Bill C-38 (Historical)

An Act to amend the Air Canada Public Participation Act

Message from the Senate

[The Deputy Speaker]

I have the honour to inform the House that when the House went up to the Senate chamber the Governor General was pleased to give, in Her Majesty's name, the royal assent to the following bills:

Bill C-6, an act to amend the International Boundary Waters Treaty Act--Chapter No. 40.

Bill C-24, an act to amend the Criminal Code (organized crime and law enforcement) and to make consequential amendments to other acts--Chapter No. 32.

Bill C-31, an act to amend the Export Development Act and to make consequential amendments to other acts--Chapter No. 33.

Bill C-32, an act to implement the free trade agreement between the Government of Canada and the Government of the Republic of Costa Rica--Chapter No. 28.

Bill C-34, an act to establish the Transportation Appeal Tribunal of Canada and to make consequential amendments to other acts--Chapter No. 29.

Bill C-36, an act to amend the Criminal Code, the Official Secrets Act, the Canada Evidence Act, the Proceeds of Crime (Money Laundering) Act and other acts, and to enact measures respecting the registration of charities in order to combat terrorism--Chapter No. 41.

Bill C-38, an act to amend the Air Canada Public Participation Act--Chapter No. 35.

Bill C-40, an act to correct certain anomalies, inconsistencies and errors and to deal with other matters of a non-controversial and uncomplicated nature in the Statutes of Canada and to repeal certain provisions that have expired, lapsed or otherwise ceased to have effect--Chapter No. 34.

Bill C-44, an act to amend the Aeronautics Act--Chapter No. 38.

Bill C-45, an act for granting to Her Majesty certain sums of money for the public service of Canada for the financial year ending March 31, 2002--Chapter No. 39.

Bill C-46, an act to amend the Criminal Code (alcohol ignition interlock device programs)--Chapter No. 37.

Bill S-10, an act to amend the Parliament of Canada Act (Parliamentary Poet Laureate)--Chapter No. 36.

Bill S-31, an act to implement agreements , conventions and protocols concluded between Canada and Slovenia, Ecuador, Venezuela, Peru, Senegal, the Czech Republic and Germany for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income--Chapter No. 30.

Bill S-33, an act to amend the Carriage by Air Act--Chapter No. 31.

Carriage By Air Act

[James Moore, Canadian Alliance, Port Moody—Coquitlam—Port Coquitlam, BC]

Mr. Speaker, I rise to speak to Bill S-33, an act to amend the Carriage by Air Act. The bill exists for only one purpose. It adds the convention for the unification of certain rules for international carriage by air signed at Montreal on May 28, 1999, as schedule VI to the Carriage by Air Act.

Bill S-33 is the third transport related bill to be tabled in the House since September 11. It is the third transportation focused bill to avoid such timely and important topics as the death of airline competition in Toronto, Montreal, Halifax and St. John's; the collapse of Canada 3000; the launch of Air Canada's Tango, and the urgent need to address present airport security concerns.

The Minister of Transport has laid before parliament three bills since September 11: Bill C-34 on September 26 to create the transportation appeal tribunal, Bill C-38 on October 25 to amend the Air Canada Public Participation Act and Bill S-33 on September 25 to update an airline liability convention passed in 1929.

All are important but none are of any real urgency whatsoever to everyday Canadians. The government has allowed the Standing Committee on Transport and Government Operations to hold hearings and pretend to be working on weighty matters. Meanwhile across the country an airline went bankrupt, thousands of people at Canada 3000 and Air Canada lost their jobs, Canadians called for air marshals on flights, and the travelling public called for better and tighter airport security.

I hope the Standing Committee on Transport and Government Operations will consider these matters within the context of meaningful legislation because they are the transport related topics foremost in the minds of Canadians and, most important, to encourage Canadians to keep flying.

I shall focus my attention on the task at hand which is the consideration of Bill S-33. If anyone is wondering why this subject should concern the House, the answer is found on the back of every airline ticket issued for international travel. There are two pages in English and French right beside the coupon that the airline takes when it issues a boarding pass. It includes the following notice:

If the passenger's journey involves an ultimate destination or stop in a country other than the country of departure the Warsaw Convention may be applicable and the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss or damage to baggage.

The reference to the Warsaw convention invokes a legal regime that governs the process by which airline passengers or their families may make a claim against an airline for death or injury resulting from an accident during an international trip. The process was designed in 1929 to build confidence in the fledgling air industry and it consisted of two main planks.

First, article 28 allowed a claim to be brought in one of three places: the carrier's head office, the place where the ticket was bought or the place of destination. For example, in the case of Air India 182 which was destroyed by a terrorist bomb on June 23, 1985, the family of a Buffalo resident travelling from Toronto to London on that fateful flight could bring a claim in Buffalo where the ticket was bought; in London, the place of destination; or in Mumbai, India, the airline's principal place of business.

Second, article 22 made the airline liable for death or injury to passengers and limited this liability to 125,000 gold francs, then worth roughly $138,500 in today's Canadian currency.

In essence the convention was a great idea. On the one hand claimants did not have to travel halfway around the world to present a claim, as inevitably one of the potential places to present a claim was nearby. On the other hand airlines were prima facie liable for injury or death to passengers so claimants did not have to go through a lengthy or complex trial to get the money.

As many of today's airport security procedures around the world reflect the aftermath of September 11, the 1929 Warsaw convention was very much a creature of its time.

A decade earlier, from June 14 to June 15, 1919, Captain John Alcock and Lieutenant Arthur Whitten Brown made the first non-stop aerial crossing of the Atlantic. Five years earlier, on April 26, 1924, Imperial Airways initiated daily London-Paris air service. Two years earlier, on May 21, 1927, Charles A. Lindbergh astounded the world by landing in Paris after a solo flight from New York across the Atlantic in The Spirit of St. Louis .

In the year preceding the drafting of the Warsaw convention both the first U.S.-Australia and the first California-Hawaii flights landed safely at their destinations.

In 1929 a several hundred mile long trench was dug in the Arabian desert so that Imperial Airways could launch a service from London to Delhi via Cairo and Baghdad without the pilots getting hopelessly lost while flying over the vast expanse of sand. On September 24, 1929, James H. Doolittle became the first to fly from takeoff to landing entirely by use of instruments and radio aids and without reference to the ground.

The venerable DC-3 had not yet flown. It would be a decade before Pan American Airways would fly the first trans-Atlantic passenger service. Some of the engineers who would build the 747 four decades later had not yet been born.

In 1929 KLM turned ten, Qantas turned nine, Imperial Airways turned five and Lufthansa turned three. Trans-Canada Airlines would not be created for another eight years. To say that the international airline industry was in its infancy is a huge understatement.

The Warsaw convention boosted consumer confidence in the airline industry at the very moment that confidence was needed most. Like most countries, Canada ratified the Warsaw convention and implemented it in domestic law by adding its text as schedule I of the Carriage by Air Act.

The years passed, technology improved and airlines became safer. Where once airline accidents seemed to be a daily occurrence, better training, aircraft construction, navigation and instrumentation led to a vastly improved safety record. The safety was so improved that on March 26, 1940, U.S. commercial airlines completed a full year of flying without a fatal accident or serious injury to a passenger or crew member.

Two other technologies would dramatically improve both airline safety and passenger comfort. The first of these was the Boeing Stratoliner, which made its maiden flight on July 8, 1940. It had a pressurized cabin which allowed it to fly at altitudes of up to 20,000 feet thereby avoiding turbulence. The second was the Boeing 707 which made its maiden flight on July 15, 1954, introducing the world to the jet age.

The years passed and accidents still occurred although safety had dramatically improved. In an 18 month period between October 1952 and April 1954 six de Havilland DH-106 Comets crashed at various airports in Italy, India, Pakistan and Africa.

A new engineering concept called metal fatigue was discovered, as was the inadequacy of the now 25 year old liability limit in the Warsaw convention. Legislators began to realize that the Warsaw convention needed a touch up right about the same time that Boeing engineers were putting the final touches on the 707 prototype.

The buying power of the 125,000 gold francs also declined rather dramatically and what had once been seen as a quick, fair settlement was now rather paltry. On September 28, 1955, negotiators from around the world met at The Hague for the purpose of modernizing the Warsaw convention. The result of the negotiations was The Hague protocol and article 11 doubled the former liability limit to 250,000 gold francs, largely restoring its buying power.

Canada ratified the protocol and included its text as schedule III to the Carriage by Air Act. For a short time it appeared that the Warsaw convention, as amended at The Hague in 1955, would be a success. However with growing inflation the buying power of 250,000 gold francs began to wane.

There were two further attempts to modify the convention: the Guadalajara convention of September 18, 1961, and Montreal Protocol No. 4 of September 25, 1975. Neither raised the liability limits, although Canada ratified both by adding them as schedules V and IV respectively to the Carriage by Air Act.

In the absence of further amendments to the Warsaw convention which might raise the liability limits, skilful lawyers tried a variety of means to get around the limits.

Article 3 of the convention required the delivery of a passenger ticket and required that the ticket contain “a statement that the transport is subject to the rules relating to liability established by the convention”. Moreover, article 3.2 of the convention required the carrier to deliver a ticket in order to avail itself of the provisions which limited its liability.

As early as 1965 in Warren v Flying Tiger Line, the U.S. court of appeal, second circuit, considered whether a passenger had to be given a ticket including the statement of limited liability prior to boarding the plane.

At around the same time another line of cases was studying the fascinating question of how large the print had to be in order to give the passenger true notice of the limitation of liability. In 1966 the district court of New York heard the case Lisi v Alitalia and decided that four point print was too small, leaving open such crucial questions as what font and type size might be acceptable.

Font and type size arguments were a favourite way of getting around the liability limitations. For many years they were a principal weapon in any court case against a carrier, especially when the ticket stock had been printed in another country and was being examined in a U.S. court.

In both Canada and the United States the issue of type size went all the way to the supreme court. In 1979 the Supreme Court of Canada in Ludecke v C.P.A.L. permitted 4.5 point type. In April 18, 1989, the U.S. supreme court in Chan v Korean Airlines stated that carriers would no longer lose the benefit of the convention's liability based on type size arguments.

Nonetheless it was obvious that $20,000 U.S. was an inadequate amount to compensate a family in Europe or North America for the death of a loved one, notwithstanding that the $20,000 could be got almost immediately without the need to go to trial.

Thus lawyers began to explore article 25 of the Warsaw convention which excluded limited liability in cases where the airline was guilty of wilful misconduct. The article essentially said that there were cases in which the airline's negligence was so great that the Warsaw convention limits should not apply. In other words, had the airline taken reasonable measures, the accident would not have happened and the passengers would not have died.

This line of argument has been used in virtually every case involving suspected terrorism or the shooting down of an aircraft such as Air India 182, Pan Am 103, EgyptAir 990 and Korean Airlines 007.

Claimants who manage to prove that an airline was grossly negligent can get more than $20,000 U.S. in compensation from an airline for the wrongful death of a passenger. In virtually every other case claims are limited to $20,000 U.S., unless the passenger was travelling to, from or via the United States.

America has a higher standard than the rest of the world. While the rest of the world explored ways to get around the $20,000 limit, the U.S. imposed the Montreal agreement on all international carriers serving the United States. The agreement dates from May 13, 1966, and raises the Warsaw convention liability limit to $75,000 U.S.

As part of the agreement the following text appears in airline tickets of virtually all international carriers serving the United States:

Advice to international passengers on limitation of liability. Passengers on a journey involving an ultimate destination or a stop in a country other than the country of origin are advised that the provisions of a treaty known as the Warsaw convention may be applicable to the entire journey, including any portion entirely within the country of origin or destination.

For such passengers on a journey to, from, or with an agreed stopping place in the United States of America, the Convention and special contract of carriage embodied in applicable tariffs provide that the liability of certain carriers, parties to special contacts, for death of or personal injury to passengers is limited in most cases to proven damages not to exceed U.S. $75,000 per passenger, and that this liability up to such limit shall not depend on negligence on the part of the carrier.

For such passengers travelling by a carrier not a party to such special contacts or on a journey not to, from, or having an agreed stopping place in the United States of America, the liability of the carrier for death or personal injury to passengers is limited in most cases to approximately U.S. $10,000 or U.S. $20,000.

Back in 1966, Canada could have followed America's lead and insisted on similar or even identical wording to be applied to all travel to, from and via Canada. This was not done.

Today, some 35 years later, the government presents Bill S-33 through which the government essentially ratifies the Montreal convention which creates a new higher liability regime. If and when the Montreal convention enters into force, Bill S-33 would automatically raise the liability limits on all round trip international flights originating in Canada and on all flights between Canada and another ratifying country.

The Montreal convention was concluded on May 28, 1999, and to date only 12 nations have ratified it. Canada will be the 13th. Both Mexico and Japan ratified it over a year ago, while in the past year Canada has done nothing. Neither the United States nor any of our trading partners, except for Japan and Mexico, have yet ratified the treaty and it will likely not come into force until they do. The convention needs another 17 ratifications before it enters into force, and this could take decades. For example, Montreal protocol No. 4 was concluded on September 25, 1975, but did not enter into force until June 14, 1998, some 23 years later. Thus, there is no urgency whatsoever in Bill S-33.

The government has waited until today to ratify the Montreal convention and could wait several more years. The higher liability limits of the Montreal convention do not apply to anyone until 30 countries ratify it. There really is no rush for the legislation.

If the government really wanted to increase the Warsaw convention liability limits beyond the current paltry sum of $20,000, it would do well to follow America's lead and adopt a regime similar to the U.S. government's imposed Montreal agreement of 1966, which is what it did. Thirty-five years have passed and it is not too late to follow America's lead.

To my knowledge our government has never considered such a step so one can only conclude that raising the liability limits is not a burning concern for the government. In the meantime, the higher liability limits do apply on Canada-U.S. transborder flights and on all travel via the United States.

The Montreal convention raises the Warsaw convention liability limit from around $8,300 U.S. to roughly $135,000 U.S. For that reason alone we should support Bill S-33 which would ratify the Montreal convention and make it an instrument of our domestic legal system.

The Montreal convention also makes it easier for claimants to get their hands on the money and deals with such modern day realities as code shares and e-tickets.

Bill S-33 is a good idea but it is not one that is more urgent than the aviation security legislation which the American congress passed just this past week.

Since September 11 my office has been flooded with calls relating to airline competition, the need to improve airport security and to put air marshals on planes. Rather than debate the issues that are foremost on the minds of Canadians, our government has chosen to update a 72 year old treaty.

Bill S-33 is worth supporting but, like so many other transport related bills brought before the House since September 11, it does not address a pressing concern. We will support the bill but in supporting it I want to clearly state that it is time the House considered aviation security legislation today. That issue, unlike the modernization of the Warsaw convention, is foremost on the minds of Canadians.

This is the third non-urgent transport related bill that the House has seen since September 11. While we will support it, it is no more urgent than the other two. It lets the government claim to be working while adopting largely motherhood legislation that will have relatively little immediate impact on most Canadians.

It is time to stop posturing. It is time to stop the busy work and get down to the transport issues that concern Canadians. At committee I will be calling for the bill to be passed as quickly as humanly possible so that we can be ready to deal with the aviation security legislation that Canadians have called for each and every day since September 11.

We support Bill S-33 as it is important legislation, but within the context of what the country is facing, what the air industry is facing and what Canadians want this place to address vis-à-vis aviation security and competition in the air industry, the legislation is of little concern to Canadians.

Air Canada Public Participation Act

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

Madam Speaker, I am pleased to speak today to Bill C-38. Before I begin though, I would like to congratulate the member for Argenteuil--Papineau--Mirabel for the excellent work that he has done on this bill.

I listened intently to his speech this morning, and I must say that it contained all of the elements the government needs to ensure that this bill really helps the airline industry in Canada and particularly in the regions.

I am pleased to speak to Bill C-38, an act to amend the Air Canada Public Participation Act. This issue of restructuring the industry in Canada has been discussed at great length for over two years now.

In fact, in the summer of 1999, the sale of Canadian Airlines led to a power struggle between Air Canada and Onex for the purchase of this company, which was in dire financial straights. After giving his implicit support to Onex, the transport minister had to backtrack when the takeover bid was ruled illegal by the Superior Court of Quebec.

At that time, the basis for the ruling was the percentage limit of capital shares in Air Canada that could be held by a Canadian investor. Just one year ago, the Minister of Transport raised the limit from 10% to 15%. Under the current bill, the government would remove the ceiling for this figure.

It must be said that this proposal would not be without consequences. In fact, removing the 15% ceiling would pave the way for the private sector to invest even more heavily in air transportation and the industry would find itself in the hands of financial sharks with no sense of the importance of offering quality.

In my opinion, the current quality of air service offered to the regions of this country, but more specifically to Quebec, should serve as an alarm bell for the federal government. Remember now that Baie-Comeau no longer has direct air service to Quebec City. Business people who want to travel on Air Canada's regional carrier must first go to Montreal, before boarding a flight to Quebec City. How crazy is that? It is completely unacceptable.

Given the situation, business people on the north shore would do better to walk to Quebec City. It would probably be faster than taking the plane.

Such a situation also exists in Gaspé and in the lower St. Lawrence area. Regional air services have disappeared. This is a paradox in the 21st century. It seems to me that this should be an era of modernity and of easy travel. But no, people in the regions are 50 years behind the times now. If they want to travel out of their region in future, they will have to take the bus. As Michel Vastel put it a few weeks ago in an editorial in which he was taking a few pot shots at this government, “Welcome to the 21st century!”

My comments on Bill C-38 are therefore understandable. By removing the 15% limit, we could be making the present situation even worse. The only way to try to improve this potentially disastrous situation is to strongly urge the federal government to impose some very strict conditions.

The Bloc Quebecois, through the hon. member for Argenteuil--Papineau--Mirabel may therefore approve of removing the ceiling, but only if amendments are made and very strict conditions set.

This is a difficult challenge, but we are offering Liberals the chance to correct past mistakes. They can no longer be counted on the fingers of just one hand. I need only mention the dreadful quality of French in this country's airline industry. Moreover, there seem to have been a good many reprimands to the government about this by the Commissioner of Official Languages, Dr. Dyane Adam and her predecessors.

This is just one more source of government tax revenue.

I would also like to mention the federal government's unfair treatment in terms of financial assistance for the smaller airlines that operate in the regions.

This morning, my colleague mentioned to me that it was the Parliamentary Secretary to the Minister of Transport, the member for Chicoutimi—Le Fjord, who spoke on behalf of the government. He said that he was pleased that Air Canada was in the process of getting its business in order, cutting short haul flights within the regions.

I come from the Saguenay—Lac-Saint-Jean, the same region as my colleague, the member for Chicoutimi—Le Fjord. I think that we have a right to the same service we had in the past. When Air Canada received permission to purchase Canadian Airlines in 1999, it assured us that it would increase the number of flights in the regions. Air Canada did the opposite.

In our region, we pay $800 to $850 for a return flight, Bagotville-Ottawa. I could go to Europe or Florida, return, and both would cost less. We have a right to the service promised by this company in 1999. Today, the Parliamentary Secretary to the Minister of Transport says that they are in the process of putting their house in order; they are in the process of cutting flights in the regions.

The Saguenay—Lac St. Jean region does not deserve this sort of treatment from the government. I remind the House that, a few weeks ago, the Minister of Transport decided to help out the five major carriers: Air Canada, Air Transat, Sky Service, WestJet and Canada 3000, by giving them interest-free loans.

But such a policy is extraordinarily unfair. By giving financial assistance to these major carriers, the Minister of Transport has put the last nail into the coffin of small carriers. Let us not forget that the major carriers will be able to use this money to engage in unfair competition with small regional carriers, such as Air Alma, in my region of Saguenay—Lac St. Jean.

I read an article this morning in Le Soleil , in which the Minister of Transport said that the competition commissioner must be given more power. When he appeared on CTV yesterday, he talked about giving more power to the competition commissioner. But there is no need to do that because there will be no more competition, no more regional carriers.

I think that telling the people in the regions not to worry, that the government is going to give the competition commissioner more power, is just another way of misleading them.

This is an extremely important issue because jobs are at stake. Workers deserve to get back their fair share of what they are paying in, of what they are entitled to, from the government. This is completely ridiculous.

Last week, I asked the Minister of Transport a question. Since Canada 3000 had gone bankrupt, he had promised it a loan guarantee. I asked whether he could give the remaining $45 million to the regional carriers so that they could get back on their feet too.

But he did not even answer. So it is clear that this bill will not solve anything. It will make matters worse. It will not make Air Canada a better administrator. It will simply prevent the regions from obtaining the services to which they are entitled.

I think that the Bloc Quebecois will support this bill, but I hope that the government will include in it the extremely important conditions we put forward.

[Robert Lanctôt, Bloc, Châteauguay, QC]

Madam Speaker, we are dealing with Bill C-38, which we are told is an important bill. When one takes the time to read it, however, and it does not take long, it is of a rare simplicity. In fact, it is so simple, one wonders how much it is justified.

One cannot be opposed to it, knowing how affected the workers in the airline industry are. One cannot do otherwise than to say yes to such a bill. Yet, what will the repercussions of such inaction be? This bill alone will not help this industry, which is so much in need of help, particularly since September 11, 2001.

We have no choice but to look at how the private sector might invest in its capital stock to see how it will be managed. At the present time, an individual or company may own 15% of Air Canada's stock. Will removing this limit improve the situation of shareholders? Will it be the same, or worse?

Quite frankly, I do not think there will be huge numbers of investors rushing to invest in an industry like the aviation industry, especially since September 11. They are trying to convince us that this bill is of such importance that it will solve the problems. My point of view is that the problem will not be solved if there is no direct investment in the airline or aeronautical industries.

One needs only think of Pratt & Whitney in Quebec. One needs only think of all the job losses directly linked to it, not only in the aftermath of September 11, but also because of poor management by the board. Is this board going to be changed by changing the number of shareholders? Who will monitor this? For what purpose?

There will perhaps be no other choice but to rationalize. Those who are going to invest are certainly all involved in high finance and will at some point expect the company to break even and also generate a profit. How will this be done? Obviously, all a board of shareholders could require of an executive board is to rationalize. Is this what will really happen? Is this good for the men and women who work for Air Canada?

Unions are telling us that they will accept this decapping. They have no choice. The government has no other idea. It is not directly investing the money that is required. It is simply saying that it will ask the private sector if we can privatize even more and put new money into the industry. What is the government doing right now?

Madam Speaker, I forgot to inform the Chair that I will be sharing my time with the hon. member for Jonquière. I appreciate the fact that she is here.

Will this new investment with new money really take place? I am not sure, particularly since the government just told us that it would deal with this as the situation evolved.

We all saw how things went with Canada 3000. It was requested that the necessary money be invested directly, while knowing full well—at least I hope so—what the situation was with Canada 3000. A short time later, Canada 3000 went bankrupt. The government did not put money directly into that company. Yet, workers everywhere in Quebec and in Canada are losing their jobs.

What is the government waiting to protect workers' jobs? As we know, Air Canada employs a number of people in Quebec. Why not invest, why not be proactive and create a new situation? The government has several billion dollars in surpluses, but it hesitates to invest directly in our airline industry, an industry that Canada and Quebec greatly need.

During various oral question periods, we asked the government to invest directly in Quebec's regional companies to support the airline industry and these airline companies. The government flatly rejected our request, saying that it would help major carriers instead. Some help.

Canada 3000 is bankrupt and has not yet received any money. The government is talking about $160 million, but I think this is for part of the loan guarantee, for new money. The government has billions of dollars in surpluses. It must protect that airline and that industry.

These amendments must not set the stage for the cap on foreign investment to be lifted in future. I know that this is not mentioned in Bill C-38, but the role it gives the government does open the door. It sees the bill as a way to allow greater privatization.

What if shareholders are not interested? What will they do? I hope that they will not lift the 25% cap on foreign investment in Air Canada. That is a risk. I am not saying that this is the direction in which the government is heading, but merely that I hope that this is not its goal.

This money must be invested directly. There are billions of dollars in the surplus. We are told that the government is waiting for the budget before deciding where to spend them but, in the meantime, the airlines are in trouble, so much trouble that some of them are going bankrupt and others are looking for ways to cut costs. Who is going to foot the bill? Once again, Air Canada workers.

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

Madam Speaker, I am pleased to participate in this debate. I begin by thanking my colleague the member for Churchill, the NDP transportation critic, for the incredible work she has done on this issue over the last number of months and years.

The crisis in this country's transportation sector and particularly the airline industry is a very serious one. It is critical in terms of the future of our economy and the very identity of our nation.

My colleague from Churchill has outlined our opposition to Bill C-38. She has indicated to us that this bill represents an inadequate band-aid approach to a very deep rooted, far reaching problem. Concerted action on the part of the government is needed, not tinkering, not playing around at the edges, but actual involvement in this crisis. It needs to initiate a clear strategy for getting our airline industry back on a solid footing.

We often talk about the ties that bind. When we look at the ties that bind, there is no more important institution than Air Canada. Over the years we have turned to Air Canada, our national railway, our post office, our pension system, our health care system, our quality education system. All those are examples of great institutions once all within the public sector that united this country and helped us build on, and not see as a negative, our diversity. Air Canada has been part of that tradition. It has been part of our approach as a nation to the difficulties we face as a people who are spread out in such a wide geographical area, who come from so many different regions with such a wide range of income levels. Air Canada is fundamental to who we are as a nation and where we will go in the future.

Today we are facing a crisis of such proportions that we may see a collapse of Air Canada. In that context, is this bill appropriate and up to the task of preserving a national airline that reaches out to provide transportation to every part of the country, to every region no matter how small, no matter how remote? The answer clearly is no. The bill does not even begin to tackle this very critical issue nor does it address the concerns of Canadians, of workers, of people who depend upon the airline industry for transportation and for their livelihoods.

I do not need to remind anyone what the collapse of Air Canada would mean for our economy. It would be disastrous. My colleague from Churchill has said that over and over again. As a result of the mismanagement by the government supplemented by the tragic events of September 11, the whole airline industry is on the verge of a collapse which would have cataclysmic consequences for our nation. As a result of this crisis, more than 9,000 jobs are at risk. This is causing hardship, distress and anxiety for the proud working men and women who have contributed so much to the industry and who have invested their working lives to ensure that air transport in the country is a viable system for Canadians.

The instability in the airline industry not only affects the thousands of men and women who work for Air Canada, but it also has had a ripple effect on all of our communities. Certainly, small independent travel agencies, particularly in my community of Winnipeg, are suffering greatly because of the instability in the industry and because of the crisis in Air Canada. Let us not forget all of the people involved in the entire transportation system who desperately turn to the government for leadership.

I want to indicate what it would mean for a community like Winnipeg if Air Canada went bankrupt and were allowed to collapse due to negligence and passive reaction by the government.

Winnipeg alone would be looking at the loss of an aircraft maintenance base with more than 800 employees which services contracts from all over the world. It would be looking at the loss of a 400 to 500 person reservations office. It would be looking at the loss of pilot flight operations and in flight operations and the loss of an entire cargo sector. There would be the loss of approximately 150 airport customer sales and service workers as well as the loss of ramp and baggage workers serving over half the Winnipeg airport. There would be the loss of an entire building of finance employees. It would also be looking at the loss of many subsidiary or spinoff services such as Air Canada Vacations. The list goes on and on. It would have a disastrous impact on every community in the country and on our need as a nation to build on the ties that bind and not accentuate our differences because of geography.

As has been said over and over again, the bill is totally inadequate to address the task at hand. What is needed desperately is for the government to say, no matter how hard it is, that it made a mistake years ago when it got into the whole business of privatization and deregulation, off-loading and outsourcing in the interests of trying to balance the budget on the backs of Canadians.

It is not too late to say that the public sector plays an important role. An institution like Air Canada within the purview of the Government of Canada is an absolutely critical part of our society and country. Let us look at finding ways to ensure an equity position in Air Canada and finding enough of a control and hold over the ownership of Air Canada to preserve jobs, to serve communities no matter how far and remote they are, and to address all of the transportation needs of Canadians.

We have heard from others in the House today, especially the Alliance members, how one should simply turn to the marketplace, to foreign investment, to the kinds of scenarios which have been tried but have failed Canadians over the last number of years. It would be worthwhile to look at the fact that changing the ownership rules is clearly not a solution to Air Canada's problem. As has been said over and over again, some foreign investment at best would bring in a short term cash infusion and would keep Air Canada in the air for a few more months. The solution we are proposing is to address the reasons Air Canada is losing money and look at the role that government ought to be playing in terms of a regulatory framework and government involvement.

Too many times we have heard from the Alliance and other members in the House how much of a burden it would be to actually think about re-regulating and deprivatizing an institution like Air Canada. Many in the Alliance Party have a hard time imagining the possibilities under a re-regulated airline system. They have a hard time understanding the benefits to all Canadians of proactive government involvement in an area as vital as transportation.

I hope we can overcome that kind of ideologically blinkered position and actually look at a proactive government role once again in this area. We owe it to Canadians who have invested in the corporation with their working lives. We owe it to every community that needs to be connected to the rest of the country in order to feel some sense of identity and belonging to this great nation. We owe it to the world to show there is another way that public institutions can play an important role in providing services to people and recognize that sometimes services for people are more important than profits for corporations.

I urge members across the way especially to think again about their role with respect to Air Canada and the airline industry. I urge them to come forward with a package of proposals that will ensure that Air Canada survives and that will look at putting our entire airline industry on a stable footing.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Madam Speaker, I am pleased to take part in the debate on Bill C-38. As the minister's parliamentary secretary, the hon. member for Chicoutimi--Le Fjord has said, this is a simple bill, since it contains only three paragraphs. It calls for the current 15% limit for shares an Air Canada shareholder could own to no longer apply. Thus the control such a shareholder could have over the administration of Air Canada is no longer subject to a limit.

Obviously, the parliamentary secretary and hon. member for Chicoutimi--Le Fjord is trying to sell this as a cure-all, a bill which will finally enable Air Canada to escape from its economic woes.

It is a disquieting choice by the government. This is what I am going to try to point out to the people of Quebec, to the employees in the airline industry, and to the employees of Air Canada who may be listening to us.

We must look at what the Government of Canada has decided, as opposed to what other governments, the U.S. government in particular, have done. Immediately after the events of September 11, the American government announced a massive investment of $15 billion into its airlines: $5 billion in direct assistance and $10 billion in loan guarantees. This was announced within days of September 11. When the bad economic news became known, for example the bankruptcy of Swissair, Switzerland made the decision to invest 38% of shares in a company called Crossair. An announcement has already been made that public funds would be used to revive the Swiss airline industry. These are, of course, societal choices.

I will quote the hon. parliamentary secretary, the member for Chicoutimi--Le Fjord. He expressed the Canadian position very aptly in saying “Corrective steps will be taken as problems arise”.

Clearly, the government has opted for a piecemeal approach when it comes to solving problems in this sector which is of such great importance to Canadian industry. The airline sector supports an entire aerospace industry. We are talking about a number of companies that manufacture aircraft in Canada, including Bombardier, companies that manufacture motors, including Pratt & Whitney, and companies that manufacture parts. We know that Montreal is the world's second greatest centre when it comes to aerospace manufacturing. Obviously, if Canada chooses not to support its aerospace industry, as is the case now, we see results such as the Canada 3000 bankruptcy.

This is a tough blow to the airline industry, obviously, and I will speak later about the government's reaction. Canada's second largest carrier has gone bankrupt. It was decided to let it go bankrupt. Let there be no mistake on this. Quebecers and Canadians must understand the situation. The government had announced a $75 million loan guarantee for Canada 3000, but with requirements that were so demanding and difficult that it was clear from the outset that the company would not be able to fulfill them.

So the government never paid out its loan guarantee and the company declared bankruptcy. What is worse is that top management was in such a terrible state that they even decided to refuse work sharing. Three weeks ago, the directors of Canada 3000 refused a work sharing program for their employees. They already knew they were on the verge of bankruptcy.

The Government of Canada and the Minister of Transport should therefore have known that Canada 3000 was on the verge of bankruptcy. In this regard, perhaps the government wanted to appear as Canada 3000's white knight, knowing all the while—and on this Canadians and Quebecers must not be deceived, unlike the press, into thinking that the government was helping Canada 3000—, that the company was close to bankruptcy.

None of the help announced materialized. Canada 3000 was given no loan guarantees. With the conditions that were set It was clear from the start that their announcement was meaningless. Today we see the result. There are 4,800 employees now out of work and they have no guarantee they will get their jobs back. This is human capital we had in Canada in the aviation field, and the government has done nothing to help them.

Those are the facts of the matter. What is the government doing for Air Canada? The parliamentary secretary and member for Chicoutimi—Le Fjord put it clearly when he said that when the government learned the cost of insuring the aircraft would be astronomical it had to help. It helped with insurance costs.

Subsequently there were costs relating to the six day closure of airspace. It agreed to cover the costs. It was not the $160 million cited by the member for Chicoutimi—Le Fjord, this was for loan guarantees. Between $37 million and $50 million was given to the airlines to cover their losses during the closure of the airspace.

The government dealt with the situation on a day to day basis. As the parliamentary secretary mentioned, corrections were made as problems would surface.

But the problem is that the airline industry is practically bankrupt. In a speech delivered just a few weeks ago, the Minister of Transport said that Air Canada had $1 billion in cash on hand and could still borrow, sell its aircraft and use them to borrow $3 billion. But the government is making a company go bankrupt. When we decide to make a company sell its liquid assets—as with Canada 3000, which no longer had any cash and went bankrupt—we push airlines to the brink of bankruptcy.

Today, we are dealing with Bill C-38, which proposes that private shareholders be allowed to own more than 15% of the capital stock, a measure that is supposed to save the company. The harsh reality is that not one witness told us that passing this bill would generate an interest for Air Canada's stocks, for the simple reason that the government is in the process of making Air Canada get rid of its liquid assets. This is the reality. Therefore, there will be no massive buying of stocks.

The Caisse de dépôt would make a bad investment if it decided to convert these debts, as suggested by the Canadian Alliance member, into company stocks. Debts are interest loans that were given to the company. Therefore, it would be a bad investment to convert them into capital stock, since stocks are not constantly increasing in value these days. So, it would be a bad investment to convert debts, that is the loans given to the company, into shares. This is the reality. There will not be a keen interest for these stocks. It will be a long term solution for Air Canada.

When the situation becomes normal again for airlines worldwide, then Air Canada will probably have succeeded. We hope so. We hope that its fate will not be the same as that of Canada 3000. The government will probably react, because Air Canada is the largest carrier. It will, as the parliamentary secretary said, wait and see.

So, probably when Air Canada is on the brink of bankruptcy, the government will decide to make a major investment. But in the meantime, how many other companies, such as Canada 3000, will have shut down? This is the reality.

How many companies will have disposed of their liquid assets, as Air Canada is now doing at the suggestion of the Government of Canada, borrowing on everything they can, selling their airplanes and leasing instead, that is taking money for their airplanes and turning around and leasing them themselves from a leasing company in order to come up with the money to get through the crisis, which will last how long? That is what is difficult to understand. It is certainly hard for all the workers in the airline sector across Canada and for Air Canada workers to understand. The government is going at this in dribs and drabs, rather than announcing massive investments in the industry, as the Americans did.

This is what Canadians and Quebecers need to understand: in difficult times such as these, in the wake of September 11, the workers of Canada's airline sector are not to blame for the sad events which took place, but they are the ones now paying the price. They represent human capital in a highly competitive sector.

Before September 11, we were highly competitive in the airline sector, in the manufacturing of planes and parts and in the entire aerospace industry. But how will Canada be able to support companies that manufacture planes when they receive orders from American and Swiss companies because those countries have decided to help their industry?

Obviously, Canada 3000 will not be buying any more planes. How are we going to be able to sell the entire aerospace industry internationally, when Canada is not supporting the airline industry?

We are sending a very poor message to the rest of the planet, while others have decided to provide direct assistance to the industry. The Americans have decided to provide direct help; the Swiss have decided to provide direct help. These countries, or their airlines, will likely buy—or so one hopes—aircraft from Canada, a country that will not have helped its air industry while in crisis as the result of an event for which it was not responsible.

The government has a responsibility, the responsibility of passing the message that neither the aviation industry nor its workers should have to bear the brunt of September 11. Before that date, things were not as cut and dried. Obviously, the Bloc Quebecois will never agree with a policy sanctioning poor decisions by airline administrators; it is up to the shareholders to do that, through shareholder meetings. As for the rest, a clear message is necessary, not one such as we have received today about taking things one day at a time, claiming that this is what will rescue Air Canada from its problems. This is wrong. Air Canada will not be saved in the short term by this means. It will keep on losing its liquid assets.

As the minister said, once again Air Canada will be encouraged to sell its aircraft in order to amass some capital and then to lease them back. Air Canada's level of indebtedness will be increased and its shares will be increasingly less interesting. I repeat, as we speak, it would be a bad decision for the Caisse de dépôt et de placement du Québec to convert its debts or loans with a fixed interest rate to shares. Their behaviour is unpredictable, particularly their rate of dividend. They will surely not go up in value in today's conditions, when everyone is aware that there are constant losses month after month in the aviation sector.

It is easy for us to support a bill such as the one under consideration today, but it is difficult to do so without commenting on the crisis that the airline industry is experiencing. It is also difficult to believe, as the parliamentary secretary and member for Chicoutimi--Le Fjord predicts, that this is one of the most important bills in terms of Air Canada's future. The minister did not even show up to deliver the message this morning. With all due respect to the member for Chicoutimi—Le Fjord, this is not one of the most important bills for the airline industry in Canada, otherwise the minister would have come in person today to deliver the message about this bill that is apparently of such importance.

The bill is important. It will allow shareholders, who complained in the past that they could not control the board, to participate. It is therefore good that the 15% ceiling was removed and that those who want to invest for more than 15% ownership in Air Canada may now appoint directors proportionally to their share of ownership in the company.

Once again I will repeat for Quebecers, all of the witnesses who testified before the committee were unanimous in stating that the passage of this bill would not result in investors running out to buy more than 15% ownership of Air Canada tomorrow morning. The situation is very difficult. And we will be seeing more and more difficult situations.

The minister himself said so, and I repeat, Air Canada will have to divest itself of its $1 billion in cash. It will have to sell its aircraft. That represents $3 billion it could put its hands on, but that would put it in debt. It is up to the government.

In the meantime, it will affect the other companies that do not have as much cash as Air Canada. It is a fairly well managed company and it has considerable liquid assets, an advantage Canada 3000 did not enjoy, like other companies that are losing more and more money with each passing week, have less and less cash and will need help.

Here again, there are no programs. The minister is not here today to make an announcement, which could have accompanied the message sent by Bill C-38, that there would be real help for the airline industry in the form of direct aid to anyone deciding to buy part of Canada 3000.

Why not announce help and make it a condition for the new buyers of bankrupt companies, such as Canada 3000, that they provide better service to the regions?

Some restrictions should be included, to avoid the situation described by the parliamentary secretary when he said that Air Canada did a clean up by eliminating certain routes from its network.

Eliminating certain routes means that some towns located in various regions will no longer be served by Air Canada. How are we going to explain this to these communities? I can never say it enough: these towns are located in various regions. In committee, the expression used was small municipalities. These are towns that gained their status because they are located near the natural resources that make Quebec and Canada such beautiful countries. This is the reality. These towns are all entitled to the same transportation services as every other centre across our beautiful Quebec and Canada.

Of course, this is the harsh reality. Once again, we are letting the free market dictate things. Last week, Canada 3000 went bankrupt. One thing is certain: if all the investments and assistance measures announced by the parliamentary secretary and the minister since the beginning had produced such good results for the industry, Canada 3000 would not be closed today. The government must recognize that it has failed. It is obvious that it did too little too late. And the same thing will happen with the airline and aviation industries, where Canada used to be a most competitive player on the international scene.

This is the message we must send Canadians and Quebecers, and all workers in the airline and aviation industries “You are the best and that is why we are going to help you”. Sitting around and watching the Americans investing to support their industry, the Swiss using public money to support their industry and all its workers, will not encourage the rest of the world to buy the planes and parts we produce in Canada. By not supporting its airline industry, Canada is sending a terrible message to the rest of the world.

This is what the highly competitive human capital in the airline and aviation industries finds hard to accept. I repeat, the government must address this very serious issue. This is what matters today, that and the fact that Bill C-38 will allow the capitalists of this world to increase their share in Air Canada and to control the board of directors.

The message that needed to be delivered today, a message that the government failed to deliver, was that there would be support for all the human capital in the airline and aviation industries in Quebec and in Canada. What the government is doing, and I again refer to the message the parliamentary secretary delivered for his minister, is dealing with problems as they arise.

To conclude, once again, this is the approach adopted by the Government of Canada, this Liberal government, which has no respect for one of the most prosperous industries in Quebec and in Canada.

[James Moore, Canadian Alliance, Port Moody—Coquitlam—Port Coquitlam, BC]

Mr. Speaker, I am going to speak in favour of Bill C-38, an act to amend the Air Canada Public Participation Act, but I would like to reiterate the points I made when I last spoke to the bill on October 31.

This change is long overdue. It finally puts Air Canada on a level playing field with other Canadian carriers with respect to the sale of its shares. For the first time in Canadian history a Canadian citizen can buy, sell or trade as many Air Canada shares as he or she wants, just as if they were shares of any other private sector Canadian company.

Bill C-38 represents a marked departure from traditional thinking of Liberal governments. Air Canada was created by an act of parliament in 1937 as Trans-Canada Airlines. Ever since that time it has been the subject of much discussion in the House. For the first 40 years of the company's existence it was seen as an agent of the crown and as the federal government's principal policy instrument in the field of aviation. That changed with the passage of the original Air Canada Act in 1977. For the first time Air Canada was required to borrow in its own name and was declared to no longer be an agent of the crown. Even so, it remained a crown corporation and cabinet retained the power to appoint its directors.

Then in 1987 the Progressive Conservative government passed the National Transportation Act. This fundamentally changed the rules of the game and attempted to introduce competition rather than regulation as the primary arbiter within Canada's domestic airline industry. Within a year the Progressive Conservatives had correctly realized that in a competitive situation the government had no business owning one of the competitors, so the parliament of the day quickly passed the Air Canada Public Participation Act essentially privatizing Air Canada and turning it from a crown corporation into a regular company whose operations were subject to the Canada Business Corporations Act.

Section 6(1)(a) of the Air Canada Public Participation Act limited to 10% the number of shares that could be owned by a single shareholder. This was presumably done in the interests of ensuring that Air Canada stocks would be held broadly by as many Canadians as possible. The clause also put Air Canada on a level playing field with its principal domestic competitor, Canadian Airlines International. Let us not forget that the Air Canada Public Participation Act was first read in the House on May 19, 1988, nearly six months after the January 1, 1988 birth of Canadian Airlines International from the fusion into a single entity of all of Air Canada's pre-1980 domestic competitors: Pacific Western Airlines, Transair, Nordair, Québecair, Eastern Provincial Airways and Canadian Pacific Airlines.

In 1988 Canadian Airlines' parent company was governed by Alberta's Pacific Western Airlines Act which set a 4% limit on the number of shares any one group could control. The 10% share limit set in the original Air Canada Public Participation Act was actually a more liberal limit than the 4% set in the act governing Canadian Airlines. Then with the takeover of Canadian Airlines by Air Canada in 2000, Bill C-26 raised to 15% the number of shares that could be held in Air Canada.

Now, some 64 years after parliament first created Air Canada, we are finally discussing whether to give it some of the same rights as any other private sector company. If we were to believe the government members, Bill C-38 would put Air Canada on a level playing field. By striking down section 6(1)(a) of the Air Canada Public Participation Act, Bill C-38 ostensibly does put Air Canada on that level playing field with other carriers with respect to the way its shares can be bought, sold and traded by Canadian citizens. On that basis alone quite frankly, it should be supported. As a party that believes in free market and free choice we support that.

At the same time it must be said that Bill C-38 does little to address Air Canada's short term financial concerns that have led to thousands of layoffs at Air Canada. This is because: one, Air Canada does not obtain money when its shares are acquired by a new buyer unless Air Canada is the seller; two, no single shareholder is currently restricted by the present 15% limit, in that no current shareholder owns 15% and has publicly expressed a desire to purchase more but cannot as a result of the current restrictions; and three, if one were not inclined to buy Air Canada stock before this legislation, the fact that one can buy more of it does not work as an incentive.

In fact there are only two ways that Bill C-38 would financially benefit Air Canada. One would be if some of the debt which the Caisse de dépôt et placement holds were to be converted into shares. The caisse currently owns roughly 9% of Air Canada's stock. Converting its debt into shares would give the Caisse roughly 18%. This move, based on the $2.50 price per share at the date of the transport minister's announcement of his intention to introduce this legislation, would allow the company to convert roughly $17.789 million worth of caisse debt into 9% of Air Canada's voting shares.

The second way it could help Air Canada is if an individual or group were to take control of Air Canada with a clear plan to restructure the company.

It has been alleged that this legislation is legislation on behalf of the transport minister, urged by a whole bunch of interests as a “get Robert Milton” piece of legislation. It may very well be but time will tell. Frankly that is not any of the government's business but it puts it on a level playing field. If that leads to broader restructuring of Air Canada and new management, and looks after the broader interests of the company, the people who work there and Canadian consumers, that is a choice and decision for the board of directors of the company.

When we really look at it, the bill basically is political posturing. It lets the government claim to be addressing Air Canada's concerns while ignoring the company's pleas for bigger and bolder policy moves such as the implementation of air marshals or putting the issue of airline industry restructuring before the Standing Committee on Transport and Government Operations for immediate consideration and redeliberations.

Bill C-38 requires us to examine specifically the Air Canada Public Participation Act, and while I must report that I am in favour of striking down section 6(1)(a) of the act which this legislation does, we should not stop there. There is more to be done. We should ask ourselves a basic philosophical question. As we enter the third millennium, do we believe that the government should continue to regulate the internal affairs of a publicly traded corporation whose shares it no longer owns? Why for example should sections 6(1)(d) and (e) of the Air Canada Public Participation Act require Air Canada by law to maintain facilities and/or offices in certain cities? Surely these decisions are more properly the responsibility of the company's shareholders and board of directors.

Why for example should section 10 of the Air Canada Public Participation Act make the Official Languages Act applicable only to Air Canada while no other Canadian airline is similarly bound? If we really believe that the Official Languages Act should apply to Canada's airline industry, to place it only against Air Canada and not against other carriers, against in the sense that it is a regulation and a requirement that they meet its standards, then it hardly seems fair to hold Air Canada to a higher standard than the former Toronto based Canada 3000, Calgary based WestJet and Montreal based Air Transat.

Why should sections 6(1)(b) and (c) of the Air Canada Public Participation Act restrict foreign share ownership in Air Canada when a more equitable regime would see similar limits placed on all Canadian carriers? I believe that sections 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. There already is a prohibition against foreigners owning more than 25% of a Canadian air carrier in the Canada Transportation Act. Section 55 of that act defines a Canadian carrier as:

--a corporation or other entity that is incorporated or formed under the laws of laws of Canada or a province, that is controlled in fact by Canadians and of which at least seventy-five per cent, or such lesser percentage as the Governor in Council may by regulation specify, of the voting interests are owned and controlled by Canadians.

Section 56.3 of the act gives the Canadian Transportation Agency the power to review all mergers and acquisitions in the airline industry and determine whether such activities would affect the airline's status as Canadian under law. Section 6(1)(a)(i) requires a carrier to be Canadian in order to have a licence to operate domestic services. Section 69 only allows two types of carriers to operate international air services: Canadian air carriers under the definitions I have just outlined; and non-Canadian carriers which have been designated by a foreign government or an agent of a foreign government to operate an air service under the terms of an agreement or arrangement between that government and the Government of Canada.

Under the Canada Transportation Act, if WestJet, formerly Canada 3000, or Air Transat were to allow foreigners to acquire more than 25% of their voting shares, they would no longer be Canadian. As such they would lose their ability to serve domestic routes within Canada and international routes between Canada and any other country, which is to say they would lose their value to any potential buyer.

Given that restrictions against foreign ownership are already present in the Canada Transportation Act, sections 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. As well, it is important to note that if we do have a debate finally in this place, as some government members have said should happen, that the foreign share restriction on carriers, specifically Air Canada, should be raised from 25% to 49%, then it makes total sense to scrap that provision in the Air Canada Public Participation Act and leave it in the Canada Transportation Act so that when we do have that debate, the new restriction which would be lifted would apply to all carriers evenly. We would not have to amend two pieces of legislation in order to get the same thing done which would require more time of the transport committee, more bureaucracy and politicians wasting more time standing around talking about things they already agree on.

This is just simple streamlining and making things easier to do.

Even if there were no prohibition in the Canada Transportation Act on the 25% foreign shareholder limit, Air Canada's board of directors would undoubtedly take actions to ensure that control of the firm remained in Canadian hands because the convention on international civil aviation, more commonly referred to as the Chicago convention, sets out the basis of international commercial aviation.

Internationally scheduled commercial air traffic is then made possible only by bilateral agreements in which governments typically exchange air rights for the benefit of their respective carriers. Typically, on any international route, each country can designate a national carrier. Thus Air Canada and Air France fly between Montreal and Paris, Air Canada and Korean Air Lines fly between Vancouver and Seoul and Air Canada and Cubana Airlines fly between Canada and Cuba.

Only in the most exceptional cases do we find an airline flying between two cities when neither is in the airline's home country. In virtually every case where a foreign airline flies between two foreign destinations, it is only as an extension of a flight that started in the home base of the airline. Air Canada flies between Sao Paulo, Brazil, and Buenos Aires, Argentina, but only as part of a Toronto-Sao Paulo-Buenos Aires service and only with the approval of the governments of Canada, Brazil and Argentina.

Even without the safeguards in the Canadian Transportation Act, if Americans or anybody of any other nationality were to acquire a majority of Air Canada's voting stock, foreign governments might well refuse to recognize Air Canada as a Canadian company and thereby deny it the ability to continue serving routes to those countries. Thus, if United Airlines and Lufthansa were to buy 51% of Air Canada's voting stock, the British, French and Chinese governments would have the right to deny Air Canada permission to fly to London, Paris and Shanghai.

Without the ability to serve international routes, Air Canada, as an airline, would cease to have value to its investors. For this reason alone, its board of directors would never allow foreigners to own a majority of stock of Air Canada.

Anyone doubting this needs only to look at the arrangement that American Airlines had with Canadian airlines in 1999. It flew passengers from the United States to Vancouver and then from Vancouver on jets of Canadian Airlines to Asia. The reason for this was that the American Airlines had only been granted routes to Japan from the United States and needed access to Hong Kong, China, Taiwan, Thailand and the Philippines. The Asian services of Canadian Airlines were based on bilateral agreements between Canada and the Asian countries concerned. Had American Airlines taken control of Canadian Airlines, it would quite literally have killed the goose that laid the golden egg.

As I said earlier, I am in agreement with repealing section 6(1)(a) of the Air Canada Public Participation Act. For this reason I and the official opposition will be supporting Bill C-38. At the same time, having carefully examined the Air Canada Public Participation Act, I see no reason why we cannot just eliminate the entire act itself. It has at least four irrelevant clauses.

Section 4 deals with the transfer of shares to the Minister of Transport. Air Canada tells me that these shares have since been sold. Section 5 deals with continuance. Presumably this has been achieved in the 12 years since the act was passed. Section 11 deals with the continued appointment of the Air Canada directors past the privatization date. Presumably the terms of these directors have long since expired. Section 14 repeals the Air Canada Act. This clause has also been spent.

The act also discriminates against Air Canada in four specific areas.

Subsection 6(1)(a) limits share ownership of an individual or group to 15%.

Subsections 6(1)(d) and (e) make Air Canada maintain facilities and/or offices in defined cities. They make them maintain offices in Montreal, Mississauga and Winnipeg. We talk in the House all the time about getting out of the face of business, letting people sink or swim on their own merit, and getting out of the business of corporate welfare, mandating useless bureaucracy that is none of the government's business. This is a clear example of that.

I raised an amendment at the committee stage to have this part of the act struck down and it was voted down without any logic. It would be unheard of for the United States to mandate that Southwest Airlines, or United Airlines or American Airlines maintain facilities in Chicago, or Dover or Portland, Maine. The idea of telling a private sector company that it has to have a maintenance facility in a certain city is absurd. It is none of the government's business.

Specifically, subsections 6(1)(b) and (c) of the act restrict foreign share ownership in Air Canada, as I mentioned. Section 10 makes the Official Languages Act applicable only to Air Canada. As a Canadian who happens to believe in the principle of official bilingualism, who was taught in a French immersion class, whose mother taught French in this country, whose sister is a teacher of French immersion, in British Columbia no less, it seems bizarre to me that if we believe in bilingualism, if we believe that all Canadians should be able to speak equally in both of Canada's official languages, all we would have to do is put the idea of mandating official bilingualism in the air service, say that it was in the national interest and then put it under the Official Languages Act.

Why would we put the Official Languages Act and mandate it into the Air Canada Public Participation Act? It is a level of bureaucracy. It is a restriction and a burden on Air Canada that is not placed on other Canadian carriers. If we believe that people should be speaking in both official languages, if we believe in reaching out and it is an important principle for the country, then apply it to all of Canada's air carriers evenly, not just to one of them.

If the government is really intent on putting Air Canada on a level playing field with its domestic competitors, it can do this by not just removing the share limitation of section 6(1)(a) of the Air Canada Act, but by repealing the entire act itself. The legitimate policy aims which are contained in the act should apply equally to all Canadian carriers and not just Air Canada.

As written, the Air Canada Public Participation Act discriminates against Air Canada in ways that are utterly counterproductive and which retard the marketplace.

Just because Air Canada is a corporation, does not mean that the thousands of employees of Air Canada should be held to a higher standard than their colleagues at other companies. Either we believe in fairness as a nation or we believe in double standards. The official opposition believes in fairness and competition. I hope the government's opinion of the air industry will one day be the same.

Since 1937 the federal government has regulated Air Canada mercilessly. It is time to throw off the shackles. It is time to let Air Canada be held to the same high standards and only the same high standards as every other Canadian carrier. It is time to repeal the Air Canada Public Participation Act in toto and finally create the level playing field that people on both sides of the House say they want.

I will be supporting Bill C-38, as will the official opposition, but I have also introduced amendments and will continue to push for the full repeal of this legislation, so that Air Canada can be put on a level playing field with its domestic competitors for the first time in its 64 year history.

I also wish to mention something else. We are now at the third reading of Bill C-38. Many thing have gone on in Canada's air industry. Since we started debating Bill C-38, Canada 3000 has gone bankrupt and thousands of people have lost their jobs.

Since we started debating Bill C-38, 78% of Canadians have said that air marshals would make them feel safer. Since we started debating Bill C-38, 66% of Canadians have said that they worry that the airline they use will go belly up, leaving them stranded. Since we started debating Bill C-38 the U.S. congress has passed S-1447, the aviation security act, dramatically improving U.S. airline security. Since we started debating Bill C-38, a host of experts have come before the transport committee and called for the entire scrapping of the Air Canada Public Participation Act to put all air carriers on a level playing field. In all of these areas the government has turned a deaf ear.

I want to look specifically at the poll that was released by Ipsos-Reid, CTV and the Globe and Mail , six days ago. It is quite something. The press release reads:

As Air Canada begins flights to Washington, D.C. Reagan National Airport with an armed security officer known as an Air Marshal on board, an Ipsos-Reid/Globe and Mail/CTV poll released today indicates that most Canadians support the idea of Air Marshals on Canada's airlines. Eight-in-ten (78%) Canadians say that they would feel safer flying if they knew that there was an armed Air Marshal on board. In fact a majority (52%) strongly agrees with this view. The cost of providing security aboard flights should be covered by the Federal Government according to seven-in-ten (72%) of Canadians.

Two-thirds (67%) indicate that they would be more likely to fly if they knew that an armed Air Marshal was on board the flight.

When we break down the numbers, it is quite something. It went on to say:

Those in Atlantic Canada (87%) are most likely to agree that they would feel safer if they knew an Air Marshal was on board their plane. This compares to those in British Columbia (78%), Alberta (78%), Ontario (78%), Saskatchewan/Manitoba ( 77%), and Quebec (77%).

Canadians with a high school education (82%) or less than high school education (86%) are more likely than those with post-secondary education (76%) or those with a university degree ( 72%) to say they would feel safer if an Air Marshal were on a flight.

Older (81%) and middle aged (80%) Canadians are more likely than younger (74%) Canadians to say that they would feel safer on a flight with an Air Marshal.

Women (81% versus 75% of men) are more likely to agree that they would feel safer on a flight with air marshals.

According to seven-in-ten (72%) of Canadians the cost of providing security aboard flights should be covered by the Federal Government. In fact, four-in-ten (41%) strongly agree with this view.

It goes on and on. It is overwhelmingly evident that Canadians believe in this principle. When we came back to the House after the September 11 attack, I raised the issue of air marshals with the transport minister. He said it was a radical idea and he would not go in that direction because it was not a good idea. He has for years said that Canada should have a seamless security regime in our skies. Yet about a month ago he said that he would put armed air marshals on flights only to Reagan National Airport, by definition creating a seam in the security regime in this country by saying we would have air marshals on some flights but not on other flights.

Either we agree with the principle or we do not. The United States said that we could only fly into Washington's downtown Reagan National Airport, if we had air marshals on planes. The transport minister has said that because it is an important relationship he would do it. He either agrees with the principle that it is safer, he agrees with 78% of Canadians and with most parties and most members in the House that it would make air travel safer and does it, or he does not. If the transport minister does it for Reagan airport and if he is to hold to this principle of a seamless security regime in this country, I would think that he would extend the air marshal program and make everybody feel safer flying. That is what we need.

It should also be noted that since 1993, when this government came to power, seven Canadian air carriers have either declared bankruptcy, sought bankruptcy protection or have been taken over. Almost one carrier each year has been dropping like flies in the country.

Blame can be spread to a lot of places, but a lot of the blame does fall on the shoulders of the government because of legislation like the Air Canada Public Participation Act, which holds Canadian private sector companies to differing regulatory standards and therefore retards the marketplace. It does not allow carriers to compete on a pure level playing field so that the truly best will survive. It is time for the government to rethink where it is going, to end the political correctness and to stop mandating that Canadian air carriers and private sector companies have to have maintenance facilities in certain cities. Let Canadian carriers compete on their own.

We support Bill C-38, but if the government really had the chutzpah, it would show greater leadership, introduce real legislation on air marshals and airport security, scrap the Air Canada Public Participation Act and have renewed thinking with regard to Canada's air industry.

[André Harvey, Liberal, Parliamentary Secretary to the Minister of Transport]

Mr. Speaker, it gives me pleasure to rise and speak to Bill C-38, which is being given third reading today.

Initially, I very much want to thank the members of this House for their co-operation in ensuring passage of this short but important bill, which was debated in this chamber at the end of October and was referred to committee immediately. I want to express my gratitude to the committee members who agreed to deal with the bill so expeditiously.

Bill C-38 has but one purpose, which is to amend the Air Canada Public Participation Act to eliminate the 15% limit on ownership by any person of voting shares in Air Canada.The bill does not try to resolve all the longer term issues relating to Air Canada that were raised during debate on second reading.

The proposed legislative changes will provide our national air carrier with one of the key tools it needs as it attempts to regain its financial health, which has been severely strained by a number of events this year. Even before September 11, it had become quite apparent that Air Canada was going to have to make some significant moves to address its weakened financial situation.

The carrier’s efforts to integrate Canadian airlines; the high fuel prices; declining passenger demand; and the severe slowdown in the economy; have all had a significant impact on Air Canada.Air Canada has stated publicly that it needs new equity and it has taken, and continues to take, measures to acquire a considerable amount of non-voting equity.

However, for those investors who may have wanted to have some say in the direction of the company, there has been the legislated limit on voting shares along with the companion prohibition on association between the holders of those same voting shares. Taken together, these measures were designed to ensure that individual shareholders could not act in concert to take control of the airline and thereby nullify the concept of a widely held company.

A 10% restriction was in place until last year, when Bill C-26, the airline restructuring legislation, came into force on July 5, 2000. Bill C-26 had in it a section that amended the Air Canada Public Participation Act by raising the individual limit on the holding of voting shares to 15%. The prohibition on association was not changed.

In the lead up to Bill C-26, both the House of Commons and the Senate Standing Committees on Transport held extensive hearings to assess the views and concerns of the airline industry in Canada. In their separate reports, both committees recommended that the limit on individual voting share ownership in Air Canada be raised to 20%. The government agreed that the limit should be raised as a means of encouraging investment in Air Canada, while still preventing a single shareholder from gaining effective control.

The government’s view, at the time, was that 15% was the appropriate threshold, and it is this new limit that was ultimately accepted and entrenched in law. In coming to the decision to remove the limit, we have been told by a number of persons that any limit can act as a disincentive to an investor with serious intentions of having a say in the management of the company.

The events of September 11, 2001 have had devastating consequences for airlines around the world. Passenger traffic has fallen significantly and short and long term financial difficulties are forecast for our entire industry. Regrettably, we have already witnessed the bankruptcy of Canada 3000, our second largest air operator.

Air Canada has been forced by the effects of the terrorist attacks in the United States to re-examine its entire operation, even more profoundly than had been previously announced. It needed to adjust the services it offered to reflect demand.

It has had to reduce costs wherever possible. This has meant extremely difficult decisions had to be made by Air Canada’s management, including laying off close to 9,000 employees.

As we know, the government did not feel it could hold the carrier to its commitment of no involuntary layoffs or relocation, which had been negotiated in the context of the acquisition of Canadian Airlines. Clearly when all other major carriers were facing similar traffic and financial problems in the wake of September 11, Air Canada could not be forced to retain all its staff on the basis of that commitment.

To reduce the layoff impacts, the company has been working with Human Resources Development Canada to ensure its employees can benefit from any existing federal programs, including work sharing to reduce layoffs.

The carrier has also eliminated some routes from its network and has scaled back on the number and size of aircraft used on other routes.

Air Canada has benefited, along with every other Canadian air carrier, from the government initiatives that were instituted to help the industry cope with the severe economic fallout from September 11.

The government provided an indemnity for third party war and terrorism liabilities for essential aviation service operators in Canada. It took this action, as did other governments around the world, to ensure our carriers would be able to keep operating.

In recognition of the closure of Canada’s airspace, the government implemented a $160 million program to compensate the more than 1,300 businesses providing air transportation for passengers and cargo and offering specialty air services.

A great many Canadian carriers have already filed their claims under the compensation package and a number of carriers have already received their initial payments, including Air Canada.

Reagan National Airport’s unique geographical location has resulted in authorities in the United States imposing more stringent security requirements than at other American airports. The requirements include aircraft size specifications, dedicated crews, and trained, armed security personnel on board flights operating to and from the airport.

In order to re-establish Air Canada’s important flying rights into that airport from Toronto and Montreal, the government authorized the presence of armed RCMP officers on Air Canada flights to the U.S. capital. It also has made the necessary provisions to allow armed U.S. air marshals on U.S. flights to enter Canada without difficulty.

The decision to amend the Air Canada Public Participation Act, at this time, is designed to provide additional assistance to Air Canada in its attempts to return to financial stability.

Let me assure the House that the board of directors of Air Canada supports this change. The matter was discussed with the chair and Air Canada has stated publicly that it supports the government’s decision.

The government is confident that this measure offers the private sector greater opportunities for investing in Air Canada that could contribute to the successful restructuring of the company.

Moreover, in the committee hearings held during the first week of November, there was not one witness who voiced objection to the elimination of the 15%. It will provide new freedom to invest in Air Canada and should attract new capital for the airline.

With the enactment of this bill, Air Canada will find itself on the same footing as the rest of the air industry with respect to individual share ownership there will be no limit except for the 25% limit on non-residents which is a very different issue.

On this point, I must emphasize that Bill C-38 will not, in any way, result in a change in the government’s position on foreign ownership. This government remains committed to ensuring that Canada’s airline industry is run in Canada, for Canadians, by Canadians. Consequently, the government’s longstanding policy of a 25% limit on foreign ownership of voting shares, which applies to all carriers and not just Air Canada, remains unchanged.

This is a bill with only three sections. The first removes the 15% limit and the prohibition on association. The second renders null any other corporate documents that addressed the 15% limit. The third deals with when the changes will come into force.

The legislative changes which will be enacted as a result of this bill are in the interests of airline passengers and all of those who believe that our national air carrier, the world’s 11th largest airline, should continue to be the great carrier that it is.

I therefore encourage members to give it swift passage on third reading.

I want to thank all the members of the Standing Committee on Transport for their extremely constructive work. While this bill has its limits, it solves a major financial problem for Air Canada's future. I am convinced that all the suggestions made in committee, both by its members and by all the witnesses that appeared before it, will give us an even better perspective on the future of Canada's transport industry.

I am convinced that the huge amount of work that will have to be done in the coming year as part of the overall re-examination of everything that relates to our transportation industry will allow us to integrate several suggestions that were made before the committee during the review of this bill, which, while being very restrictive from a financial point of view, allows us to expand our perspective regarding many issues that exist within the department. It goes without saying that we are there to make corrections as problems surface.

Therefore, I am very pleased to take part in this exercise, along with all the committee members. Incidentally, in the next few days we will travel to Washington to continue to strengthen our co-operation with the Americans regarding extremely important measures to make our fellow citizens feel safer and to make changes that will be increasingly more substantial.

Again, I thank all the members of the committee and of this House for their interest in this bill, which is substantial even though it only has three clauses and which will allow Air Canada to be financially sound.

[Lucienne Robillard, Liberal, for the Minister of Transport]

moved that Bill C-38, an act to amend an act to amend the Air Canada Public Participation Act, be concurred in at report stage.

(Motion agreed to)

Business of the House

[Don Boudria, Liberal, Minister of State and Leader of the Government in the House of Commons]

Mr. Speaker, this afternoon we will continue with Bill C-10, the marine parks bill.

Tomorrow we will consider Bill S-31, respecting a number of tax treaties.

As indicated by the deputy House leader for the opposition, next week is a week in our constituencies. When we return we will consider: report stages and third reading of Bill C-38, respecting Air Canada; second reading of Bill C-41, respecting the Canadian Commercial Corporation; report stages and third reading of Bill C-27, the nuclear waste legislation; Bill C-35, respecting foreign missions; and second reading of Bill S-33, respecting carriage by air. During that week the government may introduce another bill dealing with public safety and we would begin debate on that matter as soon as possible.

Finally, I intend to consult colleagues later this afternoon, given the uncertainty in the airline industry, to see whether there would be a favourable disposition, notwithstanding the tabling of the report on Bill C-38 today, to see if the House would agree with dealing with third reading tomorrow. I intend to consult later this day on this matter.

Airline Security

[James Moore, Canadian Alliance, Port Moody—Coquitlam—Port Coquitlam, BC]

Mr. Speaker, this Sunday will mark two months since the tragic attacks in the United States where commercial airliners were used as weapons.

In the past two months the House and Senate transport committees have studied three transport related bills: Bill C-34 to create a transportation tribunal, Bill C-38 to amend the Air Canada Act and Bill S-23 to update an airline liability convention passed in 1929.

Airport security is the top priority of the industry right now. Yet no legislation at all has come forward from the transport minister. When will the transport minister show leadership and table legislation to get people flying again so we can have first tier security in our skies?

Air Canada Public Participation Act

[Gary Lunn, Canadian Alliance, Saanich—Gulf Islands, BC]

Mr. Speaker, I want to speak to Bill C-38 in which the government is finally acknowledging that it is willing to raise the foreign ownership restriction from 15% to 45%. I compliment the member for South Surrey--White Rock--Langley. She has been a leader on the issue and has fought for these changes ever since I was a member of parliament.

If the government had taken leadership on the issue years ago the airline industry may not be in the mess it is in right now. It is important to emphasize that. Canada's airline industry is in a disastrous state. The government is scrambling and grasping at straws to make the changes that will somehow pull it out of the ground.

The government must take responsibility for the mess we are in today. It was directly involved with the Canadian Airlines and Air Canada deal. Who knows to what level it was involved? It is important that this be stated here in the House.

We in my party support the bill. I cannot overemphasize the amount of work my colleague the member for South Surrey--White Rock--Langley has done on the issue. She has been a leader. She saw the problem when the airline industry was first in trouble. She did virtually everything in her power to get them to come to their senses.

It is important to emphasize that this is not a result of the events on September 11. There is no question that the attacks had a compounding effect, but the industry was in dire straits prior to that. Air Canada was losing something like $1.5 million a day and the government refused to move. I wish the government had done something sooner.

I am not convinced the bill would save Air Canada. Air Canada has huge problems. I have spoken to people directly involved in the industry who are not convinced Air Canada can survive. Technically it should be bankrupt now.

I have stated before on the record that I do not believe bailouts at the cost of the taxpayer are the solution. It is one thing to provide Air Canada with direct compensation as a result of September 11. However to start bailing it out with the billions of dollars it is asking for is not the answer. There must be changes to Air Canada. There must be changes to the way the airline is managed. It is a disaster.

We in the Canadian Alliance will be supporting the bill. I am pleased to stand and support legislation that the member for South Surrey--White Rock--Langley might well have drafted herself. She is the one who brought the issue to the forefront. She is the one who has advocated it for so long.

It is a pity the government would not listen to her. It is a pity the government would not listen to the good ideas of a member of parliament who knows the industry inside and out, who has many airline workers in her riding and who has followed the issue. It is a pity the government would not put the future of airline industry employees who face losing their jobs ahead of politics. Unfortunately the government only started listening at the 24th hour. It is now uncertain whether this can be saved.

We in my party will be supporting the legislation. It is about time the government woke up.

[James Moore, Canadian Alliance, Port Moody—Coquitlam—Port Coquitlam, BC]

Mr. Speaker, I wanted to come back to the House after my speech and clarify some things that were said about my speech within the context of the debate on Bill C-38.

It was said by the hon. Bloc member that I was somehow anti-French and anti-Quebec because I dared say that the Air Canada Public Participation Act is not the most efficient means by which to enforce official bilingualism in Canada.

By mandating that only Air Canada must enforce the Official Languages Act and not the other carriers, we are doing a disservice to the principle of official bilingualism rather than a service to it. That is the only point I was trying to make. The member dared to stand in this place and say I am anti-Quebec and anti-francophone because I dared to point out that principle and enforce the view that official bilingualism is an appropriate principle for Canada.

I would inform the hon. member that my mom taught French immersion in British Columbia. My sister teaches French immersion in British Columbia. I am a product of French immersion. When I was 12 years old I lived in Quebec for a month in a community that was totally francophone. I did so because I wanted to learn the language and understand the country better by being exposed to literature in both official languages.

I would say to the Bloc member that there are a lot of British Columbians who want to learn both official languages to understand the country better. However enrolment in French immersion classes is way down because of the Bloc Quebecois and separatist movements.

My family has done more for the country by advancing official bilingualism and the French fact than the Bloc Quebecois has ever done. For the hon. member to dare stand in this place and say I am opposed to official bilingualism is absolutely offensive.

I would encourage the hon. member to withdraw the remarks because the official opposition and I are in favour of official bilingualism. That sort of smear is totally inappropriate and undignified for the French language in Canada.

[Val Meredith, Canadian Alliance, South Surrey—White Rock—Langley, BC]

Madam Speaker, I am pleased to be debating the second reading of Bill C-38. It is with a degree of astonishment that we find ourselves addressing the issue 18 months after the fact.

The issue of public ownership and domestic ownership in Air Canada did come up when we were reviewing the restructuring of the airline industry 18 months ago. One of the dissenting opinions of the Canadian Alliance Party and myself was that this limitation of 15% was not a good thing and should not be in the legislation. We said at that time, and I repeat it now, that the 15% limitation in ownership hindered Air Canada from dealing with the issues rather than helping it. The government was urged at that time to remove the controls on ownership to give Air Canada the ability to raise capital in order for it to be able to afford the debt it was taking on with the acquisition of Canadian Airlines.

At that time the government said, as the minister did today, that it was not necessary to remove the limitations, that it was all fine and well and Air Canada could move ahead without it. Today I heard the minister say the same thing about foreign ownership, that it is not important at this time to remove the limit or raise the limit from 25% to 49% because all is well and Air Canada, with this amendment to the legislation, would be able to garner the capital that is necessary.

I would suggest that now it is time for the government to look seriously at the issue of Air Canada, at its financial position, the issues and the problems it has to deal with, and the government should realize that now is not the time for government to put on restrictions. Air Canada has an enormous debt load. Airlines cost big dollars, not small dollars. Air Canada will require a large amount of money, not a small amount of money, in order to remain afloat.

I would suggest that today the government is showing the lack of foresight that it showed 18 months ago when it would not remove the government restrictions to ownership in a way that would have allowed Air Canada to reach the maximum possibilities of getting fresh capital into its company.

It is interesting to see that Air Canada is now in favour of these changes, that Air Canada is now willing to look at removing this 15% control of domestic ownership and raising the foreign ownership limits from 25% to 49%. It is interesting because 18 months to two years ago it was this restriction on domestic ownership that caused the other bidder, Onex, to remove itself from the merger of Canadian Airlines and Air Canada. It was this limitation on domestic ownership that forced the government to deal with the bid that Air Canada had put on the table. This control on domestic ownership allowed Air Canada, I would suggest, to perhaps make an unwise decision to fight the takeover bid that Onex had put on the table.

Having said that, let me say that the problems Air Canada is facing are not due to September 11. September 11 did not help, but certainly the problems did not originate with the horrific events of September 11. The problems that Air Canada is facing have been ongoing.

There was an article in The Economist of July 7, 2001, obviously before September 11, that outlined in great detail the problems in the airline industry, the problems with the downturns in the economy, the fact that air travel fell in the United States and Europe for the first time in decades in May, and the fact that on any given day, at that time, four million people around the world were taking to the air and that at any one moment in time a quarter of a million people were in flight. However, bad weather, congestion on the runways, hamstrung air traffic control, computer failure and the late arrival of incoming flights all turn air travel into a lottery.

It was quite apparent before September 11 that there were major problems in the airline industry. Air Canada is one of the larger players. I understand it is the 11th largest airline in the world but that just means that its problems are perhaps larger than some of the smaller airlines. Air Canada has been having difficulties, to say the least, in merging the two workforces and cultures of Canadian Airlines and Air Canada. It is because of these problems that it ended up in a dire situation that preceded September 11.

We cannot deny that the events of September 11 had an impact on the airlines but I suggest that the government's decision to remove the domestic controls on ownership is a sorry response to the issue Air Canada is facing. The government has shown a complete lack of vision as to where the airline industry should be going. Had it had some vision of how Canada could have a strong national airline with support from other airlines and that all those pieces could work together, perhaps a lot of this angst would have been sorted out before now. Unfortunately, the government has not shown that kind of vision. It had a knee-jerk reaction to emergency situations that arose at the time.

The government had a knee-jerk reaction when Canadian Airlines was going under. Now that Air Canada finds itself in financial difficulty, again it has a knee-jerk reaction. Canada 3000 found itself in financial difficulties and there was yet another knee-jerk reaction. I think Canadians would like to know that their government has given some thought to the future of the airline industry and how their expectations will be met. We have not seen that from the government.

I would argue that there is surely room for one national carrier in Canada. Surely there is enough business. I know in this room alone there are 301 people who end up flying somewhere. Surely there is enough business to support one national carrier, but it should not be at the exclusion of all regional carriers. We should not allow this one national carrier to put every other carrier out of business.

When Air Canada was given some support, as were other airlines, the federal government gave it $160 million to supplement or compensate it for its direct costs of September 11. What was Air Canada's response to that? It immediately started Tango. What is Tango? Tango is another lower cost airline that is in direct competition to Canada 3000. When the federal government guaranteed a loan of $75 million to Canada 3000, what did Canada 3000 do? It immediately lodged a complaint with the competition commissioner against Air Canada.

I would like to think and I think Canadians would like to think that there is a long term plan, that the government does not just give money to airlines to get into a fight with the other competing airlines. That seems to be what is happening. Even though Air Canada is financially vulnerable right now, it is planning to create another subsidiary airline to go into direct competition with WestJet.

Why is the government not encouraging through measures one strong national airline that has a role to play and encouraging regional airlines and low cost airlines which also have roles to play? Why would we encourage or allow a dominant air carrier to take out its competition?

Let me get back to Air Canada and the amendment to the Air Canada Public Participation Act which removes the controls on domestic ownership.

Air Canada's board of managers own less than 3% of the company's shares. They are very small shareholders. When we are talking about running a big corporation, being a small shareholder creates a problem because the decisions that are being made need to consider the shareholders' that the board represents. If the board of managers own a very small share of the corporate shares, perhaps the decisions being made are not being made in the best interests of the shareholders, looking at the bottom line.

My colleague from the NDP would probably say that it is time to stop worrying about the bottom line, that it is time for the government to support Air Canada and perhaps take over ownership again, but I do not think that is what Canadians want.

I think Canadians are looking for an airline that has the capacity to operate without government interference and one that has the capacity to restructure its debt and move it into equities. I think they want a company that can take advantage of opportunities and operate in the private sector without looking for taxpayers to bail it out. I think that is possible. If there were a larger group of shareholders with more say and who had higher investments in the company, perhaps decisions would be made in such a way that the company could move forward.

I was a little concerned when Air Canada's largest shareholder, la Caisse de dépôt et placement, made a huge profit by selling short on Air Canada's stock during the downturn and post-September 11 when share value was dropping like a rock. In other words, it was profiting by the decline in value of Air Canada.This company then wanted Canadian taxpayers to bail it out. How can anyone explain to taxpayers that the largest shareholder is making a profit on the devaluation of the stock and yet turn around and expect Canadian taxpayers to bail it out?

I think Canadians would like to see the federal government remove the restrictions on domestic ownership and raise foreign ownership restrictions from 25% to 49%. This would allow Air Canada to restructure in such a way that its debt would be put into equity. Perhaps the largest shareholders, maybe la Caisse de dépôt et placement, would buy more shares and show their interest in making this company work. Perhaps some foreign investment could be brought in to get new capital to make it work. This is not a question of losing control. If ownership remains under 50% then the ownership is still Canadian. This would allow Air Canada to get the necessary influx of capital to function in the real world without constantly going to Canadian taxpayers for subsidies. I think it is possible for Air Canada to compete given a fresh approach and new capital.

We in the Canadian Alliance will be supporting the legislation. It is 18 months overdue which just shows that the government is, as always, slow in doing the right thing.

[Bev Desjarlais, NDP, Churchill, MB]

Madam Speaker, it is a pleasure for me to rise on behalf of the New Democratic Party at second reading of Bill C-38, an act to amend the Air Canada Public Participation Act.

It was not that long ago, in fact just about 18 months, that we last debated a bill to amend the Air Canada Public Participation Act. That was the last parliament's Bill C-26 which, among other things, approved Air Canada's merger with Canadian Airlines. I think it is important that as we debate the bill before us today we remember this context. It has been about a year and a half since the government passed Bill C-26 to approve the merger of the two national airlines and I think it is now pretty safe to say it has been a disaster. The government completely dropped the ball with the merger.

One of the minister's stated objectives in Bill C-26 was to foster competition in the domestic market. He said so repeatedly in the House. What has happened? Eighteen months later we have even less competition than we had before. Royal Airlines and CanJet are no more. They have been swallowed up by Canada 3000. Two entire airlines are gone. So much for fostering competition.

The minister also said that Bill C-26 was supposed to prevent Air Canada from using predatory pricing to drive its competitors out of business. As we on the House of Commons transport committee have heard repeatedly over these months, this part of that bill has been a failure as well. The small airlines that are trying to compete with Air Canada and offer Canadian travellers some choice in the market have repeatedly been saying what we in the New Democratic Party were already saying while Bill C-26 was still before the House: that the anti-predatory pricing measures contained in that bill were toothless and completely ineffective.

This should not be surprising to the government. The commissioner of the competition bureau came before the transport committee while we were reviewing Bill C-26 and told us straight out that the bill did not give him the powers he needed to stop predatory pricing, but the Liberals ignored him. So did the Alliance and the Tories. I do not know why that happened. Maybe they just had their ideological blinders on and would not even think about the possibility that maybe a little regulation was necessary to prevent Air Canada from abusing its monopoly.

The competition commissioner said the bill would not give him the power to stop predatory pricing. My party's response was to try to do something about it. At report stage I introduced amendments to strengthen the competition bureau's ability to fight predatory pricing. The Liberals, the Alliance and the Tories opposed it and now we see the results.

The bill before us today, Bill C-38, would repeal paragraph 6(1)(a) of the Air Canada Public Participation Act. This would remove the 15% cap on ownership of shares by an individual or a group of individuals working in concert. This is a thoroughly underwhelming response to the current crisis in the airline industry. If the minister thinks that this is going to solve either the short term or the long term problems facing Air Canada and the overall airline industry, he is fooling himself.

The government argues that removing the shareholder cap will allow large investors to come in, buy the company, recapitalize it and restructure it. There are two problems with this reasoning.

First, industry and market analysts tell us that there is virtually no interest out there from investors in making any kind of major investment in failing airlines like Air Canada. This was the case before September 11 and it is even more so now given the world decline in travel and tourism since the terrorist attacks. Who does the government think is going to come along and invest all this money in Air Canada? Unless it knows something that it is not telling us, the bill would not do even a little bit of good.

The second problem with the government's reasoning is that even if removing the cap were to solve Air Canada's short term problems, which I do not believe it will, it opens up the airline to an even more long term problem down the road.

Why has the minister flip flopped from 18 months ago when arguing against the elimination of the cap? Is it simply because he sees no other way to address Air Canada's short term cash crunch? There are much better ways to address the short term necessity of keeping Air Canada in the air, which do not carry the long term costs that the bill carries. In the past few weeks, as the New Democratic transport critic I have suggested numerous alternative ways that the government could help Air Canada make it through the short term cash crunch, like tax deferrals, interest free loans, lower airport lease fees and initiating negotiations with Nav Canada to find a way to reduce the air navigation fees.

New Democrats do not want to see a direct government handout of taxpayer dollars to Air Canada, but if it is necessary we have said it should come with strings attached and should give the government a say in how the airline is restructured.

The bill addresses only the immediate short term problem facing Air Canada and it does not even do a credible job at that.

We have to look at the long term issues facing the industry. In the long term it is crucial that the government break the airline industry out of the destructive cycle it has been in for the last decade. The cycle repeats itself over and over again in every country that, like Canada, has an unregulated airline industry. First, capacity rises to unsustainable levels. This leads to massive financial losses. Then the weakest companies go under. They collapse and are downsized or the airline reduces capacity. Then the cycle repeats itself.

This is a ridiculous way for the government to let an industry as important as the airline industry operate. The uncertainty we get from going from crisis to crisis undermines the entire national economy. We can ill afford this with our economy on the verge of recession.

If the government ever wants to end this cycle it has to drop the passive, minimalistic approach the transport minister is suggesting. It has to stop responding on a crisis by crisis, patchwork and piecemeal basis and look at some modern regulation to limit the growth of capacity. I am not talking about the old fashioned regulation of every route and every fare. I am talking about limited, targeted regulation to control the growth of capacity: a modern regulatory regime.

For the good of our airline industry the minister needs to take off the ideological blinders telling him that all regulation is bad and realize that total deregulation is just as bad as total regulation. There is a middle way and that is what he should be aiming for.

Although I do not believe this extinction of the shareholder limit will be the saviour of Air Canada or do the job of stabilizing industry, my party will not delay the bill going to committee. The transport committee needs to review the situation and, quite frankly, I hope we will see investors come forward. However, more must be done to stabilize our entire airline industry. Had one or two shareholders owned Air Canada, where would they be today? Would they have survived the huge losses of the past six weeks? Will these present changes ensure service to all regions of Canada? I think not.

My colleague from the Bloc has rightfully criticized the government for its approach to offering loan assistance. The government has said that if the airline restructures and lays off workers it will get assistance. The government has abandoned smaller rural and northern communities by not holding Air Canada to the merger agreement.

I also want to join my colleague from the Bloc in the disappointment I feel that the Alliance Party refuses to accept our bilingual nation.

Much more needs to be done to stabilize the airline industry. It is time to realize that the strategy of the last decade has not worked. We need to look at alternative methods. I look forward to having witnesses appear before transport committee and to coming up with a resolution that I hope will truly, once and for all, give some stability to our airline industry.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Madam Speaker, today's debate on Bill C-38 is in connection with Air Canada's demands for a review of the ceiling on individual ownership of shares.

The Bloc Quebecois will support Bill C-38.

Of greatest concern are the speeches by the Minister of Transport and the representative of the official opposition on the future of Air Canada and airlines in Canada.

Bill C-38, a simple bill with only three pages, repeals section 6 of the act. I will read it for the men and women of Quebec. The Air Canada employees watching us surely understand it. The act contained, and I quote:

1. (1) provisions imposing constraints on the issue, transfer and ownership, including joint ownership, of voting shares...to prevent any one person, together with the associates of that person, from holding, beneficially owning or controlling, directly or indirectly...voting shares to which are attached more than 15% of the votes that may ordinarily be cast to elect directors of the Corporation—

What the Minister of Transport is proposing in Bill C-38 seems thoroughly harmless. It would, however, allow a single shareholder to hold more than 15% of shares. It would be this shareholder other shareholders or entities who would hold the shares. They would thus have the right to take over control or to take part in the control of Air Canada's board of directors.

Is this desirable? It is what Air Canada is asking for. It is thought that investors could be interested. Citizens and companies across Canada will probably want to buy Air Canada shares, ensuring with colleagues, friends or related corporations that they have a certain degree of control over the board of directors so as to be able to play a greater role in the company's decisions, to perhaps be able to run it better and turn a profit. This would surely allow them to make some sort of return on their investment.

What this means is giving Canada's business community a free hand to control, to continue to control and to increasingly control this national company, Air Canada.

This is cause for concern, because the minister has told us quite candidly what our neighbours to the south have done. He has told us in all sincerity that the Americans provided massive assistance to the airline industry, over $15 billion he tells us, and that was the figure. Five billion dollars in direct aid and $10 billion in loan guarantees. A choice was made. In the wake of the sad events of September 11, the Americans decided to invest heavily. The minister was quite open about this. The Americans invested heavily, he told us, and that is so. The figure mentioned was $15 billion to revive the airline industry.

Other countries in the world suffered, such as Switzerland's Swissair, which sought bankruptcy protection. Switzerland decided to invest heavily in a company called Crossair, a regional airline in Switzerland. This company will soon buy up Swissair's shares and revive the airline industry. Switzerland has made a choice. It decided to invest heavily in Crossair, which will soon take over the defunct Swissair. This is a choice as a society.

What is saddening to hear today is that Canada has decided to give the market free rein and not to make any massive investments to kick start the airline industry. Anything it does do is on a bit by bit basis. Canada's approach is a piecemeal one. At the outset, the minister announced investments to meet high insurance costs.

As a result of the sad events of September 11, the airlines were faced with astronomical hikes in insurance costs. Some carriers were no longer even able to insure themselves. The government therefore decided to compensate them for the astronomically high premiums they were being charged for insurance.

It then reimbursed expenses. Since the air space was totally closed down, all companies' equipment was grounded. The Government of Canada decided, still within its piecemeal approach, to announce one week later that it would offer compensation and assistance, reimbursing the airlines' losses that were the result of the six day closing of Canadian air space.

This assistance was in dribs and drabs. After that a loan guarantee program was announced, followed last week by another loan guarantee to Canada 3000 of $74 million.

The minister refers to a business restructuring. He spoke of massive staff reductions. Once again the minister helped out Canada 3000 once it had restructured and, in particular, made massive staff cuts.

The minister has told us very candidly that the government can help the five major carriers in Canada, including Air Canada, Air Transat, WestJet and Canada 3000. He said very candidly “once they have restructured”. Downsizing is an important part of the restructuring of any company.

This is a message to the employees of all these airlines in Canada and Quebec, saying “In the end, you are the ones who will pay for the September 11 events. We will help—as was the case with Canada 3000—once your company has restructured financially”. And the minister adds “once your company has reduced its staff”.

In order to get help from the federal government, airlines must absolutely restructure. They must submit a restructuring plan that includes staff reductions. This is very hard to accept for airline industry workers, because what happened on September 11 was not their fault. It is not their fault if their industry suffered such setbacks but they are the ones who are paying for this.

Again, this applies to four airlines at the exclusion of Air Canada. In the agreement and in the various acts, very important guarantees were demanded for Air Canada. Such guarantees were demanded by the Bloc Quebecois, which questioned the government in debates on the various acts establishing Air Canada as we know it today, and by others. Why? To protect the rights of workers.

Air Canada is the largest airline, with 80% of Canada's air traffic. Therefore, it is important that it be afforded some protection. When Canadian was integrated with Air Canada, we made sure that workers would not lose. As the minister said, we made sure that small municipalities would be served. This has always been a requirement in the original legislation that is now being amended. These requirements have not changed. Protecting the rights of workers and serving small municipalities are still requirements under the acts that established Air Canada and French in the skies.

It is sad to hear speeches such as that of the Alliance member in a country where there are two founding peoples, anglophones and francophones. Members will understand why, with such speeches, that sovereignty is not dead in Quebec. If we were to hear speeches like that of the Alliance member every day, I am sure sovereignty would take off for the pure and simple reason that francophone rights must be protected.

And the law provides for the protection of French in the air.

What is harder to accept is the fact that 136 complaints are before the commissioner of official languages. They were lodged against Air Canada because French is not respected in the air. This is the harsh reality.

It is hard to hear the representatives of the Canadian Alliance say, today, that it is time to stop protecting French in the air, a practice established by one of the two founding peoples, thanks to representations by the Bloc Quebecois, among others. Air Canada is Canada's largest airline, carrying 82% of the volume.

Obviously we must carry on and make sure that the rights of travellers are protected. As regards service to small municipalities—I am using the minister's expression—it must be protected. That is what the minister said earlier.

There are no large or small municipalities. Canada was built from communities that diversified their approaches. Communities were established around natural resources. Cities—this is the term we should use and not small and large municipalities—were established across Canada.

No law makes a distinction between towns and cities in Quebec. They are cities. There are no large and small cities in the Quebec Loi des cités et villes. There are cities. Obviously, there are cities in the regions and there are cities near major urban centres, and the law must protect and continue to protect service to cities in the regions.

Canada owes its existence to its natural resources and continues to be very much a country of natural resources. The future is very important for all regions of Canada. Such is the diversity of Canada, what makes it great. We are one of the largest countries in the world in which the decision has been made to allow the market to operate freely.

That is where the problem lies. In such a vast country, a country of such diversity, the strength of which depends in large part on the natural resources located in distant regions, the government has a duty to intervene in order to ensure that transportation services are maintained, including the most rapid means of transportation, air service, so that regional cities are connected with the major urban centres.

That is why it was hard to swallow today the statement in the minister's speech saying that, with Bill C-36 which merged Air Canada and Canadian, we obtained and included protection for service to small municipalities.

I hope he will rethink his choice of words. Cities in the regions have as much right to air service as major urban centres. That is reality. Just as Canada's francophone air travellers have as much right to service in their own language as anglophones.

I am proud that the act which created Air Canada protects the use of French in the air. I hope the rumours that Air Canada wants to abandon Air Canada Regional precisely because the use of French in the air is a constraint on the expansion of all the businesses that make up Air Canada Regional, are not true.

Apparently they want to abandon these businesses, sell them or transfer a part of their routes. That is the current rumour. This is an attempt to improve the bottom line and to avoid having to respond to the 136 complaints received by the official languages commissioner against Air Canada regarding the use of French in the air.

It is difficult and it is a hard fight but we must continue to fight to protect the rights of workers under the statutes that created Air Canada as we know it today. We must continue to protect service to cities in the regions, and not small municipalities as the minister said, and protect the use of French in the air.

This bill only changes the percentage of individual or group participation in the share capital of Air Canada. It only amends this clause.

The Bloc Quebecois will support Bill C-38 for the simple reason that the rights of workers at Air Canada will still be protected, as will service to cities in the regions, and the use of French in the air.

We must continue to fight so that cities in the regions of Canada and Quebec are better served and that the use of French, the language of one of the two founding peoples of Canada, is better protected in the air.

This is a commitment which the Bloc Quebecois is determined to defend in the House.

It is sad to see the federal government deciding to put its faith in the free market in something as important throughout Canada as the airline industry. This is a position strongly backed by the Canadian Alliance, which would like to go much further. It would be a disaster for Canada's entire airline industry for the good and simple reason that this great country of Canada, and of Quebec, needs flights linking cities in the regions with major urban centres. They do not all have the same number of inhabitants and are so diversified that we must support them. In my view, the Government of Canada would do well to do as Switzerland or the United States have done and provide massive aid to the airline industry. It is a vital part of our economy.

Companies such as Bombardier were able to create markets in aeronautics because we in Canada were heavy users of air services. The entire aeronautics industry is supported by the airline industry and we must encourage this industry and its workers. They should not have to pay for what happened on September 11. They should not bear the brunt of industries' losses through the loss of their jobs. We are condemning entire families to poverty just because the government decided to give the market free rein.

I call on the minister to rethink his position on this issue. I call on the federal Liberal government to start looking at the larger picture and to send out a clear message. I hope the Minister of Finance will understand and that in his next budget he will announce heavy investments to support Canada's airline industry. As in the United States, Switzerland and other countries, this industry needs significant government support right now, until business picks up. We all hope that business picks up in the airline industry. Only time will tell.

Working on security is a good example. I support the Minister of Finance with respect to the Government of Canada's investments in security.

The problem is that we did not do enough before September 11. This is why we now have to invest so massively in security. We did not do it before. In 1987 the government decided to move the RCMP out of all Canadian airports. The RCMP was responsible for monitoring and supervising security at airports. It is not just the Liberal government that made this type of decision. That decision was made by the Conservative government and was supported by the current Liberal government. Why? For reasons of economy.

The government delegated to so-called non-profit organizations the responsibility of managing and administering some of the duties relating to security at airports.

Today we are seeing some of the results of that decision. There has not been much investment. Instead, cuts were made. The government tried to transfer the burden of security to airline companies which, over the past 20 years, have undergone major changes, including bankruptcies and the merging of Canadian Airlines International and Air Canada. Meanwhile, it was asking airlines to pay for security.

It did so by investing as little as possible. Since 1987 Transport Canada has been responsible for security at airports. This is a civilian agency which over the past 15 years has been much busier dealing with disputes about the costs to airline companies compared to the services provided by non-profit organizations set up by the Government of Canada to transfer its responsibility. They tried to make it as inexpensive as possible and now we can see the results.

Today we are being forced to make massive investments and the Liberal government is now afraid that it will not have enough money, for the simple reason that we do not know exactly how much the security bill will cost. In the meantime, we are not investing in the airline industry, we are saving our pennies to invest in security and protect passengers, users and all Canadian.

This is a choice we as a society made, and today the airline industry is paying the price. The federal Liberal government does not want to invest like the Americans have done. Once again, I thought the minister's statement was quite frank when he said that the Americans had provided massive support for the airline industry, $5 billion in direct assistance, $10 billion in loan guarantees; $15 billion in all.

Switzerland made a choice, following Swissair's filing for protection under the bankruptcy act, when it decided to invest massively, with the purchase of 38% of the shares of Crossair, which will take over from Swissair in January. So, it is a societal choice.

In Canada, all that is being promised, all that is being offered to employees in the airline industry, which supports the aviation industry, airplane manufacturers, et cetera, is Bill C-38. The world's leading companies in aviation and aeronautics are here, there are manufacturers and companies that produce parts, and all that we can promise them today is Bill C-38.

We agree that individuals should be able to have more than a 15% control of shares if they want to. If this finally allowed a major investor to control Air Canada's board of directors and try to jump start the company and get it on track, this is a societal choice that the government of Canada has made.

We must think about the workers in the airline industry, in all the companies, and not just the five major ones. There are regional companies as well. This afternoon, Air Alma was mentioned. There is Air Inuit and all the other regional carriers, which were hit with the reduction in air traffic across Canada and around the world. They are not being helped by the measures the minister announced yesterday.

This afternoon in oral question period, the minister told us candidly that revitalizing the major companies was likely to give the smaller regional carriers a boost. This represents a choice not to support the regional companies, which are often family operations, and letting them go adrift. When they hit really hard times and are within inches of seeking bankruptcy protection the government might agree to guarantee loans for them, if things are really going bad.

No plan is in place to help the airline industry. They will deal with things piecemeal, day by day. They put out fires. That is how security was dealt with. When problems arise, they deal with them. Otherwise, they try to save as much as possible in security. This is the way they have operated since 1987.

They are making massive investments because there is a security problem but the passengers on the airlines are paying the cost in Canada. Today they have nothing more to sink their teeth into. They have a bill that will enable private investors to participate more in Air Canada in an attempt to revive it.

I hope and we will demand that the context in which today's Air Canada was established will be maintained. In other words, Canada and Quebec need a strong airline that respects travellers' rights, that serves the cities and the regions and that uses French in the air, for both founding peoples.

[James Moore, Canadian Alliance, Port Moody—Coquitlam—Port Coquitlam, BC]

Madam Speaker, it is my pleasure to stand in favour of Bill C-38, an act to amend the Air Canada Public Participation Act. This change is long overdue. It finally puts Air Canada on a level playing field with other Canadian air carriers with respect to the sale of its shares.

For the first time in Canadian history Canadians can buy, sell and trade as many Air Canada shares as they want, just as if they were shares of any other Canadian company. Bill C-38 represents a marked departure from the traditional thinking of Liberal governments.

Air Canada was created by an act of parliament in 1937 as Trans-Canada Airlines. It has been the subject of much discussion in the House since that time. For the first 40 years of the company's existence it was seen as an agent of the crown and as the federal government's principal policy instrument in the field of aviation.

That changed with the passage of the original Air Canada Act in 1977. For the first time Air Canada was required to borrow in its own name and was declared to be no longer an agent of the crown. It remained a crown corporation and cabinet retained the power to appoint its directors.

In 1987 the Progressive Conservative government passed the National Transportation Act. It fundamentally changed the rules of the game and attempted to introduce competition rather than regulation as the primary arbiter within Canada's domestic airline industry.

Within a year the Progressive Conservatives had correctly realized that in a competitive situation the government had no business owning one of the competitors, so the parliament of the day quickly passed the Air Canada Public Participation Act essentially privatizing Air Canada and turning it from a crown corporation into a regular company whose operations were subject to the Canada Business Corporations Act.

Paragraph 6(1)(a) of the Air Canada Public Participation Act limited the number of shares that could be owned by a single shareholder to 10%. This was done to ensure that Air Canada stocks would be broadly held by as many Canadians as possible. The section also put Air Canada on a level playing field with its principal domestic competitor, Canadian Airlines International.

Members must not forget that the Air Canada Public Participation Act was first read in the House on May 19, 1988. This was nearly five months after the January 1, 1988, birth of Canadian Airlines International from the fusion of all Air Canada's pre-1980 domestic competitors, Pacific Western Airlines, Transair, Nordair, Quebec Air, Eastern Provincial Airways and Canadian Pacific Airlines, into a single entity.

In 1988 Canadian Airlines parent company was governed by Alberta's Pacific western airlines act which set a 4% limit on the number shares any one group could control. In fact the 10% share limit set in the original Air Canada Public Participation Act was actually more liberal than the 4% limit set in the act governing Canadian Airlines.

Bill C-26 raised to 15% the number of shares that could be held in Air Canada following the takeover by Air Canada of Canadian Airlines in 2000. We are finally discussing whether to give Air Canada some of the same rights as other companies some 64 years after parliament first created a national airline.

If we were to believe government members, Bill C-38 would put Air Canada on a level playing field by striking down paragraph 6(1)(a) of the Air Canada Public Participation Act. Bill C-38 ostensibly puts Air Canada on that level playing field with all other airlines with respect to the way its shares can be bought, sold and traded by Canadian citizens. On that basis alone it should be supported, and the official opposition supports this legislation.

Bill C-38 does little to address the short term financial woes of Air Canada that led to thousands of layoffs at Air Canada, including the laying off today of 500 to 700 pilots. I will explain.

First, Air Canada does not obtain money when its shares are acquired by a new buyer unless Air Canada is the seller. Second, no single shareholder is currently restricted by the present 15% limit, that is no current shareholder owns 15% and has publicly expressed a desire to purchase more but cannot as a result of this section. Third, if people were not inclined to buy Air Canada stock before the legislation the fact that they can buy more of it is simply not an incentive.

There are only two ways that Bill C-38 would financially benefit Air Canada. First, some of the debt which the Caisse de dépôt et placement holds would have to be converted into shares. The caisse currently owns roughly 9% of Air Canada stock and converting its debt into shares would give the caisse roughly 18%.

First, this move, based on a $2.50 price for shares at the date of the transport minister's announcement of his intention to introduce this legislation, would allow the company to convert roughly $17.789 million worth of caisse debt into 9% of Air Canada voting shares. Second, an individual or group would have to take control of Air Canada with a clear plan to restructure the company. This would not be enough unless the restructuring plan were to meet the approval of the transport minister and be acceptable to Air Canada unions.

The bill is essentially political posturing. It lets the government claim to be addressing Air Canada's concerns while ignoring the company's plea for bigger and bolder policy moves such as the implementation of permanent new security regimes on the ground that are not only better but faster and more streamlined, placing air marshals on planes, and putting the issue of airline industry restructuring before the Standing Committee on Transport and Government Operations for immediate consideration and redeliberation.

Bill C-38 requires us to examine the Air Canada Public Participation Act. While I am in favour of striking down paragraph 6(1)(a) of the act we should not stop there. We should ask ourselves a basic philosophical question. As we enter the third millennium should the government continue to regulate the internal affairs of a publicly traded corporation whose shares it no longer owns?

Why should paragraphs 6(1)(d) and (e) of the Air Canada Public Participation Act require Air Canada to maintain facilities and/or offices in certain cities? Surely these decisions are the responsibility of the company's shareholders and board of directors.

Why should section 10 of the Air Canada Public Participation Act make the Official Languages Act applicable to Air Canada and no other Canadian airline? If the Official Languages Act applies to Canada's airline industry it should do so in the Official Languages Act and not in the Air Canada Public Participation Act.

It hardly seems fair to hold Air Canada to a higher standard than Toronto based Canada 3000, Calgary based WestJet or Montreal based Air Transat.

Why should paragraphs 6(1)(b) and (c) of the Air Canada Public Participation Act restrict foreign share ownership in Air Canada when a more equitable regime would see similar limits placed on all Canadian carriers? Paragraphs 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. The transportation minister should know that there is already a prohibition against foreigners owning more than 25% of a Canadian air carrier in the Canada Transportation Act. Section 55 of that act defines a Canadian carrier as:

A corporation or other entity that is incorporated or formed under the laws of Canada or a province, that is controlled in fact by Canadians and of which at least 75% , or such lesser percentage as the Governor in Council may by regulation specify, of the voting interests are owned and controlled by Canadians.

Section 56(3) of that act gives the Canadian Transportation Agency the power to review all mergers and acquisitions in the airline industry and determine whether such activities would affect an airline's status as being Canadian. Paragraph 61(a)(i) requires a carrier to be Canadian in order to have a licence to operate domestic air service.

Section 69 only allows two types of carriers to operate international air service: Canadian air carriers and non-Canadian air carriers which have been designated by a foreign government or an agent of a foreign government to operate an air service under the terms of an agreement or arrangement between that government and the Government of Canada.

Under the Canada Transportation Act, if WestJet, Canada 3000 and Air Transat were to allow foreigners to acquire more than 25% of their voting shares they would no longer be Canadian. They would lose both their ability to serve domestic routes within Canada as well as international routes between Canada and another country. In essence, they would lose the value of any potential buyer. This restriction is utterly redundant.

Given the restrictions against foreign ownership already present in the Canada Transportation Act, paragraphs 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. Even if there were no prohibitions in the Canada Transportation Act, Air Canada's board of directors would undoubtedly take actions to ensure that control of the firm remained in Canadian hands because of the convention on international civil aviation, more commonly referred to as the Chicago convention. It sets out the basis of international commercial aviation.

Internationally scheduled commercial air traffic is made possible through bilateral agreements in which governments exchange air rights for the benefit of their respective carriers. Each country can designate a national carrier on any international route.

Air Canada and Air France fly between Montreal and Paris. Air Canada and Korean Air Lines fly between Vancouver and Seoul. Air Canada and Cubana Airlines fly between Canada and Cuba. Only in the most exceptional cases will we find an airline flying between two cities where neither is in the airline's home country.

In virtually every case where a foreign airline flies between two foreign destinations it is only as an extension of a flight that started in the airline's home base. Air Canada flies between Sao Paulo, Brazil, and Buenos Aires, Argentina, but only as part of a Toronto, Sao Paulo, Buenos Aires service and only with the approval of the governments of Canada, Brazil and Argentina.

If Americans or people of any other nationality were to acquire a majority of Air Canada's voting stock, foreign governments might refuse to recognize Air Canada as a Canadian company and thereby deny it the ability to continue serving routes in those countries even without the safeguards of the Canada Transportation Act. Thus, if United Airlines and Lufthansa were to buy 51% of Air Canada's voting stock, the British, French and Chinese governments would have the right to deny Air Canada permission to fly to London, Paris and Shanghai.

Air Canada as an airline would cease to hold value for the investors who just purchased it without the ability to serve international routes. For this reason alone its board of directors would never allow foreigners to own a majority of Air Canada's stock.

We only need to look at the arrangement that American Airlines had with Canadian Airlines in 1999. Passengers were flown from the U.S. to Vancouver and then from Vancouver to Asia on Canadian Airlines jets. The reason for this was that American Airlines had only been granted routes to Japan from the U.S. and needed access to Hong Kong, China, Taiwan, Thailand and the Philippines. The Asian service provided by Canadian Airlines was based on bilateral agreements between Canada and the Asian countries concerned. American Airlines would have literally killed the goose that laid the golden egg had it taken control of Canadian Airlines.

I agree with repealing paragraph 6(1)(a) of the Air Canada Public Participation Act. The official opposition will support Bill C-38. However, having carefully examined the Air Canada Public Participation Act, we see no reason not to repeal the entire act itself.

It has at least four irrelevant sections. Section 4 deals with the transfer of shares to the Minister of Transport. Air Canada tells me these shares have since been sold. Section 5 deals with continuance. Presumably this has been achieved in the past 12 years since the act has been passed. Section 11 deals with the continued appointment of Air Canada directors past the privatization date. Presumably the terms of these directors have long since expired. Section 14 repeals the Air Canada Act. This section has also been spent.

The act also discriminates against Air Canada in four specific areas. Paragraph 6(1)(a) limits share ownership of an individual or group to 15%. Paragraphs 6(1)(d) and (e) make Air Canada maintain facilities and/or offices in defined cities. That is mandated by the government and is not a decision of the company. That is mandated against Air Canada and not levied against other businesses. This is a government regulation that retards the economy.

Paragraphs 6(1)(b) and (c) restrict foreign share ownership in Air Canada. Section 10 makes the Official Languages Act applicable only to Air Canada and not other carriers.

The transport minister says that because the head office is mandated to be in Montreal it somehow adds virtue to a discriminatory policy which handcuffs Air Canada but does not handcuff other carriers. He says that it is in the national interest. It is in the national interest if it is in Montreal but not if it is in Calgary or Vancouver. That is not in the national interest; Montreal is the national interest.

It is a rather perverted approach to public policy. Why does the government not just leave companies alone to compete on an equal and level playing field in the free market? It might try it once. It does wonders.

If the government is intent on putting Air Canada on a level playing field with its domestic competitors it can do this not only by removing the share limitation in paragraph 6(1)(a) of the act but by repealing the entire act itself. This is what the official opposition believes the government should do.

I intend to call witnesses before the standing committee to examine the practicalities of repealing the entire act and the best ways to put Air Canada on an equal footing with its domestic competitors while respecting the other priorities now contained in the act.

If the transport minister would like to come before the committee and tell us why Montreal is more a Canadian city than Calgary, Hamilton, Toronto or Edmonton, he is free to do so. I encourage him to do so. It would be the death of the government if he did that.

The legitimate policy aims which are contained in the act should apply equally to all Canadian carriers. Aviation law should apply to all Canadian carriers equally, not just to Air Canada.

The Air Canada Public Participation Act discriminates against Air Canada in ways that are utterly counterproductive and which retard the marketplace. Just because Air Canada is a corporation does not mean that the thousands of Air Canada employees should be held to a higher standard than their colleagues at other companies. Either we believe in fairness as a nation or we believe in double standards. The official opposition believes in fairness and competition. I hope the government's opinion of the air industry will one day be the same.

Since 1937 the federal government has regulated Air Canada mercilessly. It is time to throw off the shackles and let Air Canada be held to the same high standards and only the same high standards as every other Canadian carrier. It is time to repeal the Air Canada Public Participation Act and finally create the level playing field that people on both sides of the House keep saying they want.

I will be supporting Bill C-38, but I will also be introducing at committee amendments aimed at doing what Bill C-38 should be doing, which is putting Air Canada on a level playing field with its domestic competitors for the first time in its 64 year history; transport minister be damned.

[David Collenette, Liberal, Minister of Transport]

moved that Bill C-38, an act to amend the Air Canada Public Participation Act, be read the second time and referred to a committee.

Mr. Speaker, it is a pleasure to rise to speak to Bill C-38 this afternoon to try to get the sense of the House on furthering the improvement of airlines in Canada. This is a very short bill and it has one purpose: to amend the Air Canada Public Participation Act to eliminate the 15% limit on ownership of voting shares in Air Canada by any one person. I hope there will be speedy passage of the bill.

As most people know because we have been engaged in the airline file for a number of years Air Canada took on Canadian Airlines a couple of years ago. Over the last couple of years it has done a remarkably good job of merging the two airlines together.

There have been problems, not all of them of Air Canada's making. Some had to do with bad weather in the summer of 2000. Others had to do with the increase in air traffic when the economy was doing well. There was also an inability to merge the workforces on time.

All these things came together to create a situation that combined with high fuel prices and a declining economy in the last year caused problems for Air Canada before the events of September 11. Air Canada had publicly stated its need to get its house in order to attain more equity before September 11. The events of September 11 have compounded the problem and there is no question that Air Canada, as other airlines, requires a new infusion of equity.

Because of the constraints parliament imposed when Air Canada was privatized, it was impossible for the normal kinds of investment to occur in Air Canada that occur in other public corporations in the country. Investors who wanted a say in the direction of the company were stymied because of the legislation and the restriction on voting shares.

If we are asking the House to eliminate the limit on individual ownership it would be useful to give a bit of the history as to why the limit was imposed in the first place.

Air Canada was privatized in 1988 and 1989 under the enabling legislation which is before us and which would be amended by this bill. At the time the act contained a section that limited individual ownership of voting shares to 10%. The justification for the 10% limit was to ensure that voting shares would be as widely held as possible by Canadians.

Most people do not realize that the 10% limit was accompanied by a prohibition on association between persons who hold voting shares. This was designed to ensure these persons could not act together and take control thereby nullifying the concept of a widely held company. At the time no one thought much about that and the bill was passed. The 10% restriction remained in place until the year 2000 when we raised it to 15% by way of Bill C-26.

Members may remember that leading up to that bill there was an initiative by the government in the fall of 1999 to find a private sector solution to the woes that were bedeviling Canadian airlines. As a result of actions we took we precipitated a private sector solution. Two offers were before Air Canada at the time. One was from Onex Corporation. The other was a proposal that originated with the management of Air Canada.

I will not go into all the details, but people know that Onex withdrew and subsequently Air Canada's management made good on its promise to take over Canadian Airlines subject to certain restrictions. At the time in December 1999 there were intense negotiations between the government and Air Canada because with the demise of Canadian Airlines there would be one large carrier with 82% of the capacity in the country.

As a result of those negotiations, Air Canada decided on certain guarantees with respect to no involuntary layoffs and service to small communities. It has made good on its promises. I emphasize that during those discussions at any time the Air Canada board of directors was free to walk away from that initiative. It made a conscientious business decision which it had to live with in good times and in bad.

Of course the times right now are not as good. That is why the original objection by Air Canada management to changing the 10% and having single shareholders potentially own the company has changed. It has publicly stated its willingness to agree to this kind of a change. It is in agreement with it. Therefore I cannot see any great controversy.

The decision to move to the 15% limit was one we felt was at least in keeping with other crown corporations such as Canadian National Railways. We cannot take that particular comparison too far because the ownership limits on former crown corporations have been tailored to the specific industry sector. CN and Petro-Canada for example have a 15% limit but no limits on non-residents. Nordion for example has no individual share ownership limits except for the 25% for non-residents. Major Canadian banks will allow 20% but there is a fitness test. What we are proposing for Air Canada is appropriate to the Canadian air services sector at this time in our history.

As I said there has been some degree of support for this from Air Canada. In coming to the decision to remove the limit, I have been told by a number of people that any limit in the past has been a disincentive to an investor with serious intentions when investing to have a say in the company. That is why we have decided to re-examine the entire operation and to ensure that there is an equity infusion into Air Canada.

We have been fully engaged with all of the airlines since September 11 to look at their finances and ascertain their financial health. Obviously they have been adversely affected, as have airlines around the world. What we see in Canada is not unique to us; it is something that is being played out elsewhere.

We know what the United States government has done in the aftermath of the terrorist attacks. It came forward with a $15 billion package for the airlines, $5 billion for immediate compensation, $10 billion for loan guarantees. There was another $3 billion included in the $40 billion appropriations bill for reconstruction specifically for security measures. As I have said publicly, we are examining the efficacy of the Government of Canada taking on more of those security costs.

We have watched with some concern as airlines have faced difficulty. They have all reduced capacity and made many adjustments.

Just last week I announced a loan guarantee package for Canada 3000. That airline met certain objectives such as equity infusion by investors, reduction in capacity, the paring of workforces and most important, a business plan that would restore Canada 3000 to profitability.

What I said publicly last Thursday night is that kind of program will be available for the five principal airlines in the country that cover 95% of the market. I realize from questions in question period there are other smaller carriers that would like to avail themselves of a similar loan guarantee program, but they were covered in the initial compensation program. They were covered, as were all the airlines and airports, by our agreement to pick up the war risk liability for 90 days, the third party liability that was terminated by insurance companies which affected not only Canada's air industry but air industries around the world. We did this for the air carriers, the airports and Nav Canada. Everyone has benefited.

One has to draw the line somewhere in how far one goes in terms of loan guarantees. That is why we have said the five largest carriers that cover 95% of the market that are national in scope, they being Air Canada, Air Transat, Canada 3000, WestJet and Sky Service, would be eligible for the loan guarantee initiative. I am not sure that all of them will require it.

There is no question that air traffic has come back to some degree in the last number of weeks. It is gradually coming back to approximate pre-September 11 levels. However, that is not the case certainly on transborder traffic where there is still a significant reduction as compared to the period prior to September 11.

In looking at Air Canada in particular, we have said that perhaps by eliminating the single ownership limit the company would become more attractive to investors. It would allow more of an infusion of equity. It certainly would facilitate with the overall restructuring of the company.

We come with the message that we are preoccupied with the health of the transportation sector in general, but in particular the airline industry. We have made a number of changes to security regulations and safety regulations on board aircraft with the locking of cockpit doors and the strengthening of cockpit doors. In fact last Friday after I boarded the plane and before it left the gate, I was asked by an Air Canada pilot to see the new measures that had been put in place. I was quite impressed with how quickly that had been done and it had been done with the co-operation of Transport Canada. This is being done not only here but in the U.S. and elsewhere around the world. We are facilitating extra security on planes with the new regulations.

I hear my friend from the Alliance who is preoccupied with Americana and wants the provision of armed security personnel to be blanketed on Canadian aircraft. We have said yes for those flights to Reagan national airport, specifically because the American government has said that is a condition for Air Canada to go back to that airport. I think everyone in the House understands that. Anyone who has flown into that airport knows its proximity to the downtown core. It is not just any downtown core; it has the seat of government of one of the largest nations, arguably the most powerful nation in the world. Obviously there have to be some extra security provisions. We have agreed to that because Air Canada is unique on the open skies treaty in being able to use that airport. We did not want to inhibit Air Canada in any way, so we have agreed that the RCMP, Canada's national police, will be on those flights. I have said that we would consider it elsewhere.

However, our preoccupation has been to ensure that airport security be made more stringent and that those rules be put in place quickly and be enforced. Yes, there is some inconsistency across the country, but we are getting to that. We are dealing with that through inspections.

I was on the CBC town hall meeting last night. The Leader of the Opposition was on the panel. I was very happy when he agreed that the security regime has improved and that lineups at airports are diminishing as people get through the new rules.

Of course the one disagreement, in terms of substance, was the question of whether the government should go along with armed security personnel. As I have said publicly, we have that under advisement.

We have done much to help the airline industry and the airports. There are new regulations, new security regulations. I have no doubt that the security regime at Canadian airports, in the skies generally, and in other parts of the world is much better than it was before. I thought it was good before September 11 but it is much more stringent now. Canadians should feel very comfortable in flying. Indeed gradually people are going back. Even business class passengers who stayed away in droves following September 11 are starting to travel again, even some of them to the United States.

Our decision to amend the Air Canada Public Participation Act at this time is to provide another kind of assistance to Canada's largest carrier in its attempts to return to financial stability.

Air Canada is the world's 11th largest airline. It is an airline of which we can be proud. It has not been easy for Air Canada in the last couple of years with some of the problems that it has undergone. However, the quality of the professionals that work at Air Canada both in the air and on the ground is unparalleled. The quality of service we get on Air Canada is among the best in the world. It has been adjudged as such by international bodies.

We have an airline of which we can be proud. It is an airline that is having some problems, but it is an airline which I think has the ability to get over those problems. It is incumbent upon us as politicians and upon the House in general to facilitate solutions, certainly private sector solutions, on the part of our airlines, particularly Air Canada.

I am confident that if we enact the bill it will provide the private sector greater opportunities for investing in Air Canada which will contribute to a successful restructuring of the company. With the enactment of the bill, Air Canada will find itself on the same footing as all of the other airlines. No one else has a single ownership limit. We are not at this time proposing to raise the 25% foreign ownership limit. We do not think that is necessary. We are being consistent with many other countries around the world, including the United States, which keep that 25% limit. They believe inherently that an industry so fundamental to the economy, the fibre and the being of the country should indeed not only be operated by Canadians but controlled in effect by Canadians. If we need to change that we would not need legislation because current legislation allows that change to occur, at least the raising of the limit from 25% to 49%, by order in council. However we do not think that would be necessary.

We believe that the passage of the bill would be timely. It would give Air Canada the investment. As I said before, it is a very simple bill. It has three sections. The first removes the 15% limit and the prohibition on association. The second renders as null and void any other corporate documents that address the 15% limit. The third deals with when the changes will come into force.

I would hope that my colleagues would agree that this is just another step in the government's response and parliament's response to the tragic events of September 11. But in particular, it is also a response to the ongoing restructuring and realignment of the Canadian air industry which predated September 11. I hope that my colleagues would ensure speedy passage of the bill. Certainly at committee if there are any detailed questions members would like to ask, I am fully prepared to be there with my officials.

This is a bill that is in the national interests. It is certainly in the interests of airline passengers and all of those who believe that our national air carrier, Air Canada, should continue to be the great carrier that it is.

[Don Boudria, Liberal, for the Minister of Transport]

moved for leave to introduce Bill C-38, an act to amend the Air Canada Public Participation Act.

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

Fight Against Terrorism

[Peter MacKay, Progressive Conservative, Pictou—Antigonish—Guysborough, NS]

Mr. Speaker, I am very pleased to have an opportunity to respond initially to a new piece of legislation, perhaps one of the most comprehensive we will see in this parliament.

I want to begin by commending the minister, her department and all departments that have been involved in the process of drafting what is a very comprehensive, somewhat complicated but an extremely important piece of legislation.

We will obviously have an opportunity on the part of the coalition and on the part of members of the opposition to review this at the committee level. We will hear from experts and from those who may very well raise concerns about civil liberties. However, I believe an initial reading of the bill indicates that it sought to strike a careful balance between civil liberties and the protection of Canadian citizens, which is certainly very much the backdrop to Bill C-38 before us.

There are concerns with respect in particular to the preventive arrest provisions of the legislation. This, I suggest strongly, will have to be coupled with training and with follow up from municipal, RCMP and military police to ensure that there is no abuse of this element of the legislation. As well, I suspect there will be resources attached to this type of legislation. Clearly there has been an indication on the part of the government that this is forthcoming.

The Conservative coalition is tentatively supporting the legislation. We look forward to participating at the committee level to look at some of the gaps that the legislation seeks to fill. Other countries, including the United Kingdom, Australia and the European Union, have taken steps in this direction to comply with international conventions and to comply with this new threat that came to fruition on September 11, but has been with us for a long time.

The minister, in quoting the Prime Minister, stated in regard to the legislation that the campaign against terrorism would not be painless but would be won. We take them at their word, but it will take time. Obviously this type of legislation goes a long way toward giving our law enforcement community, our defence and internal security the tools they will require to embark on this lengthy and in many cases extremely dangerous venture to combat international terrorism.

The bill itself has safeguards for parliamentary review. Some have suggested that a sunset clause of sorts might have been preferable. However, a parliamentary review in three years certainly gives parliamentarians and Canadians an opportunity to try the legislation on.

We share the sentiment of all Canadians that the preservation of peace, order and good government is the primary objective behind this type of legislation. We in the coalition very much attach ourselves to the comments of the minister in that regard.

We look forward to reviewing, as I said, elements of the arrest provision. Investigative hearings is another element that is some cause for concern. We will look at the investigative tools themselves to see how far they will go and how far they might be carried out in the pursuit of curtailing terrorism in this country.

We look forward to working with the government and with all members of the opposition in the pursuit of this very lofty but extremely important activity which we are undertaking at this time to combat terrorism in this country and abroad.

Financial Consumer Agency Of Canada Act

[Ken Epp, Canadian Alliance, Elk Island, AB]

Madam Speaker, I am both pleased and somewhat distressed to speak on the bill today. The reason I am distressed is that after a long week of sleep deprivation I am not my usual bubbly self. I am struggling with a sore throat and other things. I feel sorry for myself and I am sure the Speaker does too.

Today we are dealing with Bill C-8. I have estimated that to read the bill would take 15 hours. If one were to read it with meaning, in other words read it to understand what is going on and actually verify some of its claims, it would take many more hours.

It is a huge undertaking for us today to go through Bill C-8, an act to establish the Financial Consumer Agency of Canada. The bill would basically set up the way financial institutions in the country are run.

On balance I support the bill, although I definitely have concerns. Ever since 1992 when the then Conservative government changed the rules for banks, there has been a need for revisions and for our banking sector to, if I can use the phrase, get with the times and be able to compete in the international market.

In a sense the bill is much overdue. The government moved very slowly in that regard. To make matters worse, in June 2000, not quite a year ago, the government introduced Bill C-38 in first reading. The bill then sat there and the government basically did nothing about it. It did not call for a debate on the bill in the House. It was a very slow process.

Then, to our chagrin, there was a totally unnecessary election in the fall which caused a great number of bills to drop off the order paper. The bills were enveloped into nothingness with the call of the election. The election was called for only one purpose, and that was a political purpose. The business of the country and helping our financial institutions with a new bill took a secondary position to the Prime Minister's overriding goal of getting yet another mandate. That seems to be so important to the Liberals, hanging on to power.

In retrospect we see that it was a good strategy, politically speaking. It is very much in keeping with a cartoon I saw in which the Prime Minister is shown reading a newspaper that says “Liberals have overwhelming third majority government”. The Prime Minister is saying to the people reading the cartoon “That is the best $200 million of your money that I ever spent”.

It is incredible that the government could drop all the business of the country and hold an unnecessary election one and a half years early, an election which cost the taxpayer $200 million and was conducted strictly and totally for political reasons. The Prime Minister wanted to win and did not care what it cost.

This bill along with many others was dropped and has now been resumed. It is interesting that Bill C-38 became with a few technical changes Bill C-8. If I wanted to reluctantly compliment the government I would thank it for bringing the bill back to the House with some urgency and allowing us to debate the issues in it.

Previous speakers, including my colleague from Prince George—Bulkley Valley, have spent quite a bit of time talking about the structure that is involved. It comes under the broad topic of having a bank we can trust. I really think that is important.

From my life experience and from having been on the finance committee studying this bill and other issues, it is my view that Canada is richly blessed with a financial system that is strong and trustworthy in the big picture.

In other words, we do not have a great deal of fear about our banks collapsing or about financial transactions not being completed in a timely fashion. As a matter of fact, and I do not believe this should be addressed in legislation, we should have a website where people can post their complaints about the banks for everyone in the country to see, unfiltered by the press. That would give huge accountability to the banks.

As a member of parliament I receive complaints, not many but some, about the banks. It says something about our post office that these days I receive more complaints about the banks than about the post office. Neither type of complaint is huge in number, although some are of significance to the people who visit their members of parliament on an issue. However by and large our banks are trustworthy and we can count on them.

We have a banking system in which we can conduct financial transactions and know that everything will work clickety-clickety-click. It is all very smooth. It is a well structured organization. That is due to the combined efforts of the Bank of Canada, which has been well run during the last number of years, and the individual banks that have taken their responsibilities very seriously.

I have a question for the banks if any of them happen to be listening. If I get a cash advance on a Friday it is posted within two seconds, but if I make a payment on that same advance I do not get the credit until the next banking day. Sometimes it takes two days if it is a weekend. I wonder why that is.

The banks should be consistent. If I bring a cheque to the bank I know it has the capability of cashing it and doing the electronic transaction immediately.—

[Dick Proctor, NDP, Palliser, SK]

Madam Speaker, I will go on with my speech. This legislation will help credit unions, designate a financial services ombudsman, something the NDP has been asking for for a long time, and create a consumer protection agency, that is called the financial consumer agency. It will launch a consultation process whereby the banks could legally be forced to provide a low fee retail deposit account. This is a position we have held for a long time in the NDP; however, nothing will happen in the short term. The bill will formalize a process of collecting data on small business lending but will not expand the banks' business powers into the areas of auto leasing.

These are some of the positive things in the bill. There are also in the 900 pages many things with which we disagree. Among those negatives is the wide ownership rules which lead to the concentration of banking powers in the hands of very few individuals.

This provides too much power to the Minister of Finance. Unlike parliament, the minister would then have the final say in virtually every major change that dealt with financial institutions, including mergers, acquisitions, regulations and ownership levels. It also fails to provide a real framework of accountability between large financial institutions and their local communities.

There is no community reinvestment act similar to the one in the U.S. which works very well. There is no effective improvement in accessing basic banking services, especially in rural areas. There is no right to lifeline, no cost accounting and no effective way to stop bank branch closures. Banks are only required to provide a four to six month window of notice to close under the legislation.

There are no teeth for the independent banking ombudsman and it reduces requirements for small banks. The Office of the Superintendent of Financial Institutions has been given more powers to deal with the potential for increased risk in the system, but there is no guarantee that the OSFI would be able to use these powers effectively because of the complex structures introduced in the bill, for example bank holdings and new ownership regimes.

There is nothing on the control and regulation of high risk derivative products and off balance sheet liabilities or on new monetary policy tools for the Bank of Canada.

We have dealt with some of the positives and the negatives. We note as well that it is a highly complex 900 page omnibus bill which changes eight major financial industry acts and is probably the largest bill ever to come before a Canadian parliament. Its main thrust is to increase competition, foreign and domestic, and flexibility through deregulation and re-regulation.

The Minister of Finance is easing entry requirements in the financial services market. He is purporting to broaden the powers of financial institutions including credit unions, increasing the flexibility and the complexity of ownership regimes, and allowing access to the payment system by non-bank entities, for example insurance companies. The legislation also creates a financial consumer agency, an independent financial ombudsman.

Bill C-38, its predecessor, included cosmetic measures to improve access to basic banking services and guidelines for a bank merger review process which were made available with the bill but are not included in the current version of the legislation.

The New Democratic Party opposes the bill. We emphasize that there is some support, as I have indicated in my remarks. We support parts of the bill, including the modernization of financial services, expansion of powers to credit unions, a potentially better deal for consumers, a better competitive position for insurance companies, and status quo on the distribution of insurance and leasing.

We would support the bill at third reading stage if changes to the wide ownership rules were rescinded, if it provided for more power to the House of Commons to review megabank mergers and if the government adopted an effective framework of accountability among banks, their communities and fully regulated bank holding groups.

In conclusion, there is quasi-unanimity among major financial industry players to speed up the passage of the bill which has incorporated the majority of the MacKay recommendations and has virtually gone through an invisible committee of backroom lobbyists. Bill C-8 is a done deal which the government is selling as a progressive financial consumer package.

[Pauline Picard, Bloc, Drummond, QC]

Mr. Speaker, it gives me great pleasure to speak to the motions brought forward by the Bloc Quebecois and supported by my colleague for Saint-Hyacinthe—Bagot, who worked very hard on this issue. He submitted a brief on the subject, listened to hundreds of witnesses and also took to heart most of the recommendations made by witness groups.

The problem with this bill, and it was mentioned earlier, has to do with banks with assets totalling under $5 billion.

We are also concerned with the recommendations made by the Association de protection des épargnants et investisseurs du Québec. It submitted a brief at the committee hearings on Bill C-38, which is now called Bill C-8.

The Association de protection des épargnants et investisseurs du Québec then said:

Bank ownership is widely spread in Canada and it is so intended in order to limit a big shareholder's capacity to control one or more financial institutions while these are considered to be public services. Unfortunately, this widespread shareholding has had a perverse effect—

I repeat, “a perverse effect”,

—by leaving way too much influence in the hands of the directors of major banks. This perverse effect could well be eliminated through some legislative changes to the Banking Act.

The Bloc Quebecois supports the recommendations made by the Association de la protection des épargnants et investisseurs du Québec, and that is why we brought forward the motions read earlier. We have moved many more in support of the association, but they were rejected.

The association has made numerous representations to the federal government, to the McKay Commission in 1997, to the Standing Senate Committee on Banking in 1998 and to the House Standing Committee on Finance in November 1998. Despite these many meetings, Bill C-38 and Bill C-8 did not take any of the association's recommendations into account.

For the most part, these recommendations refer to the recommendations made by the association. I would like to quote some of these recommendations if I have enough time, but I know that time flies.

First there is the restriction on the number of boards a director is allowed to sit on at any one time. Our proposal dealt with the restriction on the number of boards a director would be allowed to sit on at any one time. What exists now is the old boys' club rule where “You appoint me, I appoint you, and we appoint each other”.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Madam Speaker, I would like to go back to the comments made by the hon. member for Drummond on the importance of the whole issue of the classification of banks and the degree of ownership.

For the benefit of those who are listening, I should point out that the new bill on financial institutions establishes three categories of banks: major banks, that is those with equity of $5 billion or more; medium size banks, that is those with equity of $1 billion to $5 billion; and small banks, that is those with equity of less than $1 billion.

For each of these categories, the degree of ownership is different. For example, in the case of major Canadian banks, such as the Royal Bank, an individual cannot hold more than 20% of the voting shares, while 80% of the shares must be widely distributed among the public.

The bill has a major impact on medium size banks, such as the National Bank in Quebec. For these banks, including the National Bank, the new degree of ownership is 65:35. In other words, a single individual can own up to 65% of the voting shares and thus have full control over the National Bank, while the other 35% must be widely distributed among the public.

This new provision leads us to fear the worst in Quebec. This bill discriminates somewhat against the National Bank, the largest in Quebec, because the treatment of the Royal Bank, the largest in Canada, where one individual is allowed to own a maximum of 20% of voting shares, and the National Bank, where one individual may own up to 65% of voting shares, creates discrimination which is unjustified under the circumstances.

We are told that the purpose was to improve the National Bank's funding flexibility. I have often asked the Minister of Finance why one individual holding 65% of National Bank shares confers more flexibility than 65 individuals with 1% each. I have never had an answer. These new provisions are cause for alarm.

Recently I read comments by economists to the effect that this is no big deal, because the National Bank's equity is increasing by leaps and bounds anyway, and soon will be in excess of $5 billion. Such an analysis is wrong.

It is certain that the bill states that the banks can be reclassified. This means that, should the National Bank one day have over $5 billion in equity, it could be classified as a major bank and therefore the voting share split would be 20%:80%. In other words, with this bill a single individual could own 20% of voting shares and the other 80% of voting shares would be public, rather than the present 65%-35% split.

The point on which I disagree with the economic experts is that, under this bill, which must be read carefully, the Minister of Finance has three years to change the bank's classification. That time limit can be extended as he sees fit. In other words, even if the National Bank attains the $5 billion equity ceiling, the Minister of Finance could decide to wait three years before reclassifying it as a major bank subject to the 20%:80% split of individual and public voting shares.

Not only may he wait three years before recategorizing it, but he has the authority to extend this period. In other words, even with equity of $5 billion and more, the National Bank would not automatically be recategorized as a major bank and would therefore still be in the 65:35 category, that is 65% of shares held by one person.

There is a danger in this. Not only is the National Bank the biggest bank in Quebec, but it is also the bank that finances SMBs. As well, Quebec is proud to have such a large bank, which, through the contribution of people like Mr. Bérard, has grown at record speed to become the flagship it is today.

Concern about this is so great that even Mr. Landry, former finance minister and deputy premier, and now premier, of Quebec, wrote to the federal Minister of Finance last June 2 to suggest a number of public interest criteria for evaluating any banking operation involving a mid-sized bank.

To my great surprise, just before the election, the Secretary of State for International Financial Institutions had even agreed to these criteria being part of the banking bill. He had even signed beside the four criteria suggested by Mr. Landry, saying “Yes, provided that it is not only for Quebec, we can Canadianize—as it were—these criteria, and make them part of the bill”.

A few days later, the secretary of state changed his mind. I do not know why, but after putting his signature on this document, he changed his mind and subsequently refused to include these evaluation criteria in the bill.

There is no substantive difference between Bill C-38 as it was before the election and Bill C-8 today. When the Minister of Finance and the secretary of state released the new Bill C-8, they also issued press releases and attachments, one of which concerned the evaluation criteria for operations involving mid-sized banks, such as the National Bank.

On reading these criteria, we realized that the government had understood the message on additional criteria. We were satisfied with that, but only half satisfied. What we called for, and this is the heart of the amendment, it is the essence of the amendment we are proposing this morning, is that these criteria, which parallel the bill and are to be used as guidelines by the Minister of Finance in making a decision regarding the shares in a medium size bank, such as the National Bank, must not be left to one side and left out of the decision making process, but incorporated in the heart of the Bank Act, to ensure reference is made.

In other words, we are not telling the government to reject all transactions involving the National Bank. That is not the intent. We want to ensure additional security, additional criteria leading to the best possible decisions benefiting Quebec's economy and finances and the financial sectors of Quebec and Canada too.

We are not asking the government to be obtuse or to reject every proposal. We would be the first to criticize this sort of attitude, because we want our financial and banking institutions to move ahead and to take their place in the world, the National Bank and others too.

So, it is with an open mind that we are proposing these amendments and we hope that the government will accept them. I would say, and this is evidenced by all the representations that we have made, that since the beginning of the process, the McKay study, the white paper and the bill before us, the Bloc Quebecois has always looked positively at the reform of the financial institutions act, particularly since it is three or four years late. The delay is getting longer by the week, considering how quickly the financial sector is changing in Quebec, in Canada and in the rest of the world.

We hope this bill will be quickly passed. However, would it be possible for the government to show some openness for once? We are not asking much; we are not asking for a complete overhaul of the bill. We are simply asking the government to reassure Quebecers who are concerned about the new provisions that specifically apply to the National Bank. They hope that this new reform of financial institutions will have a positive impact on the financial sector and will not raise concerns about takeovers that would be detrimental, particularly to the interests of small and medium sized businesses in Quebec.

I urge the government which, through its secretary of state, has already agreed to the four conditions, the four criteria proposed by Mr. Landry in June, to include these criteria in the core of Bill. It recently tabled a document, along with Bill C-8, that includes these criteria, albeit in a different format, but it includes them nevertheless.

So, I am asking the government to simply show some openness by taking that document and including it directly in the core of the bill. If it does that, the Bloc Quebecois will support the bill.

[Gilles-A. Perron, Bloc, Rivière-des-Mille-Îles, QC]

Madam Speaker, since this is the first time I have addressed the House during this parliament, I am sure that you will permit me a small aside.

I wish to thank the 50% of the voters in the lovely riding of Rivière-des-Mille-Îles who voted for me in the last election and to assure the other 50% who did not that I am still their MP and I will represent everyone in my riding, regardless of how they cast their ballot.

Second, I especially wish to thank the volunteers, who played a big role in my getting elected, as you know from your own personal experience, Madam Speaker. It is thanks to the work of your volunteers and mine, who worked their hearts out, that we have a seat in this House.

Third, I wish to welcome the new recruits, particularly my friend, the member for Châteauguay. He will find the House a place of wonderful experiences.

Fourth, I would ask you to pass on a message to the Speaker and to all your colleagues who were elected and appointed. I am certain that you will do a splendid, non-partisan job, and that you will ensure that we pay careful attention to the rules and procedures under which we must operate. Madam Speaker, I thank you in advance for the work you will do.

Now for the main topic. As everyone knows, I rise this morning to address Bill C-8, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions.

I will begin by giving a brief background to the bill. It will be recalled that the MacKay report was tabled in 1998. My colleague, the member for Saint-Hyacinthe—Bagot, was a key player, suggesting some interesting amendments.

However, although we supported Bill C-38 in theory, subject to certain amendments, there was an exchange of correspondence with Quebec's then finance minister, Bernard Landry, who is now, as everyone knows, Premier of Quebec.

However, this exchange of correspondence between the Quebec minister of finance of the day and the federal Minister of Finance went nowhere. Fortunately, Bill C-38 died on the order paper because of the call of the precipitous election in November, for wich most Canadians still doubt.

Here we are this morning debating Bill C-8, which replaces C-38. Basically, the Bloc Quebecois can live with it, so long as a number of amendments are made. We have noticed in the new C-8, which is almost identical to C-38, that a number of changes have been made as the necessary result of the exchange of correspondence between the two finance ministers.

However, it leaves a bad taste in the mouth, since the concerns of the Quebec finance minister of the day, Bernard Landry, are not included in the bill. They are, rather, included in a schedule setting out guidelines for the reclassification of the banks, which had been in schedule 1 previously and whose owner's equity was less than $5 billion.

With regard to this schedule, the Bloc Quebecois has some concerns, since the schedule provides that:

—the Minister of Finance, in his sole decision, shall take into consideration, before permitting an exchange or the sale of one bank to another, the security and solidity of the bank, the direct and indirect jobs, the location of the decision-making centre and the management of the bank, the needs of consumers, the banks business and activities and the banks prospects for the future in the context of world markets.

The six points I have just outlined are just wishful thinking, since the bill would allow the current Minister of Finance, who, I believe, owns a shipping company, has adopted the practice since, of being the only master on board, like the ship's captain, when decisions are to be made. So, the minister has all the powers to ignore these six points without us being able to say or do anything about it.

Bill C-8 is much too important to allow a single individual, a single captain, that is the Minister of Finance himself, make the decisions about any changes to this legislation. This is very close to dictatorship. It is also dangerous considering that the government opposite has a great tendency to engage in cronyism and take care of its friends. We should be careful.

I strongly suggest that the final decisions be made by parliamentarians. We are here to make decisions. We are not decorating plants, we must make decisions. We must really be careful.

Another issue that is of concern to me and certainly to my friend, the hon. member for Drummond, is that the bill is three tiered with the possibility for an individual to own a bank.

It begins with large banks, that is those with equity in excess of $5 billion. The limit on individual ownership of shares is 20% of the value of the bank.

The second group includes banks with equity of one to five billion dollars, such as the National Bank, the only Quebec bank with a federal charter. Since equity for these institutions is less than $5 billion, 65% of the shares of that bank can be held by a single shareholder.

So we are back to the style of our finance minister, our great shipmaster, the only person who can decide how a bank can run itself. Will the bank defend the interests of its shareholders? Surely, since it is the majority shareholder. However, it will defend these interests to whose detriment. To the detriment of service and employees. This is cause for concern.

Then there are small institutions with less than $1 billion in equity, which can be owned 100% by one person. Unfortunately, that was not what the MacKay report recommended, as it suggested that ownership rules be changed to allow and foster the regrouping of small and medium sized financial institutions in a financial holding.

According to the MacKay report, several small financial institutions could associate and form a large bank with equity of $5 billion or more.

I see that my time is up, but I will indicate two other issues of concern to me.

First, Bill C-8 does not meet the expectations of the Bloc Quebecois about community reinvestment, not in the least. Second, it provides no protection to savers and investors.

Standing Orders

[Ken Epp, Canadian Alliance, Elk Island, AB]

Mr. Speaker, frequently when we rise in debate we begin our speech by saying “I am pleased to be able to stand and speak to this debate”. I have the extraordinary honour today of being the leadoff speaker for the opposition on this government motion. Pursuant to Standing Order 43, I am going to jolly well take my time doing it before the government prevents us from speaking at all on anything at any time.

The House leader seems to pride himself on the fact that we are patterned after the United Kingdom parliament. He gets a little smile on his face when he says “Over there, every bill is time allocated”. He seems so happy about that. I am very concerned about it.

I became a member of parliament in 1993. I have been around here for approximately seven years. In that time I have given some serious thought to what this place is. I have often said that I wish I would have learned French when I was young. I lived far away from French speaking people and I was so interested in science and math that I took those options and did not learn French.

However, one of the words in French that I know is parlez-vous; parle. It has something to do with speaking, does it not? It has something to do with debates. If parliament is not the place of debate then what is it? What then is our purpose for being here if we do not have adequate opportunity to debate issues?

I am quite aware of the fact that the motion today has nothing to do directly with debate. It is dealing with the question of whether or not members of the opposition, or any other members, can propose amendments. Backbenchers really do not have that much freedom to propose amendments, although I suppose legally according to the standing orders they could. What is really being proposed is a limitation on members of parliament, who are not in the front inner core over there, to put forward amendments at report stage.

I want to interrupt the flow of my speech for just a second. I am aware that there are hundreds, probably thousands, of Canadians watching this debate. It is Monday morning. Out west right now it is approximately 10.30 a.m. There are a lot of people who said they were going to leave their jobs for a while, watch CPAC and this important debate. The whole future of our parliamentary system hangs on this debate. I believe they are glued and riveted to their television sets right now.

I want to interrupt the talk about the proposed motion to describe very briefly how things work around here. People out there ought to know that we have three readings of bills. The first reading is usually the introduction of the bill. It seemed strange to me, when I first came here in 1993, that there was no vote on the first reading of the bill.

The Speaker gets up and asks if the minister is present. The minister usually does not even rise. The Speaker will read the motion or the bill then the Clerk will stand and acknowledge it. Then it will be said that bill is deemed to have passed, or words to that effect. I see the House leader is having major problems with what I am saying.

The bill has gone through the first reading stage, which is the stage deemed accepted without a vote. I thought that was strange but I can see why. The introduction of a bill only needs to be deemed to have been accepted by the House. I can see why neither the government nor probably the other members would want to come into the House to simply vote for something that says that the bill will be introduced.

However, the government introduces a bill and it is put on the order paper. The bill comes up for second reading on a subsequent day as given by the government House leader. Second reading of the bill is a discussion on the principles of the bill. It is a relatively short discussion as the normal rules of debate limit that time. Most of us give 10 minute speeches at that level. After second reading there is a vote and the bill is referred to a committee.

I have enjoyed my committee work. I have had some frustrations there but committee work is very enjoyable and useful. Committee work has a lot of potential for being a really important and pivotal part of the democratic process, the process of producing bills and motions.

At committee stage, the committee does a number of things. It usually gives an opportunity for people at large, whether they are a group, members of an association or individuals, to appear before the committee. Depending upon the importance, magnitude or how far reaching the bill is, the number of witnesses may be relatively small or may be quite large.

For example, I was a member of the finance committee in the last parliament when it was considering Bill C-38, a bill which unfortunately died on the order paper. Bill C-38 would have amended the way banking structures would operate. The committee heard information from many interesting and informed guests.

To summarize the stages of a bill, there is first reading and introduction and then second reading. After debate at second reading, the bill is voted on, agreed to and then referred to committee for members to consider at committee stage. Before the bill is returned by the committee to the House, the committee looks at all the suggestions and presentations made by different people. Committee members, utilizing not only their own skills but the skills of other staff and experts, may come up with amendments to the bill or to the motion. There may be an amendment that says that we will change a section, delete a section or add something. Those are amendments that come from committee.

When the committee reports the bill back to the House it simply means that the committee has finished its process. The bill comes back to the House for debate and for a vote on the amendments. It is called the report stage of the bill. At this stage we look at the amendments that the committee brought forward. This is where the system falls down.

I believe the motion before us today is trying to kill a gnat with a sledgehammer. Because the committee stage does not work the Liberals want to bring into the House rules and regulations that would prevent backbench members and opposition members from having an opportunity to adequately put forward their motions or amendments to a bill or a motion.

If this particular motion is passed, and using the clout of the parliamentary majority that the government has I believe it will pass, I predict that the motion will be subject to time allocation. I will talk more about that a little later on.

The motion will prevent members of parliament from getting their issues on to the floor of the House. There is a rule right now, and the government House leader made allusion to the fact that there is a standing order which prevents members in the House from moving amendments that were already dealt with at committee stage.

If a committee brings back a report with proposed amendments that were defeated in committee, they cannot be brought in again in this place. A certain argument can be made for that since they were already presumably dealt with in committee. On the other hand, any amendments approved by the committee will be included in the report of the bill back to the House for the House to deal with them.

It has been my observation in the seven years that I have been here that pretty well every amendment passed in committee is passed there because the parliamentary secretary who sits on the committee brings in the information from the minister and the minions which says that they want the amendment. Very often they are government proposed amendments and of course they pass. However if an opposition member puts in an amendment it is almost certain to fail since the committee has more Liberals on it right now, because the Liberals are in government, than it has other opposition members combined.

As a result the only amendments brought in are those which have the approval of the minister. His tentacles reach into the committee and basically control what happens there. The Liberals present in the House may be howling in protest, but that is my observation. That is what I have seen.

I remember proposing some amendments after my first election in 1993. I do not even remember now what the bill was, but I remember that I proposed some good amendments very early on. They were so good that some government members on that committee told me privately they were good ideas and even went so far as to say that they supported them.

A week or two later, after we heard from some more witnesses in committee, we came to clause by clause consideration. For the benefit of those thousands of people watching CPAC today, clause by clause consideration is when the chairman of the committee simply goes through the bill and asks whether the clauses should pass. Sometimes he speaks much more quickly than I was speaking now, but I am trying to give a little consideration to the interpreters who are working so hard for me this morning.

We go through the clauses very quickly. If we have an amendment for which we have given notice, we must be right on the bit when the chairman asks whether a clause should pass. Right then we must jump up and say that we have an amendment. Even if we have given notice of it, if we do not move it right at that instant it will not be dealt with and the clause will have passed unamended. That is how that works in committee. The last thing is whether the title should pass.

After that has been dealt with, the chairman asks if the bill should be reported to the House. There are also usually enough members in the committee to cause that to pass. Then it is brought back here, and that is what we are dealing with now. The bill or motion is reported back to the House, having gone through introduction, second reading, and study and clause by clause consideration at committee stage. Then the bill is back here for report stage.

As I said earlier, any amendments which have been dealt with in committee, in order to avoid duplication, are not permitted to be brought up here. Any amendments that have not been brought up in committee can be brought up by any member of the opposition or any backbencher on the government side. The government can also introduce amendments at report stage in the House which have not been dealt with in committee. That would deal with last minute technical changes or things of which it becomes aware.

Then we vote on each of the amendments. This is where the problem comes in. This is where the government just has convolutions of hopelessness. If we have a lot of amendments and if we on this side of the House force a standing vote on it, as opposed to just a voice vote which is called on division, then the government members could be literally forced to stand for hours, one at a time, voting against our amendments to prevent any amendments from going through.

Again, if I can give my observation, over all the years that I have been here now, there have been maybe three or four amendments put forward by opposition members that have passed in the House. I remember I had one. It was the first one in the 35th parliament.

Financial Consumer Agency Of Canada Act

[Richard Marceau, Bloc, Charlesbourg—Jacques-Cartier, QC]

Madam Speaker, first I want to congratulate you on being appointed Deputy Chairman of the Committees of the Whole. I wish you all the best when you are called upon to referee our debates, which tend to be raucous at times. I know you are passionate about and attentive to the proceedings of this House, so I have no doubt you will do a very good job.

I feel like I am watching an old movie. Bill C-8, formerly Bill C-38, is one of these old movies being shown in the House these days.

We heard the same arguments a few months ago, the same issues were raised, and the same positions seem to be more entrenched now.

During the debate on Bill C-38, now Bill C-8, Bloc members had expressed several reservations regarding the bill, which were shared by the Deputy Premier and Minister of Finance of Quebec.

Mr. Landry had stressed four main points. Before Bill C-38 was introduced we had been told not to worry. They were going to deal with it, everything would be all right, our concerns would be addressed.

We were somewhat surprised—I would even say disappointed—to find the elements we wanted to see not in the bill itself, or in any piece of legislation passed by the House, but in the regulations that will be appended to the bill.

As members know, unlike a bill that must be amended by this House in order to be changed, regulations may be amended at will by the executive or the Minister of Finance.

Finally, we are being asked to trust this government and in particular the Minister of Finance and to hand over a blank cheque. You will understand that we have some difficulty with that, to say the least.

Bill C-8 gives full power to the Minister of Finance to decide on his own the fate of Quebec banks without providing any guarantee in connection with Quebec's distinctiveness. Heaven knows Quebec is different. The bill provides no specific measure.

Although I do not always share the very 1960s rhetoric of my NDP colleague, who said “wicked Americans, wicked capitalists, let us turn the world upside down”, I agreed with him nonetheless on certain points, including the importance of giving the disadvantaged, who are often left out, greater access to financial services.

Finally, Bill C-8 has no answer to the very well directed questions of my colleague from Hochelaga—Maisonneuve on community reinvestment.

My colleague from Hochelaga—Maisonneuve, we will remember, is the excellent representative of a region on the island of Montreal hard hit by poverty. He has introduced many good ideas on community investment—I will return to them—which, unfortunately were not included in Bill C-8. That is regrettable.

We can only be concerned by the fact that a single shareholder could, with the agreement of the Minister of Finance, hold 65% of the shares of the National Bank, the largest Quebec bank. It is the bank of the Quebec small and medium businesses. There is an economic model in Quebec, and the National Bank is one of the cornerstones of this model, based on entrepreneurship and the SMBs. Should Quebec lose control of as important a financial institution as the National Bank, I think it would be very bad for its economy.

We also need legislative guarantees against any negative impact these new ownership rules might have on the employment of professionals, consumer and small business services, decision centres and the role of Montreal as an international financial centre. The stakes are just too high for Quebec and its economy to be left to the sole discretion of one man, the Minister of Finance.

We want to make sure—and I would say our whole position on Bill C-8 is based on this argument—that the future of Quebec's banking system is not in the hands of one man. I think most people would agree with that. Giving anybody too much discretionary power is bad; giving a federal minister too much power over Quebec's economy is even worse.

Bill C-8 does not show a firm willingness to protect consumers, particularly low income consumers, on the part of the government. The bill provides for the establishment of the financial consumer agency of Canada. I have my doubts about the kind of authority such an agency could have in an economic climate which, unfortunately, does not look too rosy, as we know, as the United States are about to be hit by a recession. We must ensure that not only middle income people but also low income people have access to financial services. Unfortunately, Bill C-8 remains vague and has more wish than real policy with regard to accessibility and consumer protection.

Finally, I would like to return briefly to the importance of reinvesting in the community. As I said earlier, the member for Hochelaga—Maisonneuve introduced a bill in the last parliament which would have required financial institutions to reinvest in the communities in which they are located. It was based on the community reinvestment act, American legislation—so we cannot be accused of being leftist.

As my colleague said, this legislation would require a regulated financial institution to show that its branches serve the deposit and credit requirements of the community for which they are chartered. This is where this issue becomes very important for, as my colleague said, and I stress this point, branches have an obligation to help meet the credit needs of the local communities for which they are chartered.

In a global context, with people looking at the broader picture, there is also a tendency to move closer to one's own neighbourhood and community. While we believe that the Canadian financial system must be strong and able to withstand the buffeting of the global economy, this globalization must not leave out individuals and entire neighbourhoods who are unfortunately ignored in the rush to prosperity.

In conclusion, I strongly urge the government to include the four points we raised during consideration of Bill C-38 not in the regulations, where they would be subject to the discretion of the Minister of Finance, but in the actual legislation which will be passed in the House. I also urge it to include the main features of the bill on community reinvestment introduced and strongly defended by the member for Hochelaga—Maisonneuve.

With these inclusions, the government could expect a much more co-operative attitude from the Bloc Quebecois.

[Suzanne Tremblay, Bloc, Rimouski-Neigette-Et-La Mitis, QC]

Madam Speaker, I am pleased to take part in the debate on Bill C-8, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions.

This bill replaces Bill C-38, which as they say died on the Order Paper when parliament was dissolved last October, after the Prime Minister decided to call an early election, having not yet completed four years of his mandate.

To begin with, this is essentially the same bill. Bills C-38 and C-8 are twins. But they are not identical because, in addition to a few minor amendments to ensure a closer match between the English and French texts, there is a major change with respect to the demands made by the Bloc Quebecois and by Bernard Landry, Minister of State for the Economy and Finance and Deputy Premier of Quebec, a change which would ultimately make the bill more acceptable by adding amendments anyway.

I was saying that the federal government decided to respond in part to the demands and expectations expressed by minister Landry by incorporating in its bill four points the Government of Quebec felt were important. However, these points were incorporated not in the bill itself, but in the guidelines on the reclassification of the banks listed in schedule 1 whose equity capital is under $5 billion.

The guidelines that accompanied the release issued on the day the Minister of Finance introduced his bill, clearly stated that, and I quote:

Any transaction involving a recategorization will be considered on its own merits, and should demonstrate that it would foster opportunities for the bank to grow and better serve the customers of the bank.

In considering whether a proposed transaction involving a recategorization is in the public interest, the Minister shall take into account all matters that the Minister considers relevant, including:

safety and soundness of the bank;

direct and indirect employment;

the location of the mind and management of the bank;

needs of consumers;

businesses and operations of the bank;

and prospects for the bank in the context of the global marketplace.

However, since these elements were not included in the act, they could be changed by the minister who could, for example, yield to the pressures of powerful international lobbies.

That being said, I must say without any hesitation that Bill C-8 raises many questions in my mind. When I think about what I have seen and observed with this government over the past eight years, I am concerned. I am concerned by, among other things, the government's arrogance, its contempt for democracy, its inability to fulfil its own promises and by the ease with which it yields to the pressures of the well-to-do and crushes the poor. I could go on and on, because there are so many reasons to be concerned about this government.

Let us take a look at a few things that are scary in this bill.

Bill C-8 gives full power to the federal Minister of Finance to decide, alone, the future of Quebec banks.

With Bill C-8, the Minister of Finance will be able to decide alone, at his own discretion, the future of Quebec banks. I find it truly unacceptable that this discretionary power is as strong as if not stronger than the act itself.

The Bloc Quebecois is concerned that a single shareholder could, with the agreement of the Minister of Finance, own 65% of the shares of the National Bank, the number one bank in Quebec. There is no need for the Minister of Finance to authorize this excessive control to ensure the flexibility of the National Bank. How is it that a shareholder owning 65% of a bank will give it more flexibility than 65 shareholders owning 1% each?

We need legislative guarantees against any negative impact these new ownership rules might have on employment, for example, on consumer services, on small business services, on decision centres and, most of all, on Montreal's role as a hub in the area of international finance. The stakes are just too high for Quebec to rely on only one person, the federal Minister of Finance, especially since Bill C-8 offers no real legislative guarantees. As I said earlier, the bill does nothing more than list some elements to consider that do not go far enough and that are under the sole control of the Minister of Finance.

Even worse, it seems to me that the finance minister's bill is full of holes which should be cause for concern to any person of goodwill. Why must the government write such thick bills if it does not seek clarity? How will this government be able to judge the clarity of others if it is incapable of seeing its own lack of clarity? One factor which contributes to clarity is precision. See for yourselves. On page 55 of the bill, clause 385 sets out the public holding requirement for banks. However, we learn a little further on, in clause 388, and I quote:

On application by a bank, the Minister may, if the Minister considers it appropriate to do so, by order exempt the bank from the requirements of section 385, subject to any terms and conditions that the Minister considers appropriate.

As well we see that the provisions of the act cease to apply if the minister so decides. In other words, this is a bill with flexible parameters, one that will allow Ottawa and the Minister of Finance to decide unilaterally on the future of the National Bank.

It is not obvious that the federal Minister of Finance's bill as presented will ensure healthy competition in the national market. Yet this competition is more important to future economic development than striving to be bigger internationally.

But the Minister of Finance has decided to make legislation in favour of the big banks, even if by so doing he has to sell out the banks of Quebec, including the National Bank, the one known as the bank of small and medium size business in Quebec.

When I think of the way certain individuals, including the Minister of Intergovernmental Affairs and member for Saint-Laurent, want to see Quebec suffer, I tell myself this is a really powerful weapon in the hands of the federal Minister of Finance, if ever the federal government decides to act.

In this case I say to my fellow Quebecers, here is another really good reason, just one more, to create our own country, so that we can make our own decisions on what we want to do with our banks.

As regards consumer protection, the Minister of Finance remains vague and expresses more wish than real policy.

Bill C-8 will establish the financial consumer agency whose purpose, according to the finance minister, will be to protect consumers.

The Bloc Quebecois is and has always been a protector of human rights and citizens as evidenced by the debate held in this House on Bill C-54 that dealt with the protection of personal information and died on the order paper in 1997 to be reintroduced as Bill C-6 and given royal assent on April 13, 2000.

I want to remind the House that Quebec already has several laws protecting consumers. For instance, there are the consumer protection act, the privacy act, as well as all the legislation on insurance companies, trust companies, savings and credit unions and securities.

This new agency will only create duplication in regulations, given all the measures that have already been taken by the Government of Quebec in this area which, need I remind the House, is under provincial and not federal jurisdiction.

The finance minister takes the credit for including in Bill C-8 a measure, the low-fee retail deposit account, as described in section 448.2, that would provide low income people greater access to financial services.

With regard to this famous low-fee retail deposit account, nobody except the minister knows exactly what it is all about. Nobody knows what are the prescribed characteristics mentioned in this clause and which would entitle an individual to a low-fee retail deposit account. Nobody except the minister of course knows whether such an account will be available everywhere, in every bank in Canada and Quebec.

How is it that, as we are talking, the minister is the only one who knows the answer to all these questions? It is very simple. The minister is the only one who knows, because all these issues will be defined in the regulations. As we are having this debate in the House, we do not have a clue about what will be in the regulations.

True enough, if the regulations had been made an appendix to the bill, it would have increased the thickness of an already voluminous piece of legislation. For the time being, all we have to go by is the minister's word.

Once bitten, twice shy, however. Members of this government have made so many promises during three election campaigns, in 1993, 1997 and 2000, without keeping their promises or being true to their word, that I must say the fine words from the Canadian Minister of Finance are not enough to be able to categorically state that consumers will be better protected under this new law.

I also question what is in the bill regarding branch closure; I wonder what will happen with the reduction in services available to consumers. The only measure provided by Bill C-8 is that a bank must give a four month notice before closing a branch.

Before, people learned about the closure the very morning their branch was to close. With the finance minister's bill, they will know about it four months ahead of time.

With this bill, the government can do precious little to prevent, through legislation or coercion, the anticipated closure of a branch. With a clause that is so unrestrictive, how can one claim, like the finance minister does, that this bill will improve access to financial services? The minister is the only one who can have this kind conviction and optimism.

Bill C-8 does not provide any concrete measure to ensure greater access to financial services for the poor. That would have been a step in the right direction. The minister should know by now that there is a real problem there. He could have made use of the bill introduced by my colleague and friend, the hon. member for Hochelaga—Maisonneuve, in the second session of the 36th parliament. The bill was entitled an act to amend the Bank Act and the Statistics Act (equity in community reinvestment). Its main goal was to ensure that certain branches of banks take measures to facilitate access to credit for persons who have a residence or a place of business in a federal electoral district in which the branches are located.

Bill C-8 does not give any guarantee that the minister will take into consideration the specificity of the financial system in Quebec. Madam Speaker, if you and I could have a conversation on the subject, I am almost convinced that you would tell me “The hon. member is well aware of the fact that the minister is himself from Quebec, and he takes Quebecers' interests to heart”. I would regretfully have to tell you that the minister is indeed the member for Lasalle—Émard, but that he ignores or purports to ignore that Quebec is a people whose financial system has its own specificities, and that the minister in no way takes that into account in Bill C-8.

I might add that we would have this conversation if you did not hold your present position. I know that you now have to be of the utmost neutrality. But if you were a backbencher, as I am, we could have had this little chat.

My colleagues, the members for St. Hyacinthe—Bagot and Drummond, who are finance critic and assistant finance critic, respectively, will propose amendments to Bill C-8 on behalf of the Bloc Quebecois to counter the inequity towards Quebec's major banks. I hope the extended Liberal caucus from Quebec will keep its promise of standing up in Ottawa for Quebecers. To this day, this caucus has given its support to the government each time it has introduced bills going against promises made during the recent campaign. Will I be forced, once more, to conclude that the population has been misled? I am waiting for proof and it is much too long coming.

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Speaker, the hon. member for Winnipeg North Centre asked me the number of bank closures in my riding in the past seven years. I can give her the number since I was elected in 1997. Twelve branches have closed in my riding alone during that period. It is an epidemic. It is an absolute flight of capital from the inner city, or at least the presence of bank branches.

The hon. member also asked what we would have liked to have seen in the legislation that might have mandated some accountability or some reinvestment in the community from the banks that have been allowed to prosper under their exclusive privileges. There were repeated calls at the committee stage throughout the development of Bill C-38 to put it in language similar to the community reinvestment act of the United States.

The United States is the ultimate free market country. Nobody is saying that the community reinvestment act somehow gets in the way of the free movement of capital. It is a sensible restriction on banks. Yes, they can make profits and yes, they can prosper and flourish, but some designated amount must be reinvested into the community that gave them the profits they enjoy.

It would not have been difficult to do this. It is a huge shortcoming in the bill and a missed opportunity for us to be advocates and champions for Canadians instead of being champions for the big banks.

I use the term corporate shill. Are we shilling for the banks with this legislation? Is that what we are really doing, or are we standing up on our hind legs and advocating on behalf of Canadians?

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Speaker, I am glad to have the opportunity to join the debate on Bill C-8. As has been pointed out by previous speakers, the bill is a reincarnation of Bill C-38 which died on the order paper last fall at second reading.

We can tell by the amount of debate in the House on this bill already today that there is great interest among all Canadians to see reform of our financial institutions and the whole financial sector. This stems from a growing feeling on the part of Canadians that our current financial institutions are failing to meet the needs of the average Canadian.

There is a growing sense that our chartered banks, which most people grew up with as symbols of stability, that they were something to be proud of and which were given charters for specific reasons, are failing to meet their mandates under the terms of which they were given their charter.

We all know that the five chartered banks have an exclusive monopoly on certain financial transactions, for instance, the right to process credit charges. These profitable transactions are huge. This is a sector that they have been given exclusive right to and the trade-off was that they would meet the needs of the average Canadian community and the average Canadian citizen for their basic financial services.

I can begin by saying that in the riding of Winnipeg Centre that has been anything but the case. In fact, there has been a flight of capital from the inner cities across the country, Winnipeg Centre being no exception. There is almost a seemingly vote of non-confidence in our communities as people watch these institutions fold up their tents, leave and not provide the basic services that they were charged with the responsibility to offer. In fact, they are doing anything but that. As was pointed out by the previous speaker, small businesses are not given a loan unless they can prove that they do not need it.

More and more of the basic financial services, such as having a neighbourhood branch within a reasonable distance for senior citizens or people of low income, are getting to be a thing of the past. These services are being taken over by ATMs or by large corporate branches that may be in the centre of the financial district, but they are not in the communities and they are not in the small towns in and around rural Manitoba.

There has been a growing resentment over this trend of bank closures. This came to light a couple of years ago when the banks were anxious to merge to form even larger institutions. Many Canadians mobilized at that time, specifically to stop the bank mergers. However, other realities came to the forefront. There has been a growing frustration with not only the lack of services in the communities. It forced Canadians to have a really serious hard look at what our major financial institutions were or were not really doing for us.

It has even mobilized people who own shares in the various banks. There is a growing shareholder movement among people who own shares in the five chartered banks. I had the privilege of going to two of the national shareholders' meetings recently. I never thought in my wildest dreams that I would be going to a shareholders' meeting of the Royal Bank or the Bank of Montreal. I do not own shares in either of those institutions, so I had to borrow some proxy votes in order to crash the gates and get in.

Our point was that at a time when the banks seem to be operating on their own and without any input from the Canadian people who cause them to be, we needed to seize the issue somehow and put a little bit of democracy back into the corporate system. In other words, if we were unable through our elected institutions to coerce the banks into doing their job of servicing Canadians, perhaps if we mobilized through a shareholders' rights movement we could coerce the banks into doing the job that they were hired to do or they were given the exclusive right of some financial transactions in exchange for.

It was rather interesting. I do not know, Madam Speaker, if you have ever been to a shareholders' meeting of one of the major chartered banks. Probably many of the people in the room have. I certainly had not. I was very surprised that as many as 1,400 people crammed the hall in a major hotel in downtown Toronto to attend the meeting. I thought it would be like other meetings of its type that I had been to, like union meetings where people would move a motion, have it seconded, debate it and the motion would either pass or fail based on its merits.

In actual fact, nobody there seemed interested in talking about very much except for the actual returns of that quarter of that actual fiscal year that was being reported on. We went there with a number of people who moved real motions that we thought would benefit the average Canadian. There were only nine resolutions put forward in the whole meeting. We moved all nine and I seconded all nine.

One of the resolutions was to limit the salary of the CEO of the bank to ten times that of the average employee, which he thought was kind of an innovative move. It was quite a fair resolution too when one thinks about it. If the average employee makes $40,000 or $50,000 a year working for the banks, the CEO would then get 10 times that or $500,000 or $600,000 a year. We would think that is pretty fair compensation.

That motion did not pass. We seconded it and argued it aggressively as to why that would be more fair. We even pointed out that the average CEO of a Japanese corporation makes 10 to 13 times that of the average worker of the enterprise over which they govern. In the case of the bank presidents of the Royal Bank and the Bank of Montreal that figure is 80, or 90 or 120 times the earnings of the average employee. Those are wildly and grossly inflated salaries to reward these bank presidents for doing what? For cutting off access to services for average Canadians. This seemed to be their reward.

Granted there were record profits involved and quarter after quarter they were making more money, but all the time they were raising service charges, closing bank branches and denying basic services like loans to small businesses. No wonder they were making a profit and rewarding each other very handsomely.

When we looked at that structure, no wonder they were voting each other big raises. They all seemed to sit on each other's boards of directors. I learned a lot when I crashed that shareholders' meeting. As a socialist and a trade unionist, attending a shareholders' meeting like that was a real education.

We learned that one of the boards of directors of the bank, I believe the Royal Bank, George Cohon, the CEO of McDonald's, sits on 50 other boards of directors. Each one of those boards meets about 10 times a year. That is 500 board meetings a year that presumably one would have to attend, but nobody can do that. The only board meeting one really has to go to is the board meeting when they vote on a raise for the board of directors. Then the other members of that board will come to that board of directors meeting and vote for a massive raise.

It becomes an incestuous little circle of people who vote each other massive pay increases. That is what motivated us to try to interfere with that whole circular process and cap it off. Whatever rate of pay one is paying one's employees, one can pay oneself 10 times that, but that is enough. Frankly, we do not believe that banks deserve to be rewarded for cutting off access of Canadians to basic banking services. That is one of the shortcomings that we pointed out.

Another motion that we moved demanded gender parity on the board of directors; 50:50, female to male. We came close on that. It is really ironic that the person that moved the motion was a famous Bloc separatist named Yves Michaud. He is the person whose motions I was seconding. The results of that vote were exactly the same result as in the last Quebec referendum, 49.6 to 50.4. There is something about that number that Yves Michaud seems to generate in people. I do not know if it is because he moved it. Perhaps I should have moved the motion myself. We thought that was a good idea. There was a great deal of interest.

One of the other motions that we moved was the very thing that I pointed out with the increasing of CEOs wages, salaries and compensation. Due to the fact that they all sit on each other's boards of directors, we also moved a motion that would limit the number of boards one could sit on to 10. If they all want to sit on each other's boards, let us make it a reasonable number. In this way we hoped to somewhat democratize the corporate structure and give the people who actually rely on the bank's services to some say on what the banks do or do not do.

In my riding of Winnipeg Centre, we have seen bank branches close in an almost epidemic way. The same is true for my colleague from the riding of Winnipeg North Centre. The banks are shutting down branches like there is no tomorrow in the hopes to increase their profits even more. The trade-off was supposed to be that we would give them the exclusive right to certain financial transactions in exchange for reliable adequate service and even some accountability to the community at large.

For instance, in the United States there is a community bank investments act which mandates that banks reinvest a certain amount of their profit into the community that they serve, even if it is not the most profitable venture, or a break even venture or marginal venture. If it is something of community interest, a non-profit group that wants to get started but is short of capital, the banks would be mandated by the community investment act to invest in at least some of these things to move the community forward for its own benefit.

Bill C-8 does one thing. It helps the credit union movement. I should say something positive about that. Many of those people are so disillusioned with the service, or lack of service, that they have been getting from the chartered banks. They have been gravitating toward the credit unions in order to get access to the financial service that every family and small business need.

One of the positive aspects of Bill C-8 is that it will finally allow a national structure for the credit unions, a credit union central, so that they would be recognized as an entity that way. We think that is a very positive step. We see it province to province. We have a Manitoba credit union central. Now there can be a national structure along those lines.

However, the shortcomings far outweigh those small benefits. Canadians are looking to the banks for support for the most basic of services and are being denied them. In a time when the banks are showing record profits, one would think that there would be some feeling that they should be able to enhance their service to Canadians instead of continually reducing them in spite of record profits quarter after quarter.

Our position is that the banks have done nothing to deserve being rewarded with the additional freedoms they would enjoy under Bill C-8. We believe Bill C-8 would, in a small way, enable the banks to achieve what they failed to achieve recently under the bank mergers. It almost institutionalizes the concept that banks will eventually merge, in that it specifically talks about that eventuality and the possibility it would be dealt with in parliament.

Instead of being dealt with on a random ad hoc basis, it more or less contemplates that mergers sooner or later will be a fait accompli. Canadians recoiled at the whole bank merger idea. The society of seniors spoke out vehemently that they were concerned that if banks were allowed to merge further and get even bigger, their interest in serving the small homeowners or small businesses would be even less.

We all know that much of the profit the banks are making now is really from their offshore and corporate customers, not from the average citizen and the small mortgages that homeowners might enjoy.

Another thing that comes to mind, and I wish we had thought of it at the shareholders' meetings of the banks, is to protest the fact that when the Minister of Finance outlined the recent round of tax cuts, the announcement that the corporate tax rate will go down from 17% to 16% slipped by without very much notice.

I have heard different figures as to what effect this will have on the chartered banks. One figure that I heard is that as much as $75 million a year will be kept by the banks as a result of that one percentage point change in the corporate tax structure.

I would ask the House of Commons and all Canadians what the chartered banks have done for us recently to deserve a reward like this, a kickback, if we will, of up to $75 million per year that they will now be able to keep above and beyond the record profits that they enjoy quarter after quarter?

One might sense that I am quite critical of our financial institutions. We were hopeful that Bill C-8 would come down hard and advocate on behalf of Canadians. We expected the Canadian government to be champions of Canadians and not, frankly, to cater to the interests of financial institutions and give them the enabling legislation they might need to go through with what they failed to do last year.

Many seniors have visited me in my riding to tell me how disappointed they were that their local bank branch was closing, and they wanted to know why. When they appeal to the banks they get a long, convoluted restructuring message on how the banks will be better able to serve their customers through e-commerce and ATMs, and that now people can bank on the Internet, switch on their home PCs and have all those banking services available to them.

That is not much consolation for a low income senior citizen on a fixed income. The seniors in my riding resent losing what they counted on as being part of their community and part of their neighbourhood. As I said in my opening remarks, it really looks like a vote of non-confidence in a neighbourhood when the local bank branch does not see fit to stick around because it does not sense enough economic activity to warrant keeping its doors open. What does a boarded up bank say about one's neighbourhood and about the viability of the town, the community or the inner city neighbourhood that one lives in?

Some people have called the attitude of the banks toward ordinary Canadians abusive and unaccountable to the community. What we had hoped to see in a bill dealing with financial institutions was a return to that accountability.

This reminds me of a parliamentary junket to Botswana that I was invited on. The outgoing president of Botswana, Masire, was one of those African leaders who really was committed to his community. It was one of those countries that was not corrupt and that worked hard in the post-war era to try to build a nation.

Masire had chartered banks in his country with the exact terms and conditions that we put on ours. That is what he said in a meeting with the minister, which we attended. However, the banks disappointed him and failed to meet their commitments in such a way that he said to hell with them. He said that he was going to invite the whole world to come and bank in Botswana because those to whom he gave that exclusive privilege had failed the country.

I am not saying we are at that point. I am not saying it is quite that drastic for us yet, but there is a growing feeling that we are giving chartered banks the exclusive right to some of the most profitable transactions. The processing of credit cards is one example. Every time a credit card is used the processing fee must be done by one of the chartered banks. If we give banks that exclusive right, we want something in return.

We do not want to see boarded up banks in our communities. We want a commitment to and reinvestment in our communities. Banks should take some of their record profits and do more than just donate to the Winnipeg Ballet or to some other arts program to improve their image. If they gave one-tenth of what they spend on TV advertising, which is a huge campaign to try to improve their image, people might feel compensated for some of what they have lost in service.

There are huge gaps in banking law. There is a real need to address the overall picture and the way Canadians view the banks, whether in terms of providing services, the insurance aspect of things, what the banks have been trying to grab, or all of their financial activities. We need to put the reins on them in some respects.

The bill, thankfully, stops short of giving them all they have asked for in terms of being a single window shopping centre for all financial transactions, whether auto insurance, life insurance or whatever. We have not gone that far.

We want to see that banks with some accountability to the community and not just to their shareholders. If they are to be motivated by profit alone and by no secondary objectives whatsoever, why are we giving them exclusive monopoly on certain transactions?

I predict there will be a growing shareholders rights movement and that more people will be buying 100 shares of one of the banks so that they can crash the shareholders meetings, hijack the meetings and get some of the amendments we put forward through.

If Canadians were polled, they would be horrified that some people make $8 million a year to run one of the chartered banks. The basic salary might only be $1.5 million a year, but when stock options and shares are added up, they are making $8 million to $10 million a year for not really doing their job. Why reward people for failing to do the job they were asked to do?

[Gurmant Grewal, Canadian Alliance, Surrey Central, BC]

Madam Speaker, congratulations on your new appointment as Assistant Deputy Chairman of Committees of the Whole. I will be sharing my time with the hon. member for Richmond who is about to make his maiden speech.

I rise on behalf of the people of Surrey Central to participate in the debate on Bill C-8, an act to establish the financial consumer agency of Canada and to amend certain acts in relation to financial institutions.

I am proud to do this because the financial services sector is the largest sector in the British Columbia economy. Our largest banks employ about 26,000 people in British Columbia. Banks in Canada employ about a quarter million people directly and contribute approximately $80 million a year to charities in Canada and about $4.5 billion annually in taxes to our provincial and federal governments.

Despite the contributions that the banks and other financial institutions make, they are a sound foundation as the backbone of our economy. Our banks, trust companies, credit unions, mutual funds, insurance companies and others are very important to our economy.

The bill proposes to address the calls to modernize Canada's financial services industry. Canadian consumers of financial services have demanded a more competitive environment while our banks have been seeking approval to merge and to have more flexibility in the way they structure their operations.

The bill is an attempt to catch up to other countries that have made changes long ago to their financial services industry. The Liberal government has been dragging its feet on this matter for about seven years. This is too bad because our financial institutions must have the ability to make long term plans for the future. Once it is passed into law, we hope the bill will give our banks the opportunity they need to perform long term planning. I doubt that will happen because of the five year sunset clause in the bill.

My colleague from Prince George—Bulkley Valley has a great deal of experience and has been of great assistance to the official opposition working on our financial services policy group. The official opposition wrote a banking report in November 1998 entitled “Competition: Choice You Can Bank On”. The report forms the backbone of our financial services policy. It is a very good and detailed report.

The bill addresses some of the changes we on this side of the House have been pressing the government to enact. The official opposition has been carrying the flashlight to show the Liberals their darkness. After ridiculing our policies they have been stealing them from time to time. We encourage them to steal more of our policies, but unfortunately they do not get them right.

I understand that my colleague on the Canadian Alliance financial services policy group will be pursuing the government with amendments to the bill at committee stage. We hope the government will show some respect for what we propose.

We recognize that a strong financial services industry is essential to Canada's economic well-being. This means we need strong banks, insurance companies and other financial institutions. We need to create an environment for our financial institutions to flourish domestically and have the ability to take advantage of opportunities in the global economy.

Canada has one of the safest financial services systems in the world. We urge the government to ensure that these consumer benefits continue and not be changed or lost.

Outside the House critics of the bill are saying that in the past five years there have been many changes to the world financial system. The bill has been left behind. The bill used to be Bill C-38 which died on the order paper. It does not go far enough to bring our banks up to date with what is going on in the world.

International changes since 1996 are not reflected in the bill that is largely the same as what the Liberals introduced in 1996 but allowed to die on the order paper. They have been trying to pass the bill for far too long. It is out of date in many ways.

There are some who say that the bill is too little too late for our banks and that it will not help to strengthen the performance and competitiveness of our banks at home and abroad. They have already lost ground and they will not be able to make up those lost yards.

Other countries are well ahead of Canada. The United States has allowed its banks to merge with insurance companies. The Liberals insist on leaving it to their finance minister to decide what mergers can go ahead and which cannot.

By lowering the amount of money required to open a bank, we hope that the legislation will allow more banks to be set up in rural areas of Canada. The smaller the capital the more encouragement for institutions to jump into it..

The bill should enhance consumer choice by allowing insurance companies and mutual fund firms to use bank cheque clearing systems. If the banks take over the auto leasing and insurance industries they may hurt our economy since a significant amount of jobs are created by small businesses like car dealerships and independent insurance companies. The further entry of banks into the insurance and auto leasing markets should only be allowed if major auto financing and insurance companies have access to the Canadian Payments Association which they have been requesting. Banks must not have a competitive advantage over auto leasing and insurance companies. There must be a level playing field for all competitors within a given market.

The Canadian Alliance supports the creation of a holding company structure where banks will be able to remove some of their non-banking operations, such as credit card businesses from bank regulations, by establishing separately regulated holding companies. This new structure would allow our banks to compete more effectively against foreign non-bank competitors.

We support increased access to the payments system so that life insurance companies, money market mutual funds and securities dealers will be allowed access to increases in consumer choice.

We support expanding the role of credit unions. I can say that because for about three years, before becoming a member of parliament, I was a director of the second largest credit union in Canada. I saw the environment from the inside. I know that the credit unions are not getting the same support as the financial institutions. They are not only consumer and community oriented, but they also have a good network of branches that help people at the community level.

We are disappointed that this measure is not included in Bill C-8 despite the recommendation in the MacKay report to allow for it. We believe that the government has failed consumers since this measure was seen to be a key point in increasing competition and benefiting consumers of retail banking, that is by the credit unions.

We are concerned about the measures in the bill that would regulate access to financial services. We are concerned about regulating branch closures. This kind of initiative by the Liberals is unnecessary red tape. The banking industry already considers it good business practice to properly justify any bank closures and to give fair warning to the communities or their customers.

The bill also proposes a financial consumer agency responsible to the finance minister. These bureaucratic positions would be filled with Liberal appointments, like Mr. Lou Sekora, just as many other failed Liberal candidates have been given patronage plum jobs by the Liberals. We would support an independent ombudsman selected by the House with penalty enforcement powers and the ability to make binding directives when necessary.

In conclusion, we hope the Liberals will pay considerable attention and take our amendments seriously. We hope they will listen to the witnesses who will be appearing before the committee. We will support the bill with amendments, particularly in the areas of credit unions establishing co-operatively held banks; the tremendous power given to the Minister of Finance; the bureaucracy created by the new commissioner of the FCAC; and the regulation that demands banks to provide money losing personal accounts.

[Pauline Picard, Bloc, Drummond, QC]

Madam Speaker, as this is my first speech in this new parliament, I want to congratulate you on your appointment to the Chair. I also wish you the best of luck.

I would like to take this opportunity to thank all my constituents and assure them that I will always be available and proud to represent them in parliament.

On February 7, the Minister of Finance reintroduced his bill to reform the financial services industry in Canada. Last spring's Bill C-38, which died on the order paper when the fall election was called, therefore became Bill C-8. Today, we are resuming second reading of the bill where we left it off. This new legislation, which will henceforth govern the financial services industry, will probably be passed in June at the latest.

Bill C-8 introduces a number of new provisions, including one on bank ownership. First, under the proposed legislation, a single shareholder will be able to own up to 20% of voting shares in one of the five major Canadian banks. The ceiling is now 10%.

Second, single shareholders will be able to control smaller banks with assets between $1 billion and $5 billion, such as the National Bank and the Laurentian Bank in Quebec.

Third, businesses and individuals will also be able to create their own banking institution.

Fourth, the new bill leaves the door open for major banks to resort to mergers, something they have been doing for a very long time. But the bill provides for public hearings at which the institutions concerned would be required to defend the merits of transactions for the common good.

I am pleased to speak to Bill C-8, an important bill introduced in this new parliament. However, although I am in agreement with the spirit of Bill C-8, I am surprised to see that the changes we have been told about do not appear in the body of the supposedly amended bill. These changes consist of guidelines. This is where we have a problem.

Everyone is aware of the Bloc Quebecois' interest in amending the legislation governing financial institutions. We contributed to the debate by submitting a brief, because we believe in the need for a legislative environment which helps to increase the capacity of our financial institutions to deal with global competition.

Foreign incursions into Canadian financial services markets are already an undeniable reality. In recent years, a number of foreign banks have established a presence in certain areas, such as electronic banking, credit cards, bank investment services and discount trading. In this era of globalization, they are competing with Canadian banks on their own turf.

As I have said, the Bloc Quebecois wholly subscribes to the spirit of the new legislation and to a number of its provisions. That said, certain problems we found during the last legislature are still present in the new bill. Even if we note a considerable change as far as the demands of the Bloc Quebecois and Mr. Landry are concerned, the four points are not incorporated into the bill but into the guidelines on the reclassification of former schedule 1 banks with assets of under $5 billion.

I would like to tell the hon. members what the applicable criteria are. These are: the safety and solidarity of the bank, direct or indirect employment, location of the bank's decision-making and administrative centre, consumer requirements, the bank's business and activities, and the bank's future prospects in a global context. These are the elements set out in the guidelines, but not in the bill itself, which concerns us somewhat.

Examination of the bill in its entirety also shows the frequency of loopholes such as “the minister may, if he sees fit” or “provisions of the act cease to apply if the minister should so decide”.

There is too much room for discretionary powers for a single man, namely the Minister of Finance. Wherever there are provisions on banks, insurance companies, trust companies, and the financial sector as a whole, the minister reserves the right to alone decide, from criteria known to him alone, whether an operation is unacceptable or not. He defines certain concepts, such as low-cost deposit accounts. It is unacceptable that this discretionary power has such sway, more even than the law itself.

In general terms, we would have preferred greater clarity in the decision making process and greater detail on certain concepts, such as low-cost deposits for the disadvantaged.

As regards consumer protection, the Minister of Finance remains vague and expresses more wish than real policy. The bill contains a number of provisions intended to protect and empower consumers of financial services. However, most of the groups heard in committee feel that these provisions are vague and will complicate the agency protection mechanisms.

Among others, there are provisions that intersect or overlap provisions of Quebec's consumer protection legislation. We oppose this. Consumer protection is exclusively a provincial matter.

However, protection specific to the banks can be a federal matter. But when we talk about consumer protection or the protection of personal information, this is a provincial matter, exclusively.

This bill talks of new intrusion by the federal government in areas of Quebec's jurisdiction. The Government of Quebec is, however, well covered by an array of laws. They include the consumer protection act, the personal information protection act, the insurance act, the trust companies act, the Quebec savings companies act and the credit and securities act.

All of these acts contain elements of consumer protection. How then will consumers know which legislation applies? Will the Quebec consumer protection act apply in a specific case? Quebecers might wonder when they look at the federal legislation and the laws we have in Quebec. How is one expected to know which act shall prevail? Will it be the Quebec consumer protection act or the new federal legislation? It is really not clear. Let us not forget that legislation respecting consumer protection is provincial legislation.

Consumer protection also concerns another group, namely the poor. The bill provides a definition of “low-fee retail deposit account”. Can anyone tell me what is meant by a “low-fee retail deposit account”?

According to the Minister of Finance, these so-called low-fee retail deposit accounts will ensure accessibility to financial services for low income people. Even though I got a Bachelor of Arts degree, I still cannot figure this one out.

No one knows who will be entitled to such an account, except the minister. No one knows if that account will be accessible everywhere, except the minister. Why? Because all these issues will be covered by regulations. One must really have confidence, or else ignore what is going on. We cannot understand, because the bill does not provide explanations.

The government is saying “Trust us. This will be covered in the regulations”.

This is all we have to go on for now, but it is not an assurance that consumers will be better protected under the new legislation.

When a branch closes and there is a reduction in services available to consumers, all the bill requires the bank to do is give six months' notice. Whether the bank is being closed in one, two, three or four months, it is still being closed. What good is this provision?

How can the minister say that such a weak provision ensures increased accessibility to financial services? The Minister of Finance is the only one who thinks so.

Let us imagine the case where a bank in a given region decides to close its doors because it is not doing enough business. We say that there is nothing in the bill guaranteeing the community that the bank must provide services. The bill says that the bank must give six months' notice before closing.

Is this good enough for the community served by this bank, when it was the community's savings that improved the bank's bottom line? One day, if business is down, the owners say: “We will restructure it, move it to a larger centre. You folks can find somewhere else to bank. We gave you the required notice and now we are closing”. This is unacceptable and it is not looking out for consumers.

When it comes to the real social and community role of banks, we would have liked the Minister of Finance to have paid attention to the proposals submitted by the Bloc Quebecois member for Hochelaga—Maisonneuve concerning reinvestment by banks in the community. I know that my colleague will be speaking to Bill C-8. We will have an opportunity to hear him.

In addition to the problems for consumers, there is a major problem in this bill with respect to ownership of major banks and financial institutions in Canada.

At this point, I should mention the bill's flexibility in allowing financial institutions to pursue their activities, and to deal with competition and globalization.

However there is a difference between the flexibility found in some aspects of the bill and the fact that some of our financial and banking institutions could be literally turned over to one investor who could gain total or near total control over these institutions or their management.

What we do not understand, and there lies the rub, is that in the case of the largest bank in Canada, the Royal Bank, one individual could own 20% of the shares? It used to be 10%. Now the percentage has climbed to 20%.

The reason given by the minister for not allowing more than 20% is that, in his view, it could be dangerous if one shareholder owned more than 20% because he could take control. One individual could take control of a major bank, a foreign investor could take control of the Royal Bank.

But in the case of the largest bank in Quebec, the National Bank, which is a medium size bank, one individual could own 65% of voting shares.

Why such a difference? Why such discrimination?

Why should it be more dangerous in this case? The minister says it cannot be raised to 30%, 40% or 50% for the largest bank, the Royal Bank, because it could be dangerous.

But in Quebec, the National Bank, which holds the business assets of Quebecers, could be bought by one individual who could own up to 65% of shares. In this case, it is no longer dangerous?

Why allow one individual so much control over the savings of Quebecers? This does not make any sense.

In some of the clauses I have read, they say it is not serious, that the National Bank has got to about $4 billion and will be governed by the rules for the major banks, where a shareholder could not hold more than 20% of voting shares.

Before this could happen, the Minister of Finance reserves the right to examine the entire situation and it could take up to three years before the bank could be allowed to come under the 20% rule.

During those three years, what is there to stop a foreigner from coming here and making use of the 65% rule to acquire all the power and then transferring the head office and all specialized jobs? The bank would be subject to foreign interests or a foreign business.

Why is this dangerous in one instance and not dangerous for the National Bank? We still wonder, why take the risk? Why two different measures, one for the big banks and one for the medium size ones? In this case, the risks are the same.

We have other criteria to add to this bill, and will do so via amendments.

Reference has been made to the guidelines. These are not part of the bill, but rather an aside, and the Minister of Finance reserves the right to apply them or not, as he sees fit. It is not reassuring to us that they are not an integral part of the bill.

The Minister of Finance of Quebec had sent a letter to the Minister of Finance of Canada calling for him to take these provisions into account, in order to reassure the consumers of Quebec and the people with savings. In his letter he wrote:

To ensure that a merger of the major banks is in the public interest, there is provision that such a merger will subject to a process of examination and that approval for the amalgamation will be subject to certain predetermined criteria. If this approach is necessary in the case of a bank merger, a similar approach is all the more justifiable when an individual is allowed to hold more than 20% of the voting shares of a low or moderately capitalized banks.

Public interest should be defined, in the present instance, according to the following criteria:

—The effect of the change on the activities of the banks, including available services.

—The effect of the change on employment at head office and in the branches and including professional jobs or those requiring particular expertise.

—The effect of the change on the regional economy and on the region's technological development.

These are the criteria we want to see and this is why we will be making amendments. I hope the government will support them.

[Ken Epp, Canadian Alliance, Elk Island, AB]

Mr. Speaker, I am delighted to be able to enter into the debate on Bill C-8, which will establish a new organization of government, the financial consumer agency of Canada. It also involves the amendments of a number of acts.

I am aware that we cannot use props so I cannot show the people of Canada the size of the bill without actually reading from it. I will just open it at random here and read one of its sections:

That subsection (6) does not apply in respect of a particular transaction if the bank is acquiring control of an entity whose business includes an activity referred to in paragraph 2(b), other than a specialized financing entity.

That is only one of three parts of section 390(7) on page 480 of the massive bill. We obviously see that the task of the opposition in bringing a critique to the bill is mammoth indeed. For us to go through and decipher the meaning of even one paragraph almost stretches the brain to capacity.

I will not be able to go through it entirely. Nor is that the purpose. However I want to go on record by saying that I agree with the bill in principle. We should send it to the finance committee forthwith, so that we can do some detailed study, along with our researchers, and listen to the witnesses that come before it.

I had the privilege of being on the finance committee in the previous parliament. We spent quite a bit of time on what was then Bill C-38, which was essentially the same bill. We heard from many different interest groups. Some were very much in favour of the particular legislation going forward. Others came to us with very specific concerns.

In fast summary I could mention three of the groups had great concerns. Those who ran automobile dealerships and automobile leasing companies were very concerned that we should not, in amending the way banks operate, give them the ability to become involved directly in automobile leasing. I have not read every word in the 900 page document, but as far as I know that prohibition is still maintained and we will not have the problem of having banks in automobile leasing.

The second group was the insurance people. They do not want banks to sell over the counter insurance because it would be deemed very unfair in the competitive field. I am not saying I agree with it but that was their argument. They made us a very strong presentation. I believe it is upheld in the legislation as well.

The third group that was very significant in its impact statements to the committee represented the down and outers in society, the people who do not have large financial holdings and in many cases no holdings at all.

They require basic banking services. They were concerned with monopolization and the concentration of the finance industry in fewer and fewer holding companies that they would be even more disadvantaged. They gave presentations to the committee. I believe the bill addresses their concerns to some degree. I have some philosophical questions about the way it does, but it is an interesting concept.

I will talk very briefly about different parts of the bill, the financial consumer agency of Canada act. It is appropriate to commend the Secretary of State for International Financial Institutions for the openness that is apparent on that side of the House in listening to the debates and incorporating into the legislation the various concerns we as a party and Canadians are bringing to the debate.

I also commend the member for Prince George—Bulkley Valley, one of our members in the Canadian Alliance, who has worked very hard in bringing forward ideas, concepts and principles that should be incorporated in the way our financial institutions are run. He has done commendable work. It is interesting that many of the things that he first came up with in his report are incorporated in the legislation.

To all the people out there listening in radio land I say that the work of a good, effective opposition is useful in parliament. We think we could do better if we were on the government side, but we on the opposition side are influencing the government. We should debate each other in a respectful manner, not the way we were forced to debate in the last election campaign. We should debate issues forthrightly and talk about the different options. Then debate is useful. An effective opposition is very important.

I also emphasize that we need a very strong financial sector. Sometimes the in thing to do is to bash banks. Many of us receive complaints from our ridings about the way people are treated in banks. We have to respond to them. Usually we try to get them in contact with the right people so their problems can be solved. Many of the complaints we hear about banks are specific.

Having strong banking and financial sectors is absolutely critical. We ought not to get into a malaise of complaining about them all the time, although it is appropriate through legislation and other presentations for us to put forward the wishes of our constituents and the fact that they deserve good service from banks.

Consequently I appeal to the banks to make sure they run their businesses properly. They should do this so that legislators do not have to come up with too many 900 page documents to regulate and control how they do their business. My first choice would be for them to make their decisions in an honourable fashion so that the public does not have reason for complaints or to come to us as legislators with a cry to bring in regulations and laws to control and restrict the behaviour of banks.

In a very real way banks have to exercise a serious social conscience. They have to make sure that they are treating their customers fairly. They have to make sure that all depositors and all people who have invested in banks are giving their money in trust to organizations that are credible and solid. The last thing we want is a financial organization that is tenuous and cannot be depended upon. It is very important for the banks to do this work. It is also very important for the government to bring in regulations and a framework for financial institutions which permit that to happen.

I will comment on some specifics with respect to the Bank Act. There is a change in the way banks are governed. One important point is that the ownership of banks is now more flexible.

[Gary Lunn, Canadian Alliance, Saanich—Gulf Islands, BC]

Mr. Speaker, I am pleased to stand on behalf of all people of Saanich—Gulf Islands to speak to the bill. We saw it in the last parliament as Bill C-38; it is now Bill C-8. It died on the order paper when the election was called.

We owe a huge thanks to the member for Prince George—Bulkley Valley who just spoke. He wrote a very detailed, in depth report titled “Competion: Choice You Can Bank On” back in November 1998. I had been elected for just over a year at that time and remember receiving a copy of the report. It was very detailed and very long.

He went into every possible detail of financial institutions and banking and how we could improve it for consumers and give them more choices. There was broad consultation with the industry. I was impressed by how much work went into the report and by how much knowledge he had on the subject.

A few years later we in the opposition see exactly what work we have done. Actually the government adopted a lot of it and of course never gave any credit for it.

I applaud the member for Prince George—Bulkley Valley. He has done a phenomenal amount of work in the financial services sector over the last few years. He can be proud when he sees the government actually adopting a number of his measures.

Let us talk about what the bill will do. As we have seen in the last few years, a number of major banks wanted to merge. They put forward proposals to do so which were all quashed by the government.

I am pleased to see that the government has finally come out with a formal merger process so that at least financial institutions know where they stand. They literally invested millions and millions of dollars to go through the process, only to be stopped in the end. Some would argue it may have been for political reasons, that the Minister of Finance was annoyed because he did not get advance notice. That is not the right reason to stop mergers.

Our interest has to be consumers, to ensure that their savings and investments will be secure in these institutions. We should also allow the institutions to compete more in the global economy and offer more choices for consumers. I am pleased to say, as my colleague has stated, we believe that will happen.

There are a couple of very positive aspects to the bill. We are pleased to see that the government left out the auto leasing and insurance sectors at this time. I agree with my colleague. I do not think it is appropriate to bring them in at this point in time. There was a lot of lobbying by financial institutions that wanted to get into the market. They recognized that they had huge lists of people to whom they could market and offer package services, from auto leasing to insurance to banking services.

The insurance and auto leasing sectors right now do a very good job and are very competitive. As the hon. member pointed out, it is inevitable that there will be changes in the years to come. We should prepare for them, but it is the right decision at this point in time not to go down that road.

I do have some concerns with the creation of a financial consumer agency of Canada. The agency will report directly to the Minister of Finance. We have seen over the last few weeks what happens when the government makes appointments based on politics, appointments which report to a minister as opposed to parliament where there is complete openness and transparency.

Even when in opposition the Liberals recognized that the ethics counsellor should report directly to parliament. In their very first campaign book in 1993, the Liberals stated that the ethics counsellor should report directly to parliament so that there is openness, transparency and a level of trust for the Canadian people. There have been decisions in recent months that have raised many concerns, yet members of parliament have no access to the reports.

The same concern is raised here with the financial consumer agency. It would report directly to the Minister of Finance, the same minister who I believe will be responsible for appointments to these agencies or boards, which may become a political dumping ground for defeated candidates or large donors to the government.

Some would say that is a bit biased, but the facts speak for themselves. We have seen that so much in the past. It does not end.

Let me read a recent press release. This is enough to make anybody throw up. On Friday, February 8, it stated: “The Minister of Citizenship and Immigration today announced the appointment of Lou Sekora of Coquitlam, B.C. as a part time citizenship judge”.

We all know that Mr. Sekora was defeated in the riding of Port Moody—Coquitlam—Port Coquitlam in the last election. When I phoned a few of my colleagues on the other side, Liberal members of parliament who are good friends, to tell them about the appointment, they started to laugh. They thought it was absolutely hilarious. It was pure, blatant partisanship.

Again, our concern is when there is not openness and transparency. I have a lot of respect for the Minister of Finance but when this type of legislation is introduced it lends itself to abuse. We tend to question whether appointments are based on politics or on the real needs of Canadians. That can happen down the road. I believe the finance committee should be given the opportunity to scrutinize and re-look at these appointments.

Those are some concerns we have in the official opposition. Again, I only speak from the record. We also see the massive problems with the ethics counsellor. We will be voting on that tomorrow night on the Canadian Alliance opposition supply day motion, where members of the government will have an opportunity to correct the very same wrong they have put into this legislation. They will have the opportunity to vote on a motion to have the ethics counsellor actually report to parliament and not to the Prime Minister.

I am sure my colleague from Prince George—Bulkley Valley, who is quarterbacking the legislation for the Canadian Alliance, will submit proposals to the bill when it goes to committee. However, there are a lot of positives in the bill that we are pleased with. It will give consumers more options and the financial institutions the environment where they will be able to compete globally, and we are going to a global economy. Those are some areas with which we are quite pleased.

The government member who first spoke on the bill talked about how it would help people on social assistance. It is an incredible stretch to suggest that lower service fees on bank accounts will help people on social assistance. It borderlines on preposterous to even suggest that.

The former premier of British Columbia, Mr. Glen Clark, came up with an idea somewhat similar to that by opening a credit union in one of the poorer neighbourhoods. He thought it would help those people. If the government really wants to help the people who are struggling to find jobs and get back on their feet, it should adopt some of the tax cut proposals put forward by the member for Medicine Hat over the last three years when he was the finance critic. We were pleased to see that the government, almost wholeheartedly, adopted a lot of the proposals contained in the member's 1998 report entitled “Competition: Choice You Can Bank On”, but we would have liked some things to have gone further.

If the government really wants to help people on social assistance who are struggling, who do need tax cuts and who do need a stronger economy where the business community can thrive, it would create economic opportunities for meaningful, long-lasting jobs. That would really help them. We will continue to push these ideas forward.

Under the new U.S. administration of President Bush, our neighbours to the south have embarked on a massive tax cut in the neighbourhood of $1.6 trillion. It believes that the economy is beginning to slow down in the United States. I agree with President Bush that those tax cuts will likely create more government revenues and create more meaningful and lasting jobs. It is the private sector that invests money into the businesses which creates opportunities for employment.

I do not believe the government can create lasting jobs. It can create short term jobs and do all types of funding, but at the end of the day it does not really create any kind of security for people.

I am pleased to speak to the bill and look forward to it going to committee. I am absolutely confident that we will be putting forward some amendments that will strengthen the bill. This is a time for all of us to support the bill, send it off to committee where the experts from the industry can scrutinize it and give us their input and then put forward some positive solutions to the bill.

[Dick Harris, Canadian Alliance, Prince George—Bulkley Valley, BC]

Mr. Speaker, Bill C-8 is a bill to establish the financial consumer agency of Canada and to amend certain acts in relation to financial institutions. While we in the Canadian Alliance are very supportive of the bill in most respects, we maintain that the government has been very slow in modernizing the regulations in the acts that govern banking and financial institutions.

The government has been in power since 1993. This is the first major piece of banking legislation, or legislation covering the other types of institutions outlined in the bill, that the government has brought in. As a result of it being so slow to react to global conditions, the global economy and what has been happening in industry in other countries around the world, we have seen ourselves, our banks, our institutions, our securities companies and our life insurance companies being left considerably behind other countries that have been more forward thinking in modernizing the financial institutions in their country.

Canada should have played a more leading role in setting an example for other countries to follow. As parliamentarians know, we have one of the safest and finest banking financial services industry in the world. We have been for the most part very prudent in setting regulations and ensuring that Canadians had a good financial services system to serve them. At the same time, until 1993 we were quite forward thinking in providing the tools for our domestic banks to compete in global opportunities.

We had all the reasons to set Canada up as a standard throughout the world for other countries to follow. Unfortunately the Liberal government did not take that initiative. It has played the role of a follower rather than a leader. For all the talk about how much good the government has done and how much attention it has paid to this sector of our economy, it has not been the leader that it should have been.

That being said, I may now have some nice things to say about Bill C-8. It calls to modernize Canada's financial services industry. Canadian consumers have been demanding a more competitive financial services sector and more choices as to where they do their financial business. In addition, the players in the industry, the banks, the insurance companies and securities companies have been requesting more flexibility to catch up with their competitors in the global economy so that they can take part in opportunities.

By catching up, I refer to having the provisions to make acquisitions within Canada and having in place a formal merger approval process. If they decided that it would be in their best interests and the best interests of their customers to merge with another domestic bank, they would have a formal process to follow. They would not have to leave anything to chance nor would they have their proposals subject to interpretation by a number of different parties that have an interest in this merger.

Under the legislation there will be a formal process. One would assume that if this is a process that has some sound reasoning behind it, two banks will be able to sit down and say that this is the criteria they have to meet, these are the steps they have to take and if they do, they can expect, according to the legislation, approval of the merger. That allows them to do some long term planning.

In this business, as a bank or an insurance company, one has to be able to have that opportunity to look far beyond tomorrow, certainly in order to set one's business plans in place. We have some criticism with the five year sunset clause.

Even though the legislation took about seven years, and now the government has promised to review it in five years, I believe the financial services industry, while welcoming the five year renewal in relation to what we have gone through, would like to have the opportunity to see far beyond that. They would like to see 10, 15, 20 years down the road. The government perhaps could have put the sunset clause together a little differently or else left it out altogether. It could have simply had an ongoing review process where amendments to the act could easily be made rather than having a sunset review.

There are many aspects to the bill of almost 900 pages. While we have some areas of concern, I did state that it addresses many of the things the Canadian Alliance finance group, of which I am the critic when it comes to banks and financial institutions, has been pressing the government for a number of years to get with the program in relation to making some changes.

I think back to 1994 when I believe the first white paper was brought in by a former secretary of state who had many years in the banking industry. Nothing was done. I think back to a couple of years later when there was another study done. Again, nothing was done. Then we had the MacKay task force report which was about two years ago. Finally, we had the legislation ready to go and then the Prime Minister in his wisdom, wisdom and Liberals seems to be an oxymoron at times, called an early election. Bill C-38 died at that time.

While the secretary of state was delivering his address in closing, he thanked a number of people. I would like to point out to him that he forgot to thank the member for Prince George—Bulkley Valley. When I read over the legislation, I was quite flattered because I and our party were way ahead the government in the legislation.

In November 1998 I delivered a report to our caucus, and to anyone in the industry who cared to read it. It was called “Competition: Choice You Can Bank On”. It covered a whole myriad of things in the financial services sector. It was accepted by our party and was applauded by practically everyone in the financial services sector as a forward thinking plan for the future of financial services in Canada.

I am really flattered when I read the bill because our party and I used my 1998 report as a benchmark to scrutinize Bill C-38, now C-8. There is an astonishingly close similarity between what is in the legislation and what is in my November 1998 report. I am sure the secretary of state simply forgot to thank me. I know he read and reread my 1998 report in order to get a good grasp on what was needed to be put in here.

I want to talk about some of the points we support such as the legislation that allows a bank to develop into a holding structure. It is going to give banks far more flexibility to compete, particularly with foreign banks that are coming here, not necessarily establishing bricks and mortars but a credit card company, or banking by phone or lending by phone. This will greatly enhance our domestic banks to compete with foreign banks. Certainly we want foreign banks to establish their branches in Canada. It goes back to giving consumers choices. We support the new provision to allow the banks to restructure under a holding company.

We talked about increased access to the payment system which will allow life insurance companies and security companies to basically operate like banks as far as deposits and cash clearing. This will end the monopoly over the payment system that the banks have had and will increase the choices once again.

We talked about the ability for credit unions to expand into a national bank structure owned by one member one vote. We noticed that was not in the legislation, but we know that perhaps this will be dealt with in a separate piece of legislation. We are going to ask the secretary of state to put it on record. We support that principle.

The provision to allow banks to set up under a smaller capitalization is going to increase choice once again. Those parties will be able to set up smaller regional banks with an initial $5 million capitalization. I hope that investors who want to get into the banking business will take advantage of this provision. Again, we have increased choice for consumers.

I talked about the formal review process for mergers and we support that. We are quite pleased about the absence of the banks' ability to retail insurance and auto leasing through their branches. That has been left out of the bill and the prohibition still remains. There is no doubt that some day, sooner or later, the banks will be in the auto leasing and in the insurance business. I do not know if that is going to be such a bad thing. However, because that provision is not in the bill, it gives the auto leasing business and the insurance business, which is a very competitive and vibrant business in Canada, a chance now to begin to lay plans for the most assured entry of the banks into those businesses. It gives them some time.

I have talked to representatives from the industry and have said that the banks will not be out forever, but here is some breathing room. I told them not to miss the opportunity to start laying some plans for the impact of the banks coming into their business. I hope they are making plans to mitigate the impact of banks coming into that business.

When it comes to the financial consumer agency of Canada, our party has some concerns in as much as the agency will report to parliament through the Minister of Finance. We are quite concerned with the fact that within the bill there are tremendous powers given to the Minister of Finance. We believe those powers should be given to parliament, and by extension, the finance committee as opposed to the Minister of Finance.

I will talk about the financial consumers agency as an example. While the bill calls for that agency to report to parliament through the Minister of Finance, we would prefer that the agency report directly to the House. By extension, this would allow a review process to be done by an all party finance committee.

I think that would serve Canadians better in terms of openness and a non-partisan look at what the financial consumer agency has to say.

We hope we will be able to deal with this in committee. I know the government is anxious to make improvements to the legislation, perhaps through amendments in committee, and I am sure it will welcome that amendment with open arms and will get on with it.

I want to talk about the financial services ombudsman and, again, the financial consumer agency. I just hope and pray that this will not be another means for the Liberal government to give jobs to its friends, something we have seen so many times.

I expect a number of defeated Liberals may appear on these boards. I hope the government will be able to surprise us and that we will see some people who have never expressed any type of strong Liberal leanings, as impossible as that may sound, when it comes to government appointments. We will look forward to that. I see the hon. member nodding his head again so I know he likes the idea.

We will support the bill, of course, but we will raise our concerns through amendments. I want to straighten out the secretary of state. He seems to have the idea that regulating low cost bank accounts of $2, $3 and $4 a month will somehow get Canadians off welfare. I fail to see the direct correlation between having a bank account and getting off welfare.

There are a number of reasons why people are on welfare. First, people, through circumstances that are no fault of their own, are unable to work. We have a responsibility to look after such people through the social welfare system.

Second, there are those people who simply do not want to work and just love welfare Wednesday, and they will never work whether they have a low cost bank account or not.

There are other people on social assistance who would dearly love to work but unfortunately, in a number of the provinces and throughout the country, there simply are no jobs. This situation exists because while we have been able to generate quite a bit of revenue from our export economy, our domestic economy still needs a lot of help.

That means that the federal government, working in co-operation with provincial governments, could do far better in providing an environment that would ensure a buoyant economy right across the country, and not just in pockets where there are conservative governments such as in Ontario and Alberta, which have booming economies despite the deterrents presented by the Liberal government.

We would prefer that the government, instead of counting on low cost bank accounts to get people off welfare, took a serious look at how it has been curtailing economic growth and how this has not helped investors and businesses create new jobs for people on welfare.

I know my colleague from Saanich—Gulf Islands has a lot of good things to say about the bill, both from a supportive point of view and a critical point of view.

I look forward to committee, as I know do members of the government, the secretary of state, his parliamentary secretary and everyone connected with the bill on the finance committee. They are very anxious to see the amendments we put forward. They will appreciate the wisdom of them and be very supportive.

[Jim Peterson, Liberal, for the Minister of Finance]

moved that Bill C-8, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions. be read the second time and referred to a committee.

Mr. Speaker, as everyone knows, Bill C-8 is a major bill, over 900 pages in length. It is, I believe, the biggest ever placed before the House. It is the outcome of a great deal of work and consultation in all sectors, including consumers and the members of the House of Commons. In fact, the latter had already seen this bill during the last parliament. At that time it was called Bill C-38.

With it, we aim to reform the strategic framework of the Canadian financial services sector, which comprises Canadian and foreign banks, trust companies, insurance companies, co-operative credit associations and other financial institutions. We have proposed a few minor changes to Bill C-38.

In essence this is the very same bill but with technical, grammatical and editorial improvements, as well as some clarifications where stakeholders identified points of confusion about the intent or application of the policies.

For example, the Canadian Bankers Association pointed out that under Bill C-38 it was unclear whether new financial sector holding companies could hold portfolio investments. The fact is that this is allowed and is now clearly stated. I thank the Canadian Bankers Association for its incredibly valuable input in the new bill, as well as that of all other industry and consumer driven stakeholder associations.

There can be no doubt that Canada's financial services sector is critical to us. It is critical as an industry, one of the truly great industries of the country, employing over 500,000 Canadians directly. It is highly export oriented, with more than 50% of the revenue from the insurers and the banks coming in from abroad. Most of the global taxes are paid in Canada, over 80%, and close to 90% of their global employees are in Canada. If we set out to devise through an industrial policy an industry that would be ideal for Canada, we could probably find none better than our financial services sector.

It is also important to us for the role it plays in our society and in our economy. After all, without financial intermediation, the capacity to deposit and withdraw funds, and to send funds around the world, where would we as individuals and our businesses be?

When we go abroad we find in many parts of the world that Canadian financial institutions are predominant in those foreign markets, giving a role of leadership not only to foreigners but also Canadians who want to do business in particular foreign jurisdictions. We have an important responsibility, therefore, to maintain the health and the vigour of this great industry.

Because they operate within a legislative framework determined by parliament it is essential that we have ongoing reviews of financial services legislation. This is probably the most extensive review that has ever been undertaken.

As a result of an extensive consultation going back to the MacKay task force which reported to parliament, the finance committee of the House and the Senate banking committee held extensive public hearings and reported back to us.

The minister then tabled before the House a white paper in June 1999, which again allowed for extensive consultation and input from all stakeholders. The bill was finally tabled last June as Bill C-38 and but for the election I am sure would have been law today. We are back to do the job, which is the culmination of all this great input.

There are four major themes in the bill. The first is encouraging the flexibility of our financial services both domestically and globally. To do so we have put in place a number of options and facilitating devices.

The first and probably most important is the holding company option. This means that our institutions will be able to compete in Canada with the foreign monolines such as credit card and lending companies that are coming here in an unregulated manner. We will give them that level playing field. It will also give them flexibility in the way they structure their Canadian and global operations.

The second point in terms of flexibility is that we are allowing a change in the ownership rules. This means that any shareholder, which under the current law would be limited to 10%, could go up to 20% of equity or 30% of non-voting shares. This is to give our institutions the flexibility to enter into strategic alliances and joint ventures with other institutions here and around the world.

The third area where we are helping them compete better is with respect to the merger review process. We have set out in the guidelines a process which must be followed for the major banks to enter into a merger.

This will offer certainty of process. At the same time it envisages hearings before both the Senate banking committee and the House of Commons finance committee. There is a great opportunity for public input because the final decision on mergers rests with the minister. He and Canadians must be convinced that any merger which takes place is in the best interest of all Canadians.

The second major thrust of the legislation is to encourage domestic competition in Canada. The reason for this is that we believe our customers are best served where there is vigorous competition in the marketplace.

How are we doing this? We want it to be easier for people to set up smaller banks or community based banks. This is why we are lowering the minimum capital that a bank must have or an institution must have from $10 million to $5 million. We think this will lead to new types of community banks.

We are also seeing under the evolution of this sector new banks associated with retailing institutions such as President's Choice Financial, a relationship between the Loblaws companies and CIBC which does their backroom work on a contract basis. This is a bank which now has over 400,000 customers and over $2 billion in assets.

Another way we are facilitating competition is with the new three tier size based ownership regime. If the equity is under $1 billion it can be wholly owned. Again this will help new banks to get established.

If the new size based ownership regime is between $1 billion and $5 billion, up to 65% of the shares can be owned or controlled by one shareholder and the rest must be the subject of a public float on the market. If the equity is over $5 billion, such as with our major banks and demutualized insurance companies, the rule is that these institutions should be widely held.

We are seeing new measures to encourage domestic competition with respect to credit unions, particularly those outside Quebec which do not have significant size and therefore economies of scale and are thus facing higher costs of operating and serving their customers who are also the owners of these unique community based institutions.

We have worked very closely with the credit union movement to help give them greater competitiveness. This is why, working with them, we have come up with an entity called a national service entity. This would allow them to combine to get economies of scale. It would enable them, for example, to issue a common credit card, and they could roll out new service offerings across provincial borders. This is a major step forward.

I will say a brief word about co-operative banks. This was a very important consideration brought forward by the MacKay committee and endorsed by the committees of the House and the other place. We have been working with the credit union movement to find out exactly what type of co-operative bank legislation should be brought forward. Unfortunately, the big group with whom we were working fell away from this project, but we have continued to study it and we will continue to study it, running on a parallel basis to Bill C-8. When the model is in place we will issue it and we will have extensive consultations, because we know there are provincial concerns and there are concerns within the credit union movement. We will subject that new measure to the same type of extensive input from the communities, the industries and the consumer groups, so that when we do come forward with the legislation it will meet the needs as expected.

A fourth way in which we are encouraging domestic competition here in Canada is through the entry of foreign banks via branches. This legislation was in place a couple of years ago, again as a result of extensive consultation, but we have enhanced it in this legislation to bring the foreign banking regime in Canada up to a level playing field with Canadian institutions, again requiring amendments in the legislation.

A fifth way in which we are encouraging domestic competition for the benefit of consumers is by opening up to the payment system the operations of life insurers, security dealers and money market mutual funds. This means that these new institutions would be able to have funds of a customer on hand and the customer would be able to exercise chequing privileges on that account, again enhancing competition.

The third major heading under this bill is the protection of customers. We think customers are best protected under any regime where there is maximum competition, so I have outlined what the government is doing in terms of enhancing competition. However, even with competition we have found in the past that there were those who remained unbanked; basic financial services were not available to them. This is why the government has taken measures under the heading of access. We are ensuring that Canadians have access to the financial services they need. We have introduced measures which would require the opening of accounts with a minimum amount of ID. Past credit or employment history, provided there is no fraud, would not be a bar to cashing government cheques.

As well, I have recently entered into a memorandum of understanding, a signed agreement, with eight of the large deposit taking institutions, which would make basic bank accounts available for Canadians. They are not all the same. This is not a cookie cutter, because we believe that competition will benefit consumers. However, each institution has come up with its own basic account with a minimum number of transactions, be they in person or via the Internet.

The costs are set forth and range among the five from $2.95 to $4 a month. We are making sure that those who can least afford it have access to the basic banking they need to get off welfare, to be able to deposit that cheque so it is safe and secure, and to pay their bills, including rent. This is important because, really, it is almost impossible to get off welfare if one does not have access to this type of basic banking.

As well, we have put in place rules for the closure of bank branches because that could be another way that access to basic services might be denied. We do not treat the banks as utilities; what we have said is that if they want to close a branch, that is their business decision. We are not going to force them to operate branches that are not profitable. That would undermine the strength of our financial services sector. However, what we have said is that they have to give notice. If the branch is in an urban area, they must give four months' notice so people can make alternative arrangements. If the branch is in a rural or less populated area, they must give six months' notice. This is so the community itself can find alternatives for the provision of these basic banking services.

Some of the alternatives will come from other institutions. With the closure of many branches in some of the western provinces, we have seen how provincial credit unions have come in and bought up those branches, at the same time ensuring ongoing employment to all of the employees who otherwise would have been affected. This is one of the virtues of giving notice. The federal government is also prepared to play a role in remote communities. Perhaps the post office could be the place people could look to for basic banking.

Another area where we have had the views and interests of consumers in mind is the financial consumer agency of Canada. Right now there are three federal departments in Ottawa that deal with enforcing our laws as they relate to consumers: Industry Canada, the Office of the Superintendent of Financial Institutions and the finance department itself. We are putting all of these operations under one roof. There will be savings in the costs of administration in so doing. It will be much more effective and efficient. We think this is a step forward for consumers.

We have had in place for a number of years the Canadian banking ombudsman. In this bill we are trying to expand the role of the Canadian banking ombudsman so that it covers all financial institutions. In an era of conglomeration where different types of financial institutions, such as banks, insurers and trust companies, are coming under the same ownership and the same roof, we think consumers would be better served if they could go to one dispute resolution centre for all their disputes regarding financial services, as opposed to having to find different ones depending upon what type of financial service they are having difficulties with. We also believe that the financial institutions sector will be better served by having this type of single dispute resolution centre.

Of course under the constitution we cannot mandate that entities which are not owned by banks have to come to this centre. That is why we have undertaken to work in very close co-operation with the joint forum of financial regulators from the provinces to find a way to bring together the disparate dispute resolution mechanisms aimed at helping consumers today. We welcome the efforts undertaken by Dina Palozzi of the Financial Services Commission of Ontario and Doug Hyndman from the British Columbia Securities Commission, who are heading up this task force which also has representation from the federal government.

The fourth major thrust of the bill is to ensure that on an ongoing basis we have responsible but responsive regulation of the sector. Of course safety and soundness have to be number one. That is why the bill has a number of measures which give enhanced powers to the Office of the Superintendent of Financial Institutions to intervene where there are difficulties, to remove directors if necessary and to impose fines where there is blatant disregard of our regulatory regime.

At the same time we want to ease the regulatory burden. This is why we are streamlining the approval system. Many approvals would be done on an exception basis: a request for an approval, if it goes to OSFI and is not denied within 30 days, would be deemed automatically passed.

It is critical as we go ahead that we have in place an evolving, dynamic regulatory regime, because we are seeing incredible changes with globalization, with exploding technology, with conglomeration and with consolidation, all of it taking place on a global basis. Our regulatory regime must be capable of keeping up with this. That is why in Bill C-8 we have reserved to the minister many areas of ministerial discretion. If it were there in black and white law, it would require an act of the House to change it. That is why we want, in many areas, to have this ministerial discretion.

As a minimum, within five years this law will sunset, again triggering, I hope, vigorous debate, with a telescope on the future looking at where the sector is heading, but because the changes in this industry and sector are so dynamic and so global, we cannot predict where they are going to be. We cannot predict what types of countermoves or accommodating moves we must make in order to ensure that we have a dynamic, competitive sector helping our consumers and competing globally. This is why we are committed as a government to reviewing the bill, not just five years from now but at any time sooner should it be necessary to do so, and then making the necessary changes.

In conclusion, I thank the stakeholders, the institutions, the financial sector, consumers' groups, members of this House and members of the other House. I particularly thank finance officials who have worked so assiduously on this, as well as those in OSFI and the other institutions, for bringing the bill to fruition in what I believe is a very responsible and critical way. Because the bill has had input from so many, I believe that it behooves us as parliamentarians to give it serious consideration. Because we have already had the input, I ask that it receive speedy passage. I would hope that it goes from this Chamber as quickly as possible into committee, where the real detailed work can be done and the witnesses can be heard.