Mr. Speaker, when the hon. member for Scarborough East, speaking for the Minister of Finance, moved for second reading and referral to a committee of Bill C-9, he said: "We have carefully reviewed the measures in this legislation and believe we can support them in their own right". He added, however, that one of the measures in the old legislation had been dropped and that, as for the other measures, to quote the minister: "Our primary criticism generally is that they represent only a small piecemeal effort by the previous government to deal with a large and pressing need in this country to strengthen the economy and to create jobs".
A little further the hon. member said the following: "I ask my colleagues and my hon. friends opposite to consider this legislation not as an indication of the approach this government takes to economic management".
Since the Liberals have now been in power for four months and we still do not know what this government intends to do, perhaps I may comment and express some of the reservations we have about the economic measures this government intends to implement very shortly.
The newly-elected federal government announced in the speech from the throne on January 18, 1994, that it attached the highest priority to job creation and economic growth. The
government has said repeatedly, both in the speech from the throne and in its red book, that it will focus on small and medium-sized businesses because they will be the decisive factor for economic recovery. So far, we have seen no significant measures to help small and medium-sized businesses, with the exception of Bill C-9, which was drafted by the now defunct Conservative Party and which, in the opinion of the hon. member for Scarborough East who introduced the bill, reflects an approach that combines slash and burn with ineffective tinkering.
It is high time the government recognized the considerable potential for job creation in the small business sector. In fact, small businesses as a whole continue to provide the jobs that are so badly needed in this country at a time when large companies are downsizing.
From 1979 to 1989, companies with fewer than 50 employees represented 85 per cent of net job creation in the private sector. In 1990, although the country's economy was not doing well, small businesses with fewer than 20 employees took up the slack created by downsizing of large companies as a result of cost cutting and business closures.
Net job creation by expanding and new small businesses represented practically all net job creation since the beginning of the recession in 1990.
Even in 1991, when due to the recession more businesses went bankrupt than were created, net job creation by very small businesses with fewer than five employees helped cushion the impact of substantial job losses elsewhere in our economy.
Canadian small businesses are ready and able to act as a springboard to a much needed economic recovery. They are better adapted to a changing economy where markets have become more specialized and decentralized. They represent an invaluable potential for job creation and economic growth. According to a survey conducted by Angus Reid for the Canadian Federation of Independent Business, these businesses survived the recession and are now ready to hire more employees. They will if small and medium-sized businesses are confident that conditions are improving. However, despite lower inflation and interest rates and the lower value of the dollar, they are still hesitant to make such decisions.
Unfortunately, this attitude is reinforced by the increasing tax burden on consumers and small businesses, generated by all levels of government. The federal government particularly has shown during the past 20 years that it is incapable of or little inclined to control a steadily growing deficit.
Now more than ever before, businesses want and need government policies that create a climate of certainty. They are justifiably afraid of being hit by more taxes, regulations and administrative red tape.
The federal government has told everyone who would listen that it understands the needs of small businesses. However, it keeps drifting off course with measures that are the exact opposite of what small businesses feel they need, for instance fewer and less cumbersome regulations, which would provide relief for small businesses and consumers.
Bill C-9 contains fiscal measures to help small and medium-sized businesses with the purchase of production equipment, including machines, materials, and so forth. We must not forget, however, that there is already a long list of federal and provincial programs to assist small businesses, all with more or less the same objectives. Just to illustrate my point, I will give a non-exhaustive list of federal and Quebec agencies in charge of helping small and medium-sized businesses modernize and conduct research and development.
At the federal level we have the Federal Business Development Bank, the National Research Council, the Department of Industry and the Federal Office of Regional Development for Quebec.
In Quebec we have the following agencies: Centre de recherche industrielle du Québec; Fonds de développement technologique; Société de développement industriel; ministère de l'Industrie, du Commerce et de la Technologie; Caisse de dépôt et de placement du Québec.
I should say that these are only the main agencies. We could add a lot of sectoral organisations, or municipal, regional, semi-public or non-profit organizations.
I excluded from the list the provincial tax incentives to encourage investment, and the federal and provincial programs for export, computerization, automation, expansion, growth or marketing. Job training or retraining programs are also excluded, as well as those dealing with technology transfer, start-up and general financing.
As you can see, Mr. Speaker, there is quite an array of programs which overlap or offer the same services in the various departments or the different levels of government.
The situation is so complex and so confusing that small and medium-sized businesses would require the services of consultants or tax experts that most of the time they cannot afford to find the programs which could best answer their needs.
I recognize that small businesses need help, but to make all the measures at their disposal effective and efficient, we urgent-
ly require serious thinking in order to try to eliminate overlaps and duplication, and their tremendous cost.
We should look first for a simpler way of qualifying expenditures to facilitate small business access to these measures; second, we should streamline aid programs to reduce their excessive administrative cost; third, we should have a single entry point for all forms of aid to small businesses, as suggested by the Montreal Chamber of Commerce; fourth, we should eliminate overlaps between the federal and provincial programs, by delegating to the provinces which apply for it, the management and preparation of business assistance measures.
In the second part of my speech, I would like to focus on another amendment to the Income Tax Act proposed by Bill C-9. This is the extension to March 1, 1994 of the home buying program. The amendment extends by one year the program which allows first time home buyers to use part of their RRSP to buy a new home.
What I will say is largely based on an analysis of the program prepared by W. Paul McCrossan for the Canadian Real Estate Association.
The federal government has often used housing programs to stimulate the economy during recession periods. This particular program was introduced in the February 1992 budget. It allows buyers to withdraw, tax-free, up to $20,000 from their RRSP to use as a downpayment when buying or building a new home. However, the money withdrawn must be returned to the RRSP by way of an equal payment plan over 15 years. Originally, people had until March 1, 1993 to take advantage of this measure, but now Bill C-9 extends the limit to March 1, 1994, a couple of weeks from now.
On September 1, 1993, the Canada Mortgage and Housing Corporation published data showing that in 1992 consumers using the home buyers' plan accounted for 26 per cent of all sales at the national level.
Department of Finance statistics show that during the first year of the plan, which ended on March 1, 1993, a total of 153,452 persons benefited from the home buyers' plan. Moreover, according to raw data for the five months from March 2 to July 29, 1993, the department has received 45,500 additional requests for withdrawal of funds from RRSPs. These data clearly show that this plan is still fulfilling real and urgent needs.
As I mentioned before, Angus Reid recently published the results of a vast survey ordered by The Canadian Real Estate Association, which clearly illustrate the relationship between the economic situation surrounding the usage of the home buying plan and the demographic characteristics, the attitudes and the views of those who take advantage of it.
According to the survey, households withdrew on average $13,965 from RRSPs for a downpayment on a house. Almost half of the households, that is 47 per cent, used their RRSPs to buy their first home. More than a third, precisely 34.5 per cent, of the total amount invested by those who took advantage of the plan came from RRSPs. However, among families with a total income of less than $30,000, almost half the capital invested came from RRSPs, that is 46.8 per cent.
Even if there are no restrictions in the plan for first home buyers, one of the social effects of the plan's provisions is to give those who otherwise would never be able to afford a house, the opportunity to buy one. Nearly half, that is 47 per cent, of those who took advantage of the plan were buying their first home.
Furthermore, among first home buyers, 86 per cent mentioned that the plan was a decisive factor in their decision to buy a house. Analysis by income category also shows that middle and low-income Canadians were mainly the ones who benefited from the plan.
Among users of the plan chosen at random for the survey: 28 per cent were from the upper middle class with an annual income between $50,000 and $70,000; 23 per cent were of the lower middle class with an income of between $30,000 and $50,000; and 10 per cent were of low income, that is below $30,000. They are the ones who have the hardest time buying a house.
The key question raised by the home buyers' plan is whether or not this plan supplements the existing system allowing for retirement income high enough to be taxable or if it encourages immediate goods consumption at the expense of retirement income security?
Participants were asked to indicate on a one to seven scale the importance of various elements with respect to retirement income security. Ownership of a house came first with 6.1, followed by personal savings-5.8, RRSPs-5.7, Canada pension plan-4.5 and old age security-4.5.
Not only do low income and lower middle class Canadian families consider owning a house as the single most important factor for their retirement income security, they also gave it the highest rating among types of incomes, that is 6.2.
Regardless of their age, all respondents said that owning a home was very important, 55 per cent said it was fairly important, 19 per cent found it to be important, and 13 per cent declared that it was important for Canadians as a whole, in terms of their retirement income security. The importance of owning a home for retirement income security was confirmed when 84 per cent of all respondents said that as far as they were concerned, it was from very important to rather important.
Only 6 per cent of respondents believed that they could count on old age security or the Canada pension plan; 90 per cent were of the opinion that they would have to rely much more on their own resources in the future. This cynicism regarding government pension plans was more pronounced in the 25 to 35 age group, 3 per cent of whom believed they could rely on old age security or the Canada pension plan, compared with 95 per cent who believed that they would have to support themselves.
To conclude, in view of such attitudes and given how important owning a home is for these respondents to secure their retirement income, it is hardly surprising that the maximum use of the RRSP home buyers' plan is found in the 25 to 45 age group.
As a result of these survey findings, I suggest that the government extend the home buyers' plan another year, or better yet, another three or five years. At the end of this period, the program should be reviewed, taking into account the suggested economic activity, the demographic characteristics of the home buyers, and the actual amount of loans paid back to the RRSP.