Motion No. 9
That Bill C-46 be amended by deleting Clause 14.
As with respect to our amendments to clauses 8, 9 and 10, we wish to address the amendment to clause 14 with the same kind of principles we used to evaluate and analyse the others.
In particular, we want to suggest to the House again that it is the obligation of government and it is and should be the intent of legislation to provide checks and balances to ensure openness, integrity and honesty in the performance of the duties and responsibilities incumbent upon government.
Second, the marketplace should determine winners and losers, not the government or intervention by government or its ministers in that marketplace.
Finally, the role of government is to provide a level playing field so that competition can be equal, fair and on a level playing ground so that the refereeing of the game of business is in fact conducted in a manner that provides success for as many as possible.
The results of the application of these principles is confidence for business and government and it certainly enhances the international competitiveness and the ability to provide for changes in the new economy that is coming.
I wish now to address the particular amendment to clause 14 which really is to eliminate and delete from the bill the total clause. There are a number of reasons we would like to propose that clause 14 be deleted from the bill.
Clause 14 gives to the minister a tremendous range of powers. May I just quote briefly from the provisions of the bill. The bill suggests that the minister under this act may:
(a) make loans to any person;
(b) guarantee the repayment of, or provide loan insurance or credit insurance in respect of, any financial obligation undertaken by any person; and
(c) make grants and contributions to any person.
The broad range of power given to the minister under this section is such that it makes it possible for that minister to intervene directly in the marketplace on behalf of or against any business or individual or group of persons, organizations or associations.
We believe that that provision is most objectionable and must not be allowed to stand. It allows the minister or through the minister under certain conditions that follow in the other sections the cabinet to pick winners and losers in the economy.
The authority violates a fundamental principle of openness, honesty and integrity. As we know, and history has shown over and over again, power tends to corrupt and absolute power tends to corrupt absolutely.
The provisions of this act are such in this clause that the minister can without reference to anyone do the kinds of things we talked about: make loans, give grants and things of this sort.
The government's role is to regulate the marketplace so that it is level but not to intervene and choose winners and losers by that intervention. If business is to succeed then it must be allowed to do so without having competitors gaining unfair advantage as a result of government intervention of one kind or another, particularly when it has to do with monetary assistance in particular areas.
If a business or a business sector is going to fail, it should do so because it lacked the competence or for some other reason it did not succeed. The government assistance should not be used to prop up a business that cannot survive in its own right. If the only way a business can survive is by government intervention and by shoring it up then indeed that business is of questionable integrity and questionable work in the economy.
I would like to refer particularly to what can happen when government intervention of this kind takes place. I refer here to the 1993 Auditor General's report with regard to the then Department of Science, Industry and Technology now known as the Department of Industry.
There we have a very interesting situation. In 1985, the cabinet authorized the Minister of Finance to provide an equity injection into the Federal Business Development Bank to enable that bank to purchase a $69 million special issue of preferred shares.
Subsequently, that was increased to $79 million, only $10 million more. The investment of the company was made pursuant to a directive of the governor in council and executed by the Minister of Regional Industrial Expansion, then Industry, Science and Technology and currently Industry. It was done under this clause and a subsequent clause in section 14.
On October 26, 1986, the government signed a share subscription agreement with a company for a two stage $260 million plant modernization project.
The information provided to cabinet for its approval on October 7, 1986, identified a specific Russian technology for the project. This technology was described as the newest and best available in the world. The company decided to switch from the Russian technology to new German technology which it purchased in September 1986.
Cabinet was not informed of the major change in this project. What was the result of all of these kinds of changes? The company's new plant using the German technology attempted startup in December 1989 and suspended operation in March 1990.
In December 1992, two years later, the company advised the Department of Industry that it could not complete stage one before December 31, 1992, for reasons beyond its reasonable control thereby suspending its obligation under the agreement.
In 1990 the department estimated that the Federal Business Development Bank was unlikely to recover its investment or earn any dividends. To date, the bank has received no dividends. In fact the Federal Business Development Bank wrote that particular investment down to zero. The agreement, however, remains in force until the year 2006.
The company's audited statement of total capital expenditures for the project at May 31, 1990 indicated that the company had incurred costs of $161 million. With $134 million that came from the federal government and some from the British Columbia government, the company was out of pocket $27 million and then only because of cost overruns. Had these cost overruns not occurred, the company's share in the project at that point would have been zero.
That is not the way to use taxpayers' money. The emphasis on it being best left to the private entrepreneur is the principle the government should observe and not use tax dollars to do these kinds of things. This clause of the bill should be deleted.
Many of the clauses are unclear. They are intrusionary. They are elitist. They allow the government and the minister in particular unlimited opportunities to interfere in the free market, and the cabinet as well under another section. In my remarks today I have shown that the legislation needs clarification. There are things that should be deleted from it. There are powers that should be circumscribed; the minister and the cabinet should not have these powers. They unbalance the very fundamentals of our economy and can strangle our treasury, as was already indicated in the Auditor General's report.
We should get to the point where the government does not take winners and losers but in fact develops a level playing field. The Department of Industry can be the department to bring about a strong engine that will drive the economy and bring about a balanced budget. That is what the department should do. However the way to do that is not by intervening directly in the marketplace through particular regional development programs or by providing loans, grants and subsidies to industries. The minister has the right to do this for any particular person and is not obligated to require that certain conditions be met for those loans.
At this point the legislation, the way it is being proposed, needs to be amended as we have suggested.