfer, is a combination of cash and tax points. I know that in Ontario the combination of cash and tax points has not amounted to a $6 billion reduction in moneys, as Mr. Harris would argue, but has been slightly less than $1 billion. In the process, the government's finances have been put back in order.

I would think that in Saskatchewan, which is arguably in unemployment terms one of our better provinces, the numbers would be similar and that in fact there has been very little reduction in terms of the CHST.

I also note to the hon. member opposite that the equalization payments have not been cut over that period of time, at considerable sacrifice to this particular treasury and to the taxpayers of Canada.

As well, cash reductions in the CHST were stopped at $12.5 billion, even though all of the provinces had signed on to a cash floor of $11 billion. As a consequence, $7 billion was back in the pot for all of the provinces to obtain.

I also note in the last budget $150 million was put into the health transition fund. There was a further $50 million for the Canada health information system.

Over the course of our deliberations the idea of a variety of report cards on how the best health care dollar can be obtained is being floated. I was shocked to learn that Manitoba's system does not compare to Saskatchewan's system which does not compare to Ontario's system.

Canadians spend something in the order of $80 billion annually on their health care system and they have no idea what they are getting for it. It is something like 9% of the GDP. Comparable health systems in other countries spend something like 7% of their GDP. How is it that they obtain a sophisticated, well managed, accessible system for something in the order of 7% of their GDP when we have to spend 9% of our GDP?

I would applaud the health minister who insists with the premiers and with the respective health ministers that they be accountable for the moneys that are to be put into the CHST.

[Finance, February 1st, 1999]

Mr. Speaker, if no one else will pick up the cudgel then certainly I will. I will speak about three things this evening, tax cuts, debt reduction and transfers on the CHST.

First is the issue of debt reduction which in my submission has been ably done by the finance minister. We have gone from a situation where we had about $42 billion in deficit to a situation where we are now running a surplus estimated at anywhere between $4 billion and $8 billion. The question is really one of how Canadians want to deal with the surplus which is their own creation, a tribute to Canadian taxpayers.

I am more of a debt hawk than the finance minister. I would allocate more moneys to debt reduction. I consider the debt to be a burden on us and our country. To my mind the $3.5 billion commitment is a minimal gesture given the size of our national debt. I am something of a minority in this view. This commitment to steady debt reduction is a first step and is something the finance minister needs to be commended for.

I am very impressed by the finance minister's ability to see the gross debt to GDP ratio reduced from something in the order of 73% down to something in the order of 66% to 67%. That is an amazing accomplishment, an accomplishment for which he is to be commended.

When the finance minister presents his budget I urge him to restate the debt so it is somewhat more comparable to our competition. When those people in red suspenders from Switzerland, talked about by our Prime Minister, actually compare our debt to GDP ratio with the ratios of other countries, they will realize this is quite an accomplishment. When we are more comparable we will achieve some savings in absolute terms on interest rates. I hope that will prevent the dead loonie bounce. We have achieved a great deal in absolute terms in the reduction of the debt and I commend the finance minister on his commitments.

I urge the finance minister to make it very public in this Chamber in two weeks that we have reduced or paid off market debt by $13 billion this year alone.

This is quite an accomplishment and a significant sum of money. This means that Canada, as a government, is no longer on debt reduction. It is no longer in the market for debt.

The direct effect is that we will make the moneys that heretofore had gone for government financing available to the private market.

I was fortunate to have a conversation with Governor Thiessen on this very point. He was saying that because Canada no longer borrows money it therefore has money available to the nation in general and also to private investors for corporate borrowings.

As we all know, borrowing on a bond market or borrowing in debt instruments is a cheaper way of borrowing money than going to the equity markets and borrowing on the equity market.

We have passed on to Canadians generally a tremendous benefit to those who need to borrow in order to carry on the capitalization of their companies.

That in and of itself is probably a bit of an unsung consequence of doing things right in a fiscal fashion. This government in my view has done it right. We have reduced debt in absolute terms. We have committed ourselves to reducing debt in a steady downward trend.

We have achieved a downward trend from 73% to 66% or 67%, which hopefully by the end of this mandate will be either in the low 60s or the high 50s. That in and of itself is a tremendous accomplishment.

Finally on the issue of debt, I urge on the finance minister two things, that he restate the debt to GDP ratio in a comparative fashion so that it is readily comparable to our competition, and that he celebrate Canadians' accomplishments in the absolute reduction of our national debt by something in the order of $13 billion this year.

I now to turn to tax cuts. If there is a budget in which to accomplish tax cuts, I would like to suggest this is the budget.

Surely the beleaguered middle class taxpayer deserves something of a break. The surtax can be removed at this stage. This was a tax imposed on Canadian taxpayers in order to fight the deficit. The fight for the deficit is now over. Deficit reduction has been completed and we are now into the realm of debt reduction. The rationale for that tax no longer exists. I urge the finance minister that this should be a priority tax cut.

In addition, 10% of the taxpayers pay 50% of the taxes. As difficult as it may seem, we need to recognize these are the people who carry the financial burdens of the country. When someone is carrying the financial burdens of the country such as this 10% group is they need to be recognized on this level of taxation.

I was somewhat disappointed that the finance minister found himself a little politically boxed in with respect to the EI cut. As members know, 10 cents costs the government $700 million. This is a shocking figure.

The government found itself in a situation where it had to pass on an EI cut. We ended up cutting 15 cents or just over $1 billion. That in and of itself uses up room for doing other tax cuts.

There is a good argument to be made that other kinds of tax cuts could have been done in priority to the EI cut.

If we looked at a variety of charts with respect to the taxes that Canadians pay, consumption taxes, corporate taxes, employment taxes and personal taxes, we would note that as a general proposition we are fairly competitive with other G-7 countries in virtually all categories, with the sole exception of personal taxes where we compare somewhat unfavourably with our nearest competitors, the Americans. There is something in the order of a 4% gap between where we would like our competitive taxes to be and where they are presently.

I for one would have liked that $1 billion in EI cuts to have been applied to personal income taxes as opposed to employment taxes. A dollar is a dollar is a dollar. However, on the other hand it would have been nice to have spread those dollars over a greater number of Canadians.

The additional cuts that I would like to see are in the area of thresholds. I know there has been a great deal of discussion about bracket creep. I suggest to hon. members opposite and indeed on this side of the House that bracket creep is a little understood concept. However, an area that is easily understood is that of thresholds.

Our tax system, generally speaking, is fairly competitive up to about $60,000 or $70,000. After that our competitiveness with respect to our thresholds erodes rather rapidly, in particular as it relates to our nearest competitors, the Americans. While we cannot expect that changing thresholds will in fact solve all problems, the only thing the Government of Canada can control is the area of its taxation systems. We cannot control how much a young engineer from Waterloo University might be paid by Microsoft versus a Toronto or a Regina based company; however, we can have some impact on the taxation system.

Therefore I would have liked to have seen something done in the area of thresholds. My suggestion would be that we move the highest threshold up to around $70,000 or $80,000 as the maximum threshold and that we move the middle threshold up from $29,000 to about $35,000. That, in and of itself, would provide considerable tax relief so that we would not be taxing Canadians too quickly. If in fact the finance minister has the budgetary room to be able to do that, I would think that is an area which should be seriously explored.

There is also a certain level of hypocrisy in our approach to this. As we see it, we are moving ourselves from a resource based economy to a knowledge based economy. When we move from a resource based economy to a knowledge based economy we can reasonably anticipate that some Canadians will do very well indeed.

How are we going to expect people to put the effort into improving their knowledge base if in fact the tax system takes it out at the other end? We need to address this as a country as we do our budgeting over the course of the next number of years.

The final area I would like to address has to do with the CHST, the Canada health and social transfer. This is of course the big block of cash and tax points which is transferred to the provinces. It is in the order of $25 billion to $26 billion.

We will have noticed in the newspapers a great deal of whining on the part of a variety of premiers concerning “reductions in the CHST”. The biggest whiner of them all is the premier of my province who is blaming his entire incompetence and mismanagement of Ontario's economy on a reduction totalling something in the order of $938 million from the federal government over the course of six years. What he neglects to point out in the course of generating his argument is that Ontario's revenues have actually risen over the past six years to somewhere in the order of $10.5 billion. Even with what we call Mike Harris math in Ontario, he is ahead by something in the order of $9 billion. However, when one philosophically commits oneself to tax cuts in priority to all other priorities, one will in fact generate a situation where one has to deal with other areas. One has to make cuts to health care and education and one has to ratchet up the debt.

Surprise, surprise, but that is what has happened in Ontario. The debt has risen under Mr. Harris' stewardship to something in the order of $20 billion to $30 billion. Depending on when he calls the election, it may be as high as $30 billion. Right now it is around $20 billion. This year alone tax cuts will cost the Ontario treasury something in the order of $4.5 billion. Those tax cuts alone would wipe out the deficit and provide a small surplus, if properly managed.

As other members opposite have said, there is some disgrace in our health care system. It is not the system that we would wish it to be. Those tax cuts could have been applied to educational priorities, but they have not been applied to educational priorities.

Therefore, when one ideologically commits oneself to tax cuts in priority to all other priorities one necessarily mismanages the government's finances, and when one necessarily mismanages the government's finances one has to blame somebody. Why not blame the federal government which has cut back the CHST to Ontario by a total of $938 million over the course of six years?

We must not neglect to point out that the effect of proper management at the federal level has brought interest rates down. The interest rate reduction benefit to Ontario alone is something like $1.3 billion, which more than offsets the minimal reductions to the CHST.

In government management there is always a choice in priorities. What priorities are we going to take? If one looks at the priorities of this government, first of all it gave priority to the reduction and elimination of the deficit. That has been achieved. It is a tremendous accomplishment to go from a deficit of $42 billion to a surplus of something in the order of $4 billion to $8 billion in the course of six budgets.

This government then gave priority to reducing the debt in absolute and real terms. Thirteen billion dollars off in one fiscal year out of the market is an enormous accomplishment.

It then prioritized tax cuts and last year made a number of tax cuts at the low end. I applaud the government for doing that. Now I would like to see the upper end receive its tax cuts.

Finally, this government has done all of this with a minimalist approach to the reductions in the CHST and it has accomplished it over the course of the six years with a great deal of notice.

Canada is more than ten little fiefdoms with one taxing authority. Canada is a nation. The priorities of our nation have been set by this government and I support those priorities.

I urge this government to continue the absolute reduction of the debt, to provide tax cuts to Canadians who have borne most of the burden and to continue to prioritize the needs of our country in the fashion that I have outlined.

[Boys And Girls Club Of Ontario, December 7th, 1998]

Mr. Speaker, in 1992 the Boys and Girls Club of Ontario started a scholarship program to help pay for the rising costs of post-secondary education for its youth members, many of whom face financial challenges. From an initial $4,800 and 6 awards, the program has grown to over $37,000 and 49 awards being given out this year.

I congratulate Asha Moore, Charles Baker and Adrian Sutherland from my riding of Scarborough East. All three have won a scholarship involving the Scarborough East Boys and Girls Club.

Asha Moore is now in her second year of the social work program at Ryerson. Charles is in his second year of computer engineering at Ryerson, and Adrian Sutherland is presently enrolled in recreation leadership at Centennial College.

I congratulate each and every one of these students for their motivation, their enthusiasm and drive to succeed in life.

[Criminal Code, December 7th, 1998]

Mr. Speaker, I congratulate the member opposite on his initiative. I congratulate any member who has enough fortitude to put his thoughts in writing and to reduce them to a bill so that they can be debated in the House.

While many members opposite might evaluate the bill on a variety of criteria, I evaluate the bill on its merits rather than on its politics. I do not propose to rant about everything that is wrong in the criminal justice system or everything that appears to be wrong in the criminal justice system. I say at the outset that the bill has nothing to do with RCMP budgets, young offenders legislation or a number of other items that are continually raised.

I would like to direct the attention of the hon. members to the Bill C-219 which states:

Every one who, while committing an offence or while attempting to commit an offence or during flight after committing or attempting to commit an offence, operates or uses a motor vehicle that he has stolen or knows to have been stolen is guilty of an indictable offence and liable to imprisonment for a term of one year.

The second section indicates that it will be a mandatory consecutive sentence. In and of itself it appears to be a good initiative. Were it to be taken in isolation, I would say it is a good initiative which deserves a lot of merit. That is on the presumption that the Criminal Code is silent about the issues addressed in the bill: the issues of auto theft, using a stolen vehicle in the commission of a crime, et cetera. My suggestion is that the Criminal Code is far from silent on these issues.

I direct the attention of hon. members to subsection 322(1) of the Criminal Code, entitled the theft section:

Every one commits theft who fraudulently and without colour of right takes, or fraudulently and without colour of right converts to his use or to the use of another person, anything, whether animate or inanimate, with intent,

(a) to deprive, temporarily or absolutely, the owner of it, or a person who has a special property or interest in it, of the thing or of his property or interest in it;

That is the overall global section attributable to the particular issue the hon. member raises. The more specific section is offences resembling theft and addresses the issue of motor vehicles:

Every one who, without the consent of the owner, takes a motor vehicle or vessel with intent to drive, use, navigate or operate it or cause it to be driven, used, navigated or operated (or is an occupant of a motor vehicle or vessel knowing it was taken without the consent of the owner) is guilty of an offence punishable on summary conviction.

Then there is a subsection which I will not read to hon. members.

I caution hon. members that when one is in a criminal court dealing with issues such as this one, this is the kind of dry legalese that is dealt with by judges on each and every day. The judges have to make decisions as to particular sections of the offence, the most relevant of which is whether the individual took the motor vehicle with intent. I adopt the view of the member opposite, the justice critic, who said something to the effect that some offences were in large measure without intent whatsoever, that in fact the individuals are more pathetic than anything else.

The final section is with respect to how a judge arrives at a sentence. This deals with subsection (2) of the proposed bill. It is dealt with in section 718 of the Criminal Code:

The fundamental purposes of sentencing is to contribute, along with crime prevention initiatives, to respect for the law and the maintenance of just, peaceful and safe society by imposing just sanctions that have one or more of the following objectives:

(a) to denounce unlawful conduct;

(b) to deter the offender and other persons from committing offences;

Subsection (2) goes on to say:

A court that imposes a sentence shall also take into consideration the following principles:

(a) a sentence should be increased or reduced to account for any relevant, aggravating or mitigating circumstances relating to the offence or to the offender, and, without limiting the generality of the foregoing.

If the Criminal Code were silent on this matter, then the hon. member opposite would have a good point. But the Criminal Code is not silent. The Criminal Code is in and of itself a perfectly adequate piece of legislation to deal with the offences being complained about. This is not to minimize or to suggest that the offences and concerns raised by the hon. member are not important concerns, nor is it to trivialize them or to consider them frivolous. On the contrary, these issues are of unique and considerable importance to Canadians and their justice system.

The manner by which the member attempts to accomplish his perceived goal is possibly naive. If anything it is counterproductive. If he expects this bill will reduce the incidence of auto crime I would suggest he is quite naive. A lot of auto crime or so-called joy riding is impulse crime. It is crime done with very little forethought by foolish people. If the hon. member thinks this bill will reduce the incidence of foolish people in our society, I would suggest that he explain himself a little more on that point.

The member needs to think again if he thinks consecutive sentencing is the be all and end all to all of our sentencing woes in Canada. The understanding among crown prosecutors, defence counsel and judges is that for any particular kind of offence there is a bit of a sentencing envelope. Within that sentencing envelope one will receive his or her sentence. That sentencing envelope is somewhat carefully crafted, with section 718 in mind, as the individual either pleads guilty or is found guilty before a judge.

When the judge hears the representations with respect to the sentencing, he or she takes into consideration all of the principles in section 718. There is the need to denounce the unlawful conduct, the need to create a safe society, the need to deter this kind of offence. Those are the kinds of principles that are taken into consideration within the sentencing envelope.

If the hon. member wishes to add a year, which is what a consecutive sentence is, I would suggest that on the other side something will get discounted because the offence will not stand in and of itself. The offence is contemplated to stand with other offences. The consequence will be that the actual offence may get discounted while the judge takes into consideration his obligation to impose a consecutive sentence. That is ultimately the flaw of the bill in its sentencing principle if intellectually you can get over the point itself.

While the hon. member addresses an issue that is of concern to Canadian society and to all of us, he does not do it through this bill. It removes all discretion from judges. The bill is not necessary. It is counterproductive and ultimately I would suggest it is quite naive.

[Violence Against Women, December 2nd, 1998]

Mr. Speaker, this week Canadians are holding vigils and public education campaigns to raise awareness about the horror of domestic violence and violence against women. It has now been nine years since the massacre at l'École polytechnique.

Could the justice minister tell the House what the government is doing to fight violence against women and tragic deaths by firearms?

[Agriculture, November 30th, 1998]

Mr. Speaker, I will be splitting my time with the member for Dufferin—Peel—Wellington—Grey, also known as the minister of feathers. Anything we want to know about feathers, that is the hon. member to speak to.

I am only the second urban member to speak on this. I want to acknowledge at the outset, as one of the hon. members asked me opposite, what in heaven's name does an urban member have to say about a farm issue.

The last farm exited Scarborough East about a generation and a half ago. It was probably my father's farm. At one point we were hog farmers and we followed that up subsequently with being market gardeners. I vividly recall doing rhubarb roots in November.

It was an awful experience. One did not have to do this for very long before realizing there was another way to make a living. The novelty of doing it wears off after a while.

I am actually the first generation not to own land and make a living from it. Some time during the next month I have to make a decision as to whether we will sell the family farm.

I can say unequivocally that the people of Scarborough East are not opposed to paying a fair price for the food they consume from Canadian farmers. That in some respects is the issue. While I speak from the vantage point of an urban member and a lapsed farmer, I want to address the issue of whether this is a crisis or a disaster as speaker after speaker has said.

I draw attention to the overview of the 1998-99 farm income forecast of NISA balances of October 30 prepared by the Minister of Agriculture and Agri-Food. If we look through the numbers for certain provinces one has to ask where is the crisis. The cash receipts for 1998 for the province of Ontario will be $6.7 billion, up approximately $400 million from the previous five year forecast. Income in 1998 will be the highest it has been in years previous. The average for the years 1993 to 1997 is $415 million. This year it will be $625 million for the province. The net income will be $674 million, up considerably over the $540 million average for the previous four years.

Hidden in the numbers are some sectoral problems, particularly in the area of hog production. If we look at the numbers there is a scheduled fall-off of about $270 million in one year. It will be concentrated in one sector. I believe that is where the crisis is.

As we move further west it is clear that the crisis gets deeper and deeper. In Manitoba the net income over the previous four years was $287 million. This year it will be $143 million falling down to $134 million, something in the order of a 40% fall-off from previous year averages. Then if we go further west to Saskatchewan the numbers become quite dramatic. The total net income for the average of 1993 through 1997 was $715 million. This year it will be $83 million. Next year it is projected to be $72 million. This is estimated to be something in the order of a 70% drop-off from the previous five year average. Clearly there is a crisis and an issue of great difficulty to individual farmers.

The numbers do not lie in these instances. There is a serious meltdown over the three provinces of Saskatchewan, Manitoba and Prince Edward Island. It is clearly directed to two sectors, the grain sector and the hog sector.

The question is whether the government should be panicked into a response. There are a number of serious issues among farmers particularly in Manitoba and Saskatchewan. The grain and hog sectors are very hard hit. There will be spill-overs into other areas and other sectors. There are vigilante people in the United States who have decided to take the law into their own hands and block access to markets. However, should the government panic as suggested by some members opposite?

Apparently the Reform Party's solution of tax cuts is the panacea to fit all evils. This is one idea that fits all issues. Tax cuts will not be too terribly useful to a farmer who has no income. Under the circumstances a tax cut is a meaningless solution.

The NDP, on the other hand, described this crisis as something comparable to the dirty thirties. I suggest that is hyperbole and not something that necessarily needs to be addressed. Its solution is to get into national programs and to look at subsidies. But if we look a little more carefully at subsidies, they do not really cut it. If I am reading correctly, the producers subsidy equivalents produced by the Minister of Agriculture and Agri-Food show that in the pork area where we subsidize the most we have the greatest problem.

Similarly, however, if we look at the wheat area where we subsidize the least, second only to Australia, that is also an area of problems, similarly with corn where we subsidize very little. We subsidize very little in barley and yet we still have problems in those areas.

It is quite clear from the statistics that even where we subsidize heavily there is no correlation between prosperity of farmers and absence of prosperity of farmers. Subsidies is not an area in which the government should go or be encouraged to go.

The government has taken something of a measured response to this issue. I suggest it is the right path to pursue. Its first response was with respect to the NISA program, a simple rainy day account to which farmers are entitled to contribute in the good years and followed up with a contribution by the government. This is the time to draw, and we heard the Minister of Agriculture and Agri-Food suggest the ability to draw will be eased in this situation.

The second area is crop insurance, also a voluntary program. It offers risk protection to agricultural producers who contribute one-third of the cost of the program. It is estimated that $430 million in direct payments will go to farmers this year.

There are a number of other programs into which the government enters along with the provincial government and I need not repeat those.

The minister has been meeting with representatives of financial institutions in order to mitigate the requirements of financial institutions and orderly programs with respect to debt management.

All these are measured and appropriate responses to a serious issue. So it is my view that the Government of Canada has shown its concern about the farm financial situation and realizes the sense of urgency and importance. This is why farm income is one of the priorities now being considered by cabinet ministers. The Minister of Agriculture and Agri-Food has kept his colleagues and government informed of the situation and is moving us toward a reasoned and measured solution.

No cause for panic. No cause for disaster. No cause for hyperbole. No cause to describe this as another dirty thirties revisited, but rather a measured and reasonable response.

[Canada Small Business Financing Act, November 24th, 1998]

Mr. Speaker, I thank the hon. member for his questions.

My reference was to a Canadian financial services ombudsman which is a differently mandated concept from OSFI. The office of the superintendent is directly responsible for the soundness of financial institutions. It does not necessarily directly involve itself in complaints between consumers of financial services and those who lend in the financial services. They are different offices and different concepts.

I encourage all hon. members to urge the government to consider the concept of a Canadian financial services ombudsman so Canadians can have some meaningful recourse when they find themselves aggrieved by financial service providers.

[Canada Small Business Financing Act, November 24th, 1998]

Mr. Speaker, as far as I am aware no other caucus has undertaken any review of the financial services sector and has tried to piggy-back on some of the work of our caucus.

This was a very extensive consultation. As I indicated in my main speech, we did it through 7 different cities with 150 witnesses. We did all this on our own budgets and on time outside of the House and outside of our committee responsibilities.

I have to commend the members who participated in that task force because I think it made a very useful contribution to the dialogue.

With respect to the second question on tied selling, the report is divided into two parts. The first part deals with mergers. The process of the dialogue has been hijacked by the merger discussions.

The second part of the report deals with a number of contributions by a variety of members on issues such as bank governance, competitiveness, community credit unions, et cetera. My contribution was in the area of tied selling. I appreciated the responsiveness by the Secretary of State for Financial Institutions in looking into that area and making amendments to section 459 of the Bank Act so that the area of coercive tied selling is something Canadians can be somewhat comforted about.

In my paper my argument is essentially that when a Canadian has a complaint about coercive tied selling there be a reverse onus. This would mean that the person is presumed to be correct in his legitimate complaint and then the bank has the onus to say that the individual was not coercibly tied sold.

Cross-selling is of benefit to all of us. We get benefits in rates and in terms and conditions. However, coercive tied selling is an area that we need to continue to monitor.

My argument is that we need to look at the issue of a Canadian financial ombudsman and whether it is an appropriate area for the government to go into. This is also an area of jurisdiction for a Canadian financial services ombudsman. The idea of a reverse onus would level the playing field and allow all of us to feel comfort that as an unequally resourced Canadian we can deal with the overly resourced financial institution.

[Canada Small Business Financing Act, November 24th, 1998]

Mr. Speaker, I appreciate the enthusiastic support of certain members of the House on this important matter. There is quite a number of very enthusiastic members in the House, at least on this side.

I wanted to speak to this bill from the perspective of a member of the national Liberal caucus task force on the future of financial services. We spent some eight months canvassing and listening to Canadians on this issue. We heard from 150 witnesses in seven different cities.

At the beginning of the day and at the end of the day the issue Canadians spoke to us about most was that of access to capital. After all strangely enough it is their money. Canadians want to use it as they see fit, subject to prudent lending principles.

Bill C-53 is about access to capital, a loan guarantee program which will fill a gap where private lending is reluctant to go.

Let me concede that the task force got somewhat hijacked by the proposed mergers. I would say that the banks proposing the mergers did themselves no service when they tried to jump the gun with their proposals. I would suggest that the biggest reason Canadians are leery about the proposals is their sense of discomfort with respect to access to capital. Canadians intuitively feel that when four banks become two banks it will reduce their access to capital on a competitive basis.

That is what this bill is all about. It allows small business access to start up capital and financing which is fair, equitable and competitive.

In our analysis we looked at the competitive environment. In chapter 3, titled Access to Capital for Small Business, our analysis was as follows. The existence of adequate competition in the financial services sector is vitally important to ensuring SMEs have adequate access to financing at affordable rates. Small businesses are highly dependent on the chartered banks for financing. This dependence has been increasing over the last few years.

The conference board has shown that domestic chartered banks held 50.3% of the SME financing in 1996 compared to 48.4% in 1994. In addition they held 72% of the outstanding commercial loans to SMEs in 1996, up from 66%. There is a significant linkage between SMEs and chartered banks.

Then we looked at the gaps. While the overall situation in SME lending markets has improved in absolute numbers, and I stress absolute numbers, over the past few years due to the development of innovative products and general growth in the volume of demand for financing, the proportion of SME financing to total business financing by the chartered banks actually declined by about a full percentage point.

Testimony to the industry committee over the past few years from bank representatives indicates that the loan loss ratios of SMEs is lower, if not the same, to large businesses.

We then turned to government involvement. The Small Business Loans Act was one of those issues. We said that one of the principal programs is the Small Business Loans Act. The SBLA has been focused particularly on assisting young, small and new business in accessing financing through private lenders. The SBLA is currently being revised and will continue to be a vital participant in small business lending. I emphasize it will continue to be a vital participant.

We did identify one notable gap and that is the absence of support for working capital financing which this bill does not address. I think it appropriately does not address this because access to that kind of financing premises an involvement on the part of the government which in our view is inappropriate.

The quarter ending December 31, 1995, which was the earliest date that the Canadian Bankers Association supplied any lending statistics to the industry committee, reported lending to small and medium size business at $45.4 billion. Lending to large businesses at that time amounted to $123.7 billion, making SME lending account for 26.8% of the total loans. This is a significant portfolio and is of great significance to Canadians.

As I said, we have noted the gap in working capital. We encourage governments to consider other ways of accessing this particular financing need.

One idea is being circulated by the Canadian Community Reinvestment Coalition and is relatively simple. A scoring report card would be developed whereby lending activity would be assessed by geographic area; by numbers and volume of loans in assessment areas; the numbers and volume of loans to low and moderate income loans; small business; farmers and community development loans. Banks and other lenders would have a score card and would be assessed annually on their performance.

This idea originated in the United States. While translating American experience here has some limitations, it is an idea that merits consideration on the part of the government and indeed on the part of all members of parliament.

May I say that initially the U.S. banks resisted fiercely this kind of report card, but now they embrace it with enthusiasm. They see it as a promotional tool they never had before and a way to access loans they have never been able to access before.

Incidentally, when the Bank of Montreal took over the Harris Bank of Chicago, the Harris Bank had one of the poorest records in the United States on this issue. It now has one of the best. In speaking to representatives of that bank and other large banks, I am encouraged to see that none of them vigorously oppose the report card concept. They do have concerns about what goes into the report card and how it is initially scored, but as an overall idea they are not resistant to it.

I am a believer in the concept that government should not be unduly involved in the financing of the lives of Canadians. The attraction of this idea is that it would not involve direct government participation. However, I am knowledgeable enough and after having had 22 years of law experience, there is a role to be played by government to come alongside Canadian entrepreneurs. This bill addresses that need.

Ultimately one would wish that the private financial market would step in. The indication from the United States is that their experience in this particular area is that those in the private financing market like to poke into these areas and to access places where they have been very reluctant to go. They want to show that they are involved in their communities. In the interim, there is this need for continuing government involvement.

I would like to again leave the House with what I consider to be the benefits of this bill. Most significantly, this bill meets the needs of small business, the entrepreneurs who are the driving spirit behind nearly 80% of new jobs. They are the young, small firms recognized and targeted by the bill's loan guarantee provisions.

Bill C-53 offers them continuing stable access to financing even as the financial services industry is in the throes of restructuring. We have heard how that the status quo cannot remain the same. We all agree. The question is how.

The bill offers taxpayers the assurance that the loan guarantee program will continue to move toward cost recovery. It is delivered by private sector professionals, not bureaucrats. It uses private sector money, not taxpayers' dollars.

Under the revised program parliament will release more accurate information and performance measurements by which to judge the program's effectiveness. I would suggest that the proposal being floated by the coalition is in fact one of those report card concepts that needs to be worked into the analysis of whether the private financial sector is in fact accessing these areas. The new five year review provision gives parliament a closer and more active role in scrutinizing the program.

Canada's 2.5 million small businesses and self-employed entrepreneurs can flourish and grow in an encouraging environment.

Our women and men in small business need to see that the federal government values and encourages their willingness to take risk.

The bill before the House is a product of an informed review by financial and audit experts, widespread consultations with borrowers and lenders and extensive examination by the House and its members.

On all accounts it is a sensible and integrated set of improvements to an already strong and creative program. I urge all members to support the bill.