Debates of Oct. 24th, 1995

Small Business Loans Act

[Herb Gray, Liberal, for the Minister of Industry]

moved that Bill C-99, an act to amend the Small Business Loans Act, be read the second time and referred to a committee.

[Dennis Mills, Liberal, Parliamentary Secretary to Minister of Industry]

Mr. Speaker, even before the red book came into being during the last election, the Liberal team in opposition made a commitment that if we were to be given the trust of the people after that election, the small and medium size business community would be the centrepiece of any policy development that would be part of our agenda.

We believed in opposition and we believe now that the greatest hope Canadians have for putting other Canadians back to work rests with the small business community. It is the small businessmen and women who, in many cases with very few resources, created, through their own ingenuity, creativity and sweat and toil, products and services that grew not only into businesses but became a very important and vital ingredient in the economy of this country.

When we were elected about two years ago we started immediately to deal with the number one difficulty that small businessmen and women had in trying to meet their objectives which was getting access to capital.

It is very important for me to recognize the critic for the Reform Party. One of the very unique experiences that we had in the industry committee was the fact that we worked as a team. We have many differences with the Reform Party. I for one do not feel as committed as they are to their attack on the deficit and debt. I find their approach too radical and too swift. However, one issue which we have consistently agreed on is the fact that small business is the hope of this country when it comes to putting Canadians back to work. It was because of our teamwork that we have been able to move an agenda forward on the access to capital front.

The amendments in Bill C-99 before us today, which is an act to amend the Small Business Loans Act, are from feedback we have received from the men and women in the House who have been working on this issue. They are the result of feedback we have had from industry and the banking community. They are also the result of the feedback and the success we have had with the Small Business Loans Act.

Some members will recall when we were in opposition that the then Conservative government initiated, in its last budget, amendments to the Small Business Loans Act. At that time, we supported those amendments because we believed that they were instruments for trying to break up the hardened attitude that many people in the financial community had toward taking risks with small businessmen and women.

This bill is not meant to be a cure all for the difficulties that businessmen and women are having. It is a bill where we told the financial community that we would develop an act in Parliament where 90 per cent of the risk that it takes on a small business project, up to $250,000, the Government of Canada would guarantee if that business should fail.

Since the Small Business Loans Act started, over many years, it has been used to help just under 500,000 small businesses in this country. Many people have had, through this act, the opportunity to take a shot at their dreams, create jobs and ultimately help create the economic fabric of this country.

When the Government of Canada is guaranteeing such a large amount, the number one question obviously is what is the down side for the taxpayer.

Until two years ago, on a loan float of about $3.5 billion, the loss to the crown was approximately $26 million. A loss of $26 million on a $3.5 billion float is pretty respectable. In the last year and a half, the float has increased considerably. The float right now is closer to about $8 billion. On that float, the estimated losses are approximately $100 million.

Because of that increased loan loss, that $100 million, and because of our commitment to fiscal responsibility, the government

has decided to listen to the Reform Party, to listen to the banks and others. It has decided that the act has to be redesigned in a way where those costs are recovered.

The essence of this bill deals with a new formula so that those loan losses can be covered. Essentially the three components in the bill to recover the loss on that rather large float would be the following: the major elements would be first, a reduction in the minister's liability to pay a loss on any business improvement loan from 90 per cent to 85 per cent. The second point is the establishment of an annual administration fee and a restriction on the passing on of the fee to borrowers except through interest rates, the establishment of a claim processing fee and the granting of authority to make regulations respecting the release of security taken for the repayment of any business improvement loan.

What we have done is this. Previously the guarantee was 90 per cent. It has been reduced to 85 per cent. If this is the way that the Small Business Loans Act can continue to be viable so that it is not going to be a drain for the taxpayer or a strain on the treasury or something that would generate too much nervousness with officials in the Department of Finance, then I naturally support all these amendments. These amendments are all good, solid amendments.

The most important thing that the Small Business Loans Act did was this. Because all of us worked together on the Small Business Loans Act, it led to another journey that we all went on in the last two years. That journey happened in the industry committee where the Bloc Quebecois, the Reform Party, and government members all worked together on this total review of the difficulties that small business men and women were having in accessing capital.

Members would probably recall that almost a year ago, the committee published virtually a unanimous report "Taking Care of Small Business". That report dealt with all of the various experiences men and women were having when dealing with financial institutions.

All of us in this House heard over the last few years story after story after story of the difficulties many of our constituents were having in dealing with the various banks or other financial institutions. It was through that feedback that we became united in dealing with this issue.

Some of the key recommendations in the report are now being implemented. As of the end of this month there will be a common quarterly reporting chart and statistics on the whole thrust of each individual financial institution's lending to small business by sector, by gender, by municipality and the size of the loan. That kind of accountability is going to change the whole bank culture and attitude toward small business.

That has been the biggest accomplishment of our committee. We have made a very strong impact in causing the men and women who are managing the banks to reflect and review the way they have been dealing with business. Not big business. We all know that whenever big business wants a $500,000 or a $3 billion loan the banks trip over themselves trying to lend those larger businesses the money. In the past few years some of those loans the banks were tripping over each other to give to the larger businesses ended up coming back in their faces, or part of them came back in their faces.

We were not really concerned with the larger corporations. We respect the larger corporations and the job creation contribution they make to the community, but we were concerned with the small business community and the fact that the small business community represents virtually all of the new job creation that is happening in this country. I believe and I know many members opposite believe that those quarterly accountability sessions are shifting the attitudes of the banks.

Ultimately, it does not matter what side of the House we sit on, we are here for one reason. We are here to get the economy of this country going again. The economy is only going to start going again when collectively we can work at creating an environment where business can flourish and give men and women the dignity of a job. That is the most important thing we can be working on today.

It is no secret that there are just under three million men and women who do not have work. I cannot imagine getting up in the morning and not having a job to go to. Many of us here have been blessed with the fact that not only do we have a terrific opportunity to serve our country right now, but we have also had the opportunity to work throughout our careers. Very few of us have felt the pain or the assault on our dignity of not having a job. That assault on dignity is the toughest thing a man or a woman can face. Our number one responsibility is to assist in creating an environment where business can take those risks and chances to get the economy going. That is why we on this side of the House, supported by members opposite as well, believe that whenever we can pass an act of Parliament that will improve on creating more jobs, even if they are minor improvements, then we are on it right away.

It is important that a bill like this does not take a long time to go through the House. That is why it is important to work together. If we can work together and get the proper amendments in this bill, then this kind of cohesion gives confidence to the marketplace and the people who execute this bill, the banks.

This bill is not executed by the government. After it is passed by this House this bill will be implemented by the financial institutions in Canada. The bank managers make the decision as to whether or not that taxpayer guarantee should be given to a small business man or woman. The implementation of the act is totally delegated to the financial institutions. Because of this guarantee those bank managers can take a bit more risk. Ultimately that is going to assist in getting the economy going.

The small business sector represents the greatest hope we have for putting Canadians back to work. It is going to accomplish that once the proper environment is put in place. Also, the small business man or woman does not tend to create a lot of bureaucracy and therefore can be more efficient when operating a small business. They tend to have much closer relationships with the men and women who work with them. The family-like environment which happens in a small business in many cases generates the kind of activity that allows creativity to flourish, that allows productivity, which allows business to create better products at better prices.

That is ultimately the reason our exports are going to be our hope as well. In the last few months our exports have been holding the economy together. Many of those exports, for example in the automotive sector, came from small and medium sized corporations. Some of them are organized in larger institutions but many of them are small, individual plants with a maximum of 30 to 50 workers.

We have to stop thinking of small business in the traditional way it has been thought of in this Chamber. For many years in Ottawa most of the attention was given to the larger businesses. The larger businesses had the resources to come to Ottawa and lobby their MPs or they had the resources through accountants and lawyers to do the work on the basic grants and support systems that were in place. Larger businesses had the resources to get their tax credit put into the tax act because they could afford to lobby the various departments including the Department of Finance.

In the last two or three years we have discovered that a lot of these larger businesses with all the great contributions they have made in terms of job creation and research, are not creating the same kind of economic thrust. Now it is the small business community. Many of us have had to reorient ourselves, go back to basics and reacquaint ourselves to try to understand what the small business community really needs.

Even though I frequently talk about access to capital, there are a couple of other things the government is going to have to address as well. We have to take up the challenge to reduce the paper burden and red tape. How many times do we hear that small business men and women are spending more time pushing paper and government forms than on their own businesses? We have become a nation of paper pushers. We have to realize that along with access to capital we must reduce the red tape and paper burden.

The Department of Industry, the Department of National Revenue and the Department of Consumer and Corporate Affairs have been working very hard in the last few months trying to create a one-all form. They are trying to organize various forms for business. They are working on a system that will be on one form, a simplified system for business reporting on various aspects of government responsibility.

That is also another realization we have come to accept and support as a result of our continued campaign on the access to capital front. In other words, that journey on access to capital has led to the realization that reducing the paper burden is something we must also work on very diligently.

The last thing I will touch on in terms of policy is where small business is crying out for our attention, which is the whole area of tax reform. Small business is telling us that the tax system is complex and inefficient. Many of them argue it is not fair.

As a government we are committed. Our red book stated quite clearly that the whole GST regime we fought so vigorously against in opposition is something the government has to address in its mandate. There is absolutely no way any Liberal member of Parliament could ever expect to go back on the campaign trail to get re-elected unless the whole issue of the GST is dealt with.

My goodness, in opposition we fought against the GST to the point that it nearly caused a riot in the other place. We challenged the government because of the complexity, the paper burden and the inefficiency of the GST. We on this side of the House are working very hard on total tax reform. It is a very complex issue to dismantle an entire structure the previous government set up. As the Prime Minister would say, it is not a matter of saying "poof" and it is gone. It has to be done responsibly, in a way that will not create a bigger problem than already exists.

We believe that dealing with the issue of tax reform is central to the requirements of small businesses and their ability to work in an environment that allows them to maximize their potential. Bill C-99, an act to amend the Small Business Loans Act, is another example of where the government is fine tuning by working with small businesses and the financial institutions and dealing with the financial markets, the currency traders, who have control on our interest rates and our dollar.

There is an issue I wish we could one day debate in Parliament. With the various challenges we take on in the House, whether related to industry, social programs or fiscal responsibility, deficit and debt with all the cutbacks, I would say the one challenge that we as a House of Commons have yet to face is the challenge of how we work with these currency traders who are essentially running most of the central banks of the world. These unaccountable, unelected currency traders move literally a trillion dollars a day, pushing paper, playing the derivative games. I have referred to them before as the private casinos in the financial institutions of the world. These men and women who move that currency around in an unaccountable way are affecting our interest rates, which in turn affect the investment activity and the job creation activity.

I do not know how we can call ourselves a sovereign nation when we think of the fact that we have essentially lost control of our currency. We are sitting here as elected people, but every day we bow down to the currency traders, asking what the dollar is going to be, what the interest rates are going to be.

Do the men and women in this room have anything to do with what goes on with those currency traders? No. Those currency traders are controlling the agenda. No matter how fiscally responsible the government is in the House, they could say that it is not good enough. Then suddenly they give us another squeeze and drop our dollar or cause a jerk in interest rates.

I would love to have a debate in the House one day on how the currency traders of the world manage their affairs and what their accountability is-not unlike the challenge we took up two years ago when we said that we wanted to see what was going on with the financial institutions in the country and what they were doing with small business. These financial institutions were not initially receptive to our exchange, our views and our attempts to try to make their attitude and their culture more responsive to business. However, because we worked together I believe we now have a constructive relationship with the banks. I now believe those banks are actually starting to enjoy the growth and the improvement they are experiencing in their small business relationships.

I would like to put to the House that an even bigger challenge would be how we could take on the currency traders of the world so we can once again get control of our economic agenda.

In closing my remarks on the bill once again I thank members opposite, members of the Reform Party and members of the Bloc for working with us on these amendments so we can hopefully get them through the House before the end of the week.

This is probably the last time I will be on my feet before the referendum vote on Monday. I appeal to those small businessmen and women who hopefully are watching or are participating in this debate to think between now and next Monday about anything they can do to help make sure this campaign for Canada is won.

I personally believe that one of the things small entrepreneurs can do, because they have flexibility, is maybe find a bit of time to get into their vans, cars or trucks and take their families to visit our great province of Quebec this weekend.

When I was a small businessman I did a lot of business in Quebec, and I never had any difficulty doing work in that great province. I believe that one of the ways we can make sure Quebec votes for Canada on Monday is to make sure that a majority of those people, especially in the outlying regions of Quebec, feel comfortable with those of us who are outside Quebec.

I know it is a precarious moment right now. Things are very tenuous. However, I think the greatest asset we have in the country is people from one region of the country talking to another, one on one, not through television ads. I respect these rallies, but the best way to bring togetherness is when people sit down and have a constructive, warm and caring relationship.

I do not think it is too late to make a tremendous turn in those numbers we all read in the newspapers right now. I believe the best way to turn those numbers is by making sure this weekend, if one is from Ontario and maybe planning on driving north to a cottage or east down to Buffalo or Niagara Falls, to travel instead to the outlying regions of Quebec. Together, when we talk about all the assets we have as a whole nation, we will end up staying together.

Thank you very much, Mr. Speaker, for giving me the opportunity to speak on the bill. I pray God that next week everything is all there for Canada.

[André Caron, Bloc, Jonquière, QC]

Mr. Speaker, I welcome this opportunity to speak on behalf of my party to Bill C-99, an Act to amend the Small Business Loans Act.

The parliamentary secretary made it very clear that small businesses play a very important role in the Canadian economy and, of course, the economy of Quebec. Both the government of Canada and the government of Quebec have set up programs to support small business, because one of the problems facing people who want to launch a small business is the financing.

Often these people are very keen and have interesting ideas, and if governments do not find ways to support them, their ideas often remain undeveloped and the business never materializes. Both the government of Quebec and the Canadian government have taken steps to provide assistance to entrepreneurs.

Of course there are private investment funds in various provinces including Quebec, such as the FTQ's Fonds de solidarité which has some impact in this sector. However, the parliamentary secretary said that today in Canada a total of nearly $8 billion is invested under this program, which is an indication of its importance.

Another indication is the fact that the program is popular among entrepreneurs. In our riding offices, we often see people with good ideas who decide to ask their member of Parliament for information on programs that could help them start a business.

Canada has legislation, the Small Business Loans Act, which was adopted several years ago. This legislation has made it possible to lend money and start businesses. The bill before the House today proposes a number of amendments to this legislation.

Originally, the purpose of this legislation was to provide guarantees for bank loans to entrepreneurs who wanted to start a business. This guarantee could vary from 85 to 90 per cent, and in fact varied from year to year.

The cost to the Canadian government is what it costs someone who wants to guarantee loans. If the individual's business is not as successful as he expected, if he goes bankrupt, then the government of Canada has to pick up the loss incurred by the banks. In 1992, these losses totalled $44 million. The maximum was changed in legislation adopted in 1993 and a number of provisions were changed as well, so that in 1995-96, the government of Canada could be faced with picking up a total of as much as $100 million in losses.

Considering the current state of federal finances, it is understandable that the minister should be concerned and that the debate on small business in the Standing Committee on Industry had to consider this aspect as well.

That is why we have a bill before the House today. The purpose of the bill is to reduce the maximum for guarantees provided by the federal government. The maximum would be reduced from 90 to 85 per cent of the loans approved. By reducing the maximum, the government of Canada is of course reducing its responsibility for amounts to be paid in case of bankruptcy.

There is of course a corollary to all this: if the guarantee is less extensive, people with higher risk projects that may be more innovative will have more trouble obtaining guarantees. This is not unusual, and if the banks are unwilling to take the risk, some projects may be rejected.

In fact, the 85 per cent rate goes back to before the amendments in 1993. It is of course an area where the government could save money. We hope there are no business people with clever and brilliant ideas, who are refused loan guarantees because of this provision.

Also, an important aspect of this provision concerns us in the Bloc Quebecois considerably. With the amendment, the ceiling could be lowered even further, should the government decide to

regulate it lower. As one of my colleagues was saying earlier, for the moment it is at 85 per cent. It could drop to 60 per cent. It could drop to 50 per cent. We really do not know.

What is of concern in all this is that the government is giving itself the option in the bill before us to lower the ceiling by regulation. Government by regulation is reprehensible. I think the House of Commons has to take measures to ensure that the bills passed are good for the country. I think, when legislation gives the government the option to decide things of this importance by regulation, we are running the risk of hurting the country's business people.

There is also another provision in the bill that causes us some concern. Basically the aim of amendment in the bill is to have moneys paid by the Minister of Finance in the event of a bankruptcy absorbed some other way. In other words, the Minister of Finance does not want to see the $100 million planned for this year back again next year. Another way for the government to ensure that losses are cut or even eliminated is for the program to be self-sufficient.

My colleague, the Parliamentary Secretary to the Minister of Industry, said it well: "How are we going to go about recovering costs?" Administrative measures will be taken. An annual administration fee will be charged. There will also be a claim processing fee.

The bill provides that these administrative fees are not to be paid directly by the business people. It does provide that they can be paid by the business people indirectly. In other words, the interest rates on loans could be raised to cover the administrative fees that the banks would have to pay.

This means doing rather deviously or hypocritically what cannot be done directly.

I would like to think that government finances are important, but the program's efficiency is going to be reduced by this measure. It will be reduced, because the banks are not going to go out of their way for business people. By definition, the banks want to be profitable and they charge the highest interest rates the market will bear.

As a result, entrepreneurs will have to bear higher costs in order to meet program requirements. This is one measure that causes serious concern among the members of the Bloc.

There are some items that we would certainly have liked to see included in the bill which are not there. The Parliamentary Secretary to the Minister of Industry has said that the measures proposed in the bill were discussed in the Standing Committee on Industry and are contained in its report tabled in October 1994: Taking Care of Small Business .

Although the Bloc was considerably involved in the drafting of this report and endorsed the bulk of its recommendations, it made a number of comments, in the form of recommendations, amendments or notes, which we felt improved upon the proposals for making the Small Business Loans Act more efficient and effective. One of these proposals was that "the Small Business Loans Act ought to provide guarantees for small business operating capital loans. To implement such a measure, the government should carry out a cost analysis of such a program and take a responsible fiscal approach".

We know that the loan guarantee given is intended to help businesses meet expenses related to very specific aspects such as buildings and equipment, but not working capital. The problem is that, in recession conditions and crisis situations, and as a result of certain changes in the Bankruptcy Act as well, there are many small businesses which need financing for their working capital for a time, but they cannot take advantage of the act as it stands to obtain either financing or a guarantee of financing.

To improve the way we help our small businesses, the Bloc Quebecois would have favoured an amendment saying that the operating capital of a business could also be financed with a government guaranteed loan under the Small Businesses Loans Act.

There are a number of things we find disturbing in this bill. I mentioned the reduction in the maximum rate, which means fewer businesses will have access to the program or those that do may have to meet more requirements. Second, there is the matter of administration fees which we think will be passed on to businesses through an increase in the interest rates they will have to pay. And third, there are aspects that are not covered by the legislation such as the financing of operating capital.

That is why the Bloc Quebecois will discuss the bill in committee, and propose amendments that will probably be along the lines of the comments I just made.

I would like to make a few more comments as I conclude my speech. This may annoy some government members who will probably think that I am not on topic or other members who will say: "Duplication and overlap, here we go again. It is the same old sovereignist or separatist refrain from the Bloc". In any case, as I mentioned in my introductory remarks, in Quebec we have a number of programs with substantially the same objectives. Take the Paillé plan, named after the present Minister of Industry, which also provides for loan guarantees. Take what is being done by the Société de développement industriel du Québec. Since I became a member of Parliament, I noticed that many constituents who want to start a business are told to go to the provincial office and the federal office. In fact the situation is not quite clear. Often there is out and out competition.

Who is responsible for this competition or overlap? I do not want to get involved in all that, but I simply want to point out that there is some overlap that is counterproductive. It does not do the entrepreneurs any good because they often do not know where they stand. And when governments at the provincial and federal levels do not belong to the same party, people often believe that if they go to one government, the other government will be annoyed and that will get them in trouble. I myself have never noticed that since becoming a member, but there are people who think they can play one government off against another or people who think there may be difficulty applying to one level of government when application or representation has also been made to the other government.

So I think that, when measures such as this are before the House, we should note-and I am not saying criticize, but we should at least note-that there are overlaps, which could hurt business people and the government's budget.

The same taxpayers, whether they are from Quebec or Canada, are helping to fund these programs through their taxes. And I really think a number of people use this sort of competition to try to get the best out of both programs. I think, in the long term that governments put themselves in situations where their expenditures under these programs will increase because of the competition, because of the overlap and because people try to take advantage of the opposition or even the competition between governments.

With bills like this one, it is important to point out problems of overlapping created by such programs.

In concluding, I would like to make one comment. More and more in the business community in Quebec and Canada, in the government and even in the Liberal Party, which did not follow such policies in the past, we are hearing talk of how the government should step aside, and the people who go into business should take on their responsibilities.

There is a movement to re-establish the laws of free competition, to promote globalization, to pare down the size of government. The Minister of Finance is often seen to support such ideas.

When the time comes to make cuts in social programs, in education, in unemployment insurance, we hear "the government is overspending, it is too costly, the government must interfere less and less in the economy". On the other hand, when we come to bills like this one, when we realize that when it comes down to it the government is guaranteeing eight billion dollars worth of loans this year, and I think that the legislation allows up to $12 billion. We realize that the neoliberal discourse of the governments was the same; it is the Liberals this time, but it was the same thing when it was the Conservatives. I cannot see much difference in practice between the policies of the former Conservative government and those of the present Liberal one. They both took a neoliberal stance, calling for government to withdraw from the economy, but yet when we get down to practicalities, to instances where according to the very theories they espouse the government's presence might be questioned, then we see that they are continuing the same kind of intervention as before.

Not that I condemn such intervention-the Bloc Quebecois is in favour of a healthy government involvement in economic affairs-but, on examining the bill and everything that goes with it and looking at what the Small Businesses Loans Act has done in the past, despite the fact that it has been extremely effective and much appreciated by entrepreneurs, I am forced to conclude that the government is saying that cuts must be made, the government must withdraw. In situations like these one realizes that not only is the government not withdrawing but it is even becoming increasingly involved.

A few years ago there were $2 to $3 millions in loan guarantees annually, and this year the figure will be $8 billion. Perhaps, the way things are set out, the figure next year will be even higher. There is one big question mark: the government is acting in such a way that it will not cost anything on the budget. All the better, one might say. It is the banks and the entrepreneurs who will pay, but basically it is the government which gives the guarantees but wants to arrange things so that it will cost nothing. In the long run, the businesses themselves pay, because of the interest rates charged on the loans.

One wonders really what purpose these programs serve. This morning I was looking at the industry committee's report "Taking Care of Small Business". Experts appeared before the committee stating that there was no certainty that business started up under the projects in question would not have started up anyway.

I heard, in fact I listened carefully to the speech made earlier by the Parliamentary Secretary to the Minister of Industry. He talked about a lot of things, but I would have appreciated it if he had tried to be more specific about the rationale underlying this bill. Is it effective? Is it true that about three-quarters or at least half of the businesses that were started with the help of this legislation would have been started in any case? What use is a program that guarantees loans but which basically does not cost the government a penny? We could say this is wonderful, it does not cost the government a penny, but on the other hand, if that is true and if the impact is neutral, why is the government involved in this kind of program?

Do not get me wrong. As a member for the Bloc Quebecois, I will debate the bill in committee, we will ask questions and we will propose amendments, but I am very disappointed that a government that wants to make cuts everywhere and has not done so in

this sector although, according to its ideology, it probably should, has introduced a bill like this one.

I am very disappointed when a government introduces a bill providing for measures that, as was pointed out in the standing committee, were ineffective, and in the presentation given by the parliamentary secretary is incapable of proving otherwise.

One wonders what the government is doing. Basically, it extends legislation, changes maximum guarantees and tinkers with details. Personally, I think this kind of legislation is effective and that the government has a role to play in the economy, but I would have liked to see the people who administer or claim to administer billions of dollars of taxpayers' money be more consistent and more credible when they introduce bills like this one.

We will probably vote against the bill, considering my comments on this legislation, but once again, in concluding, I am inclined to be rather wary of a government that again is asking us to extend and restructure a bill, although it is incapable of demonstrating the bill is effective and produces the desired results for entrepreneurs and the Canadian economy.

I will conclude my speech after comments that have indicated I am somewhat disillusioned with a government I thought would be more consistent in the way it manages the affairs of state. After two years as a member of the House of Commons, one becomes increasingly convinced there will have to be some major changes made in Canada, starting with the Canadian federation-or with the government that now claims to head that federation.

[Werner Schmidt, Reform, Okanagan Centre, BC]

Mr. Speaker, I stand to enter the debate on Bill C-99, a bill to amend certain sections of the Small Business Loans Act.

I want to pay particular tribute to the parliamentary secretary to the Minister of Industry for his very kind remarks and his description characterizing the industry committee that dealt with the report "Taking Care of Small Business", which was tabled about a year ago, and also some of the recommendations in the report, some of which are included and recognized in the bill.

I would like to follow up on some of the suggestions he made about the significance of small business in the economy of Canada. It is not a secret to us or anybody who follows the economy of Canada that approximately 80 per cent to 85 per cent of the new jobs created in Canada are created by small business. When it comes to the Small Business Loans Act it is precisely that sector of our economy that this act addresses. In my opinion, these amendments are not sufficient. They do not go far enough and some of them are virtually counterproductive.

We must recognize that in the new economy that is developing, the important issue and the characteristic of a business is the ability to apply knowledge in a way that will provide for new services, new products, and particularly the application of new technology and the most recent discoveries of science. It is very clear that in the globalization of the economy and in the international competition that is developing it will become increasingly significant that the science and the technology of a nation will become a determining factor in that particular competitive environment.

One critical factor in developing the ability to transfer knowledge and apply it to new products or new ways of processing and doing things will require a skilled and very knowledgeable workforce. That does not come by accident. It comes as a result not only of good technical schools and good universities, but begins in primary school, kindergarten to grade 12. It is here that we need to change our educational system so that it will become far more geared to science and technology, and particularly the science area, and that we all become sensitive and recognize that it is really science that is going to make the difference in the next century.

We also know from past experience that it is the small business that is most able to apply this new knowledge, because it is not fettered with all this bureaucracy. It is not fettered with all these regulations and things that are internal and the internal politics that stand in the way of new ideas and adapting to change. We need to develop that kind of awareness and recognize that it is the small business group that is going to be the leader in this particular area.

The whole idea of small business rests on entrepreneurship. Unfortunately, today in this country we have what is known as bureaucratic entrepreneurship. We all know what that is. That means that a bureaucrat sees how many more bureaucrats he can get under his supervision. That will mean that his salary and power will increase. Therefore, the entrepreneurship is one of developing larger and larger departments. We have a very well developed entrepreneurship orientation, ability, and skill level in that area. However, we do not have that same level of expertise, that same skill, that same fully developed attitude in the developing of entrepreneurship in business and the application of knowledge to produce new products and adapt to new processes in developing those products.

Right down into the kindergarten level, all the way up through the universities, we need to develop this attitude, this orientation toward entrepreneurship. The Small Business Loans Act is directed precisely to that area. We must recognize that the Small Business Loans Act is not a new idea. It has been around since 1961. It has

been amended many times. It was designed in the original instance to provide for innovation to our economy in Canada.

I want to hearken back to a moment ago when we talked about developing entrepreneurship, the skill and so on. We now need to recognize that it is this legislation that initially was designed to do just that. We should look at some of the provisions of this particular piece of legislation and ask ourselves whether the new amendments will facilitate or will stand in the way of that kind of development.

We all know that small business has as its major impediment to further growth and development, very often in its initial establishment, access to capital. There are two kinds of capital to which business requires access. One is equity capital, which establishes the machines, the facilities, and those kinds of things. The other is loan capital. There are two kinds of loan capital. Usually it is centred around operational capital, which allows the business to operate from one day to the next. We discovered in the last year that even though everybody says there is all kinds of capital available, we have story after story of business telling us that it is the access to capital that is its stumbling block. It is not getting the access it needs.

I want to draw to the attention of the House some of the elements that came to our attention when we studied this problem in the industry committee.

With the amendments that were implemented in 1992, the loans provided under the Small Business Loans Act increased dramatically. Between 1993 and 1994 the number of loans grew to 42,500 from 13,000 in 1992. The new lending reached almost $2.5 billion and averaged $58,500 per loan, from a previous average of $37,000 per loan.

There was a sad note in the evidence that was heard before the committee. A 1988 study concluded that two-thirds of the loans would have been made even without the government guarantee, which at that point was at 90 per cent. Since the revisions, however, Mr. Al Cotton of the Toronto Dominion Bank told the committee that 75 per cent of the bank's small business loans would not have been made in the absence of the guarantee. Shortly after his presentation, Mr. Kluge of the Canadian Imperial Bank of Commerce stated that most SBLA lending would have been granted in the absence of the program, but that in certain high risk sectors, such as new restaurants, the guarantee was important.

We were left with a dilemma. Here we had two bank officials from two of the major banks, one saying that the loans would not have been given without the guarantee of the loans act, another bank official saying that they would have been granted. It becomes a real dilemma. Did this loan act really produce the kind of result desired or did it not?

[Andy Mitchell, Liberal, Parry Sound—Muskoka, ON]

Sure it did.

[Werner Schmidt, Reform, Okanagan Centre, BC]

My worthy opponent says of course it did. He comes from one of the banks that was not represented by those other two, so I suspect he would agree.

The cost of administering the program exceeds two per cent of administration, which is another problem. At the present time the Small Business Loans Act tacks onto the loan a two per cent administration fee, which becomes part of the principal and can be amortized over the length of loan, or I suppose the individual can pay it off up front if he wishes to do so. In any event, the two per cent is not sufficient to cover the loss or the administration of the loan.

The third point is institutional loans. Under this provision it suggests the loan level is rather high in this way of doing business between financial institutions and their various lenders. I want to draw the Haines-Riding study into this a little later in my remarks, when I will get into this in more detail.

I now want to go on to the specific provisions of this act as it is before the House today. The first of these is the reduction of the government's liability from 90 per cent to 85 per cent. In other words, the loan guarantees are now no higher than 85 per cent of that loan. That is one provision.

The second provision, which we should all pay very special attention to, says that future changes to the rate of the liability of government are transferred from Parliament to cabinet. This means that in the future the liability that will be incurred by this government and will rest upon the shoulders of every Canadian who pays taxes will be decided not by the people's representatives but by the cabinet. I think that is an abrogation of democratic responsibility. I want to take very strong exception to this. In fact I want to introduce right here the notion and the statement that the Reform Party will not support this bill on the basis of that provision alone. Unless an amendment is made to withdraw that provision and that transfer of power from the Parliament to the cabinet, we will oppose this bill, even if we would agree with everything else in the bill. We do not agree with everything else, but that is sufficient in my opinion to oppose the bill in its entirety.

Why do I take such a strong view of this? This is a democratic country. This country is based on the principles of democracy, which means that the people in this House who are elected to represent the Canadian people have been elected to look after the best interests of those people who have elected us. That means we should represent them as honestly as we possibly can, and do so fairly, justly, and equitably. That is what I was elected to do.

This kind of amendment takes away the right of parliamentarians to represent their people on the floor of this House. That is wrong. It is wrong in principle. The time has come for us to take very strong exception to this kind of amendment.

We all know that within the platform, the philosophy, and the principles of the Reform Party of Canada we stand for precisely the ability to represent our people. We want more free votes in this House. We have had some examples of free votes in this House, and the government is to be commended for those few instances. However, the government is to be severely chastised for those moments when its members did exercise their free vote and were punished for doing so. That is a fault, a blemish on this government's record in terms of its democratic principles and the application of democratic decision making.

We talk about a referendum. There certain instances when every person in Canada should exercise their right directly and immediately not only at the time of exercising a ballot in favour of a particular person but also in favour of major social, ethical or moral issues on which they feel very strongly and about which the majority should decide what the issue in Canada ought to be.

One which has been well publicized is capital punishment. We go on from there as well. There is the other place, the Senate of Canada, and we believe there is also responsibility that it be democratized; that the individuals who sit in that chamber to provide and exercise sober second thought be elected and that they fairly and accurately represent the various regions of Canada so there can be fair representation not only by individuals but by the various regions of Canada as well.

Therefore within that framework of deep philosophic orientation we oppose the provision in this bill which would amend the act in such a way that the power moves from the House of Commons, the Parliament of the country, to the cabinet.

Another provision is the application of an annual fee of 1.25 per cent to the administration of a loan, the outstanding balance, paid by the lender. It is very interesting how this fee is to be administered. It is to be paid by the lender and the lender may not recover the cost of that 1.25 per cent except through an increase in interest rates.

It is interesting what the act does. The earlier limit on the interest rate was 1.75 per cent above prime. The amendment proposed says the new limit is 3 per cent above prime. It does not take a mathematical genius to add 1.75 and 1.25 and come up with 3, which now means very clearly that the bank or any lending institution may increase its interest rates 3 per cent above prime and thereby recover its full 1.25 per cent. That is what this provision is.

Another provision provides for a claims processing fee. When we ask the various department officials how much that fee will be, when will it be applied, under what conditions will it apply, will it be a standard fee across any loan, will it make any difference, they say they do not really know because they have not yet decided whether they will apply such a fee.

Why does the act have this provision in it? They might want to recover certain costs associated with claims. That is very interesting but it begs the question of what kinds of conditions must a lending institution meet in order to avoid being assessed a claims processing fee.

There is absolutely no provision in the act that would suggest the parameters, the guidelines, the details under which a claims fee would be applied. It is dangerous when we have open ended legislation of that kind when nobody knows how much, nobody knows under what conditions, nobody knows under what guidelines it will be applied.

I was absolutely astounded when I read this. When we got the briefing, it sounded very different. When I went back to the actual act I discovered that really the slant was quite different. I want to read this exactly as it is written. Section 4(1)(e.1): "The minister may prescribe the terms and conditions on which a lender may release any security, including a personal guarantee, taken for the repayment of a business improvement loan".

We were told in no uncertain terms that this dealt with guarantees, the actual phrase being personal guarantees. I can see where a small businessman getting started who becomes a little bit desperate will actually provide a personal guarantee. He will say: "Here is my house and my personal effects. I will stand good on a personal basis for this part of the loan". When half the loan is paid the lender says he will now take the personal guarantee away.

That is only one small part. It includes the release of any securities, which includes anything else. It could be a facility, a building, equipment, land, a variety of things. If there is a loan outstanding of $250,000 and half of it is repaid, that is a $125,000 liability. If at that point the lender can now release security, where is the security left for the balance of that loan? I can see the understanding that it goes to the personal guarantee because the building is probably worth the $125,000, but if the lender cannot take that off too and the act allows him to do that then I ask myself what kind of protection there is for the Government of Canada on the hook for the guarantee of 85 per cent of that loan.

So much for a review of the particular provisions. There are some issues we should be aware of. I referred earlier to the Haines-Riding study from Carleton University in Ottawa. It makes some very interesting observations. I think we should go back into history a little. The Small Business Loans Act up until this point had a ceiling of sales of $2 million; in other words, a business that

had sales of more than $2 million would not qualify for the SBLA loan. Under this act now that level is $5 million.

The Haines-Riding study shows very clearly that businesses with sales of $2 million or less have a much lower failure rate when it comes to the repayment of loans than those with sales between $2 million and $5 million. The differential between those loans is a failure rate increase of 14.7 per cent. That is pretty significant.

We need to combine that with the increase in the amount of loans outstanding as well. In the past the maximum SBLA loan one could have was $150,000. That has now increased to $250,000, which means, although we cannot say for sure, if the size of the business and maximum loan has increased we can conclude the loss rate will increase proportionately. Therefore if it costs $100 million now on an annual basis to run this program what will it be under the new provisions? I think the answer is very obvious. It will be higher than it is today.

That brings us into a very serious conundrum. On one hand we have an act that is supposed to build and encourage businesses. It will do that in a variety of cases. It should then generate more tax revenue and things of this nature which would then increase the economy of Canada and everything would roll along more smoothly than it did before.

The maximum of the SBLA loan ceiling has now moved from $4 billion to $12 billion, a threefold increase. If it now, under the $4 billion ceiling, runs at $100 billion, what will it do under the $12 billion? If the proportion remains constant it will also be a threefold increase. We cannot afford that.

The national debt is somewhere around $560 billion, growing at about $1,000 per second. About $45 billion to $60 billion is paid out in interest, much of which is foreign currency denominated. With the Canadian dollar being where it is today, can anyone imagine what this is doing to our social programs? That is why we are in trouble with the health care system. That is why we are in trouble with transfer payments. That is why we are in trouble with welfare payments. That is what makes this kind of bill questionable.

Yet people say they were told at the beginning that 80 per cent to 85 per cent of the new jobs are created by small business. Right. Should we not encourage small business? Right. Should not our government programs to the greatest degree possible be self-financing? Right. This bill is supposed to do all those things.

If it does that, then we can support that. However, we still want to go back to the earlier point I made about this democracy. That is absolutely at the heart of this issue and we cannot, we dare not allow that to get in the way of implementing this bill.

I want to address one final point, competition. I want to read a very extensive point made very effectively by our study on small business. We were told by Mr. Doug Robbins of Robbinex that financial institutions are increasingly using the Small Businesses Loans Act-get a load of this-to finance assets, for example cars and trucks, that are able to obtain financing without a government guarantee.

Data provided by the Scotia Bank on its small business lending portfolio show that SBLA lending is more heavily concentrated in areas of transportation by as much as 25 per cent than the bank's total small business lending portfolio in which transportation and communication lending represents only 6 per cent. The representatives of Newport Credit and the Canadian Financing and Leasing Association, specializing in asset based financing, told the committee they are having difficulty competing with lenders who benefit from government guarantees.

Since when has the government become that great and wonderful arbiter to determine winners and losers in the marketplace? The government has no business getting into this area. If a business cannot succeed in the marketplace it should not be there. That is the part that bothers me more than anything else in a bill of this kind, this orientation. We need to recognize this is not a simple, easy answer to our economic problems.

The committee received conflicting views on the future of the Small Businesses Loans Act as well. It was suggested the act be expanded by extending it to working capital. Neither the Small Businesses Loans Act nor this bill does that. It was also suggested that it be restricted by focusing on rapidly growing business that enhances the country's knowledge base and generates skilled employment, which we already talked about.

With increase lending comes increased taxpayer exposure. We have already dealt with that. This amendment, although it goes part of the way, does not go all the way. It should go further.

The committee suggested we reduce the percentage of government guarantee, which has been done, reduce the percentage of assets that can be financed, and reduce the maximum loan amounts, which the bill does not do. In fact it goes in the opposite direction. It doubles the exposure that would have been happening under the act as it is now.

The bill has numerous shortcomings like releasing securities, any kind of securities as well as personal guarantees. We need to be very clear and an amendment is needed in this area.

This bill also increases the liability of government even though the minister stood up in the House and said the bill, because it is a self-financing or a cost liquidating kind of a program, does not increase the liability of government. I dare suggest the experience will show that it does increase the liability of government. If it does

not increase the liability of government then I ask the minister whether there is any need for a program of this kind.

Let me emphasize once again that the most serious flaw in the bill is that it disenfranchises parliamentarians. It moves the authority to make decisions and obligations on behalf of the people of Canada from the House to the cabinet. That is wrong. Democracy must never be denied.

I reiterate that unless that provision is removed from the bill we will oppose it.

[Brenda Chamberlain, Liberal, Guelph—Wellington, ON]

Mr. Speaker, I am pleased to have the opportunity to speak to Bill C-99, an act to amend the Small Business Loans Act and to share with the House the concerns and hopes of small business owners and managers throughout Guelph-Wellington.

At this important time in Canadian history I remind all Canadians that it is the hope of small business people in Guelph-Wellington, their families and their employees that Canada remains united. They recognize the imperfections of our confederation, but they realize, as we have in the past, that we can continue to evolve to make our country always stronger. They are confident that a united Canada, one that includes Quebec as an active member of our nation, will continue to be regarded worldwide as the best country in the world in which to live.

Bill C-99 is part of our ongoing effort to reduce the deficit, fulfil the promises we made to Canadians two years ago and provide the support that is necessary to enable small business to grow and to create jobs. I congratulate the Minister of Industry and the Minister of Finance who have directed and focused our efforts to strengthen small business in Canada. The Minister of Industry visited my community last year. He was welcomed by small business people who encouraged him to continue his initiative of providing support and assistance to them, so that they can continue to build a strong community in Guelph-Wellington and elsewhere.

Small business people in Guelph-Wellington, when talking to me, remind me that they have hope in our future. They talk to me as women and men who have taken risks in order to build a life for themselves and their families. They are creating jobs in my community and in every riding across Canada. They look to us, the federal government, to assist them in that important responsibility.

The Small Business Loan Act is part of our efforts. Since 1961 more than 420,000 loans, totalling over $15.5 billion, have been made to small businesses. These loans have helped small business gain access to capital for start-up, expansion and growth. The program's success lies in its ability to serve as an economic development tool and as an example of public sector and private sector co-operation.

Guelph-Wellington recently hosted, through the efforts of small business leaders like Catherine Billings, Anne Redfearn-Grobbo, Richard Zinck and Valerie Poulton, Community Spirit '95, a small business expo, which brought together business people to exchange ideas, share expertise and celebrate the successes of small businesses in Wellington county. The message that I received at Community Spirit '95 and wherever I meet small business leaders is: We need government to get out of the way where it causes us unnecessary burden; to listen to us when we have ideas for our future and to provide the assistance necessary for us to weather uncertainty and to expand our resources when we want to create jobs and strengthen our achievements. The Small Business Loans Act program allows every small business in Guelph-Wellington whose revenues do not exceed $5 million annually to ask for that assistance.

Small business people in my community understand the seriousness of our financial crisis. They know that deficit spending is not the way to sustain our economic future. They are concerned about taxation and they want the government to manage its money as well and as carefully as they manage their own money. They recognize the need to reduce expenditures and to refocus spending.

The Minister responsible for Public Service Renewal visited Guelph this fall where he spoke to representatives of small business about the program review that will redesign government. They welcomed the change because they support our efforts to spend what we have and not to mortgage our future.

Recently, the Small Business Loans Act program has suffered tremendous losses for the government. Assuming continuation of the historic losses that have occurred over the past few years, the annual program cost would increase by over $100 million. Clearly this is a threat to the future of the program. The potential cost of the program given these circumstances, and the government's need for deficit control required that the program be brought to full cost recovery.

The federal government included an examination of the Small Business Loans Act in its program review process. During the months of October and November 1994 the review included extensive consultations with major stakeholders, representing lenders and those who borrow. As part of our efforts to encourage more participation by members of Parliament, the recommendations of the industry committee and the small business working committee

were also taken into account. All stakeholders supported the move to full cost recovery.

Small business people in Guelph-Wellington know that in order to survive as a nation we will have to choose. They have told me that we can no longer afford the luxuries and excesses of the past. As they have had to do in their businesses, they have asked me to work for them to make decisions on what is important to us and for our future and to concentrate on what will make us strong again.

They do that in their businesses each and every day and they welcome a federal government that from the day of its election in October 1993 does the very same in order to secure a strong future for this country.

As part of our efforts we have introduced a new 1-1/4 per cent annual administration fee on each lender's average outstanding balance of the Small Business Loans Act made after March 31, 1995. We have also announced that the maximum interest rate that a lender can charge under the program has been increased by 1-1/4 per cent.

Bill C-99 also includes changes which will complete the move to full cost recovery and improve the administration of the program. These changes will mean that the Small Business Loans Act will be better targeted toward small business which really needs its help. These changes go hand in hand with our efforts to improve access to loans to small business by our financial institutions. While we aim at cost recovery, our commitment to strengthening the future of small business in Canada is unchanged.

Small business recognizes the need for co-operation. Each and every day in Guelph-Wellington small business leaders rely on distribution, transportation and communication in order to survive. They have called on me to bring a message to Ottawa. Let us work together: government, industry and labour to get the job done.

In Guelph-Wellington we know the importance of listening and working together to build a stronger community. This summer, Wendi Bacon of the Royal Bank Business Centre brought me together again with the leaders of financial institutions throughout my riding. We discussed the concerns of small business people, their frustrations in obtaining capital and their suggestions for strengthening their relationship with the banks.

Everyone recognized that there is more to be done. But it was also an opportunity to review what has happened in the past two years and to remind ourselves that we have met with some success.

Also this summer I had the opportunity to meet with small business people, leaders like Phil Greenway of Danby Products and Dwayne Mott of Orbex Computer Systems who reminded me that they want deficit reduction and they demand that the government plan carefully, consult extensively and act responsibly.

Community leaders like Michael Henry, general manager of the Guelph Chamber of Commerce, Ralph Macdonald of the Rockwood and Eramosa Township Business Association and Mike Lazarakos of the Guelph Small Business Association, bring together business and government in order to work out solutions and most important, to listen to one another in order that we improve and enhance small businesses in Guelph-Wellington.

Small business leaders throughout Canada have told the government that the primary lending issue for them is access, not the cost of financing. We believe that by making the Small Business Loans Act self-sustaining, these changes will ensure that access will continue.

In the past two years I have participated in the ground breaking of a new Purolator facility, welcomed the Minister of Industry as he visited Skyjack and Linamar, walked with the minister of agriculture as he toured Semex, visited countless businesses and congratulated our business leaders on their successes. Guelph-Wellington supports its businesses and it celebrates their successes.

As a former small business manager I share the frustrations of individuals, couples and partners who have a dream and who work hard to establish that dream in a business of their own. I also share the fulfilment and know how enriching owning, operating and working in a small business can be.

I am excited to tell small business owners, managers and employees that the federal government recognizes that it must create a better environment for jobs and growth in the small business sector.

We have eased restrictions on internal trade, proving to the world and to ourselves that federalism works. Removing these barriers is good news to many of the businesses that sell products and provide services to other parts of Canada. This is welcome news to Sleeman's Brewery, which knows that various provincial liquor boards practise selective listing policies. Mackinnon Transport should welcome this initiative. It is aware that transportation regulations differ from province to province. D&J Construction in my riding saw new opportunities because construction procedures are different from one province to another. Trodat Canada, Clear Choice Manufacturing and Autosparks are companies that have told me that our patchwork of regulation standards and various provincial laws are unacceptable to them and to their employees.

We have also opened doors through exports. Canada is a major exporting nation. By forging partnerships with the provinces and working as Team Canada we have built a new approach to selling Canada to the world.

Nipponia Export Limited of Puslinch is one example of this success. During a recent trip to Brazil it sold 200 cattle in a deal worth almost half a million dollars. The University of Guelph re-signed an agreement with a university in Chile. Valcom Limited

recently negotiated joint ventures and recruited distributors at Telecom 95.

The message from the business community of Guelph-Wellington is loud and clear: we can compete, we can produce and we can succeed.

Bill C-99 is not the sole solution to the concerns raised to me by my constituents. It is a part of our strategy to further our commitment to our future. It is legislation which fulfils promises, makes government more accountable through cost recovery and strengthens the relationship that exists between government and business.

We have more to do. Together we must address the problems of the GST and we must eliminate the underground economy. I am proud to be working with union representatives in Wellington county to give suggestions to the Minister of Finance and the Minister of National Revenue to address an underground economy which costs us revenue and costs us jobs. The underground economy does no Canadian any good. With it we prolong the deficit and we prohibit Canadian men and women from their responsibility of providing for themselves and their families. At the same time the people of Guelph-Wellington look forward to the government fulfilling its promise to replace the GST. We will do that.

We know that it will require all 10 provinces and the federal government to work out a solution to the GST which will make it fairer and simpler and ease the administrative burden on business. Again, my constituents have provided me with suggestions which I have been pleased to forward to the Minister of Finance.

The government remains strongly committed to small business as the main engine of economic growth in Canada. We have been told repeatedly and we are listening. The best that we can do for business, large and small, is to get the deficit under control. The changes that are included in this legislation are a step in the right direction. The user-pay system which is being adopted will mean that it is no longer a contributor to the government's deficit.

The changes ensure that the Small Business Loans Act will continue to be an important public policy tool to foster the growth of small businesses in Canada.

In Guelph-Wellington we like to celebrate our success. We believe we have a workforce that is second to none because we live in the best community in Canada. We know we can accomplish much when we all work together, stay positive, and keep focused. The enthusiasm evident throughout Guelph-Wellington is there because we want to succeed.

Two years ago the people of Guelph-Wellington helped to elect a Liberal government with a mandate for change. I say to my Quebec colleagues that the best anniversary present we can imagine is a united Canada committed to change, change that will result in jobs and growth for Guelph-Wellington and in all 295 ridings in this great country. As part of that mandate, Bill C-99 deserves our support.

[Andy Mitchell, Liberal, Parry Sound—Muskoka, ON]

Mr. Speaker, I appreciate having the opportunity today to talk about the Small Business Loans Act. Obviously as a government and as a party we believe the small business sector plays an important part in the economy.

The last time statistics were compiled, in 1993, showed that 911,700 businesses in this country had fewer than 100 employees, which is actually 99 per cent of the businesses that operate in Canada. So we can see the importance of the small business sector. In fact that number represents a 30 per cent increase in the number of small businesses in Canada over the previous 11 years. Not only is small business an important part of our economy, but it is an increasingly important part of our economy.

These small businesses with fewer than 100 employees-some are micro-businesses, with between one and three employees-account for 44 per cent of the jobs in Canada. More important, small business accounts for the vast majority of the new jobs being created in this country today. As a government, we recognize that.

We as a government understand that we need to assist the small business sector, that we need to create a climate, an environment within which the small business sector can operate successfully, so it is able to be profitable. By being profitable they are able to create employment, which is the bottom line. We want to ensure employment is created. Our government has done that in a number of ways. It has done it in terms of our fiscal policy. It has done it because we have addressed Canada's fiscal deficit and we have worked as a government to bring some economic order to this House.

By the end of this fiscal year we will have come close to reducing the annual deficit by half. In the last budget the Minister of Finance had a plan that would see our expenditures reduced by 19 per cent. The public service is being reduced by 14 per cent. We are bringing economic revitalization to this country and we are bringing some sanity to our economic house, but we are doing it in a way that recognizes that behind every expenditure line on the government's expenses there are real people, real Canadians. We are determined to do this economic exercise in a fair and equitable way for every Canadian.

The second area we have worked in to create a favourable climate for the small business men and women of this country is on

the regulatory regime under which they have to operate. There is no question that if we overburden the small business men and women with regulation after regulation they spend more time doing that than they do taking care of their business, creating wealth and jobs.

Already this government has eliminated 250 regulations that have served their purpose and are no longer applicable, and we have amended another 300 plus. We are very cognizant of the need to refine our regulatory regime and we are working every day to make sure we are protecting the interests of Canadians where those interests need to be protected by regulation while at the same time making sure we do not do it in a manner that overburdens the small business sector.

We come to the third component of our strategy for small business, which is the issue of access to capital. The Small Business Loans Act and the bill we have in front of us, Bill C-99, deal very much with the whole issue of access to capital.

I, along with some colleagues here in the House, sit on the industry committee of the House of Commons. That committee has worked now for close to two years on this very issue of access to capital. We have worked with the private sector in this country, with the Canadian chartered banks and with others to try to ensure that they take measures that will ensure that there is increased capital to the small business sector. To some extent, we have met with some small successes.

The banks looked at much of what we said and agreed that there needed to be a code of conduct that clearly outlined the relationship between the small business sector and the financial institutions. In effect, that code is now in place in all of the banks. It defines things like if a person is turned down for a loan they have to be told why. They have to be given the reason. They have to be told alternatives. It talks about when a loan is called and the amount of time that has to be given in order to do that. It is helping to take some of the surprises away. I was glad to see that was the recommendation of the industry committee and that the chartered banks followed that.

A second thing they have done is put in place an alternative dispute resolution system, the ADR. Basically it is a mediation process. It gives small business men and women who have a relationship with a bank and who are not happy with what is happening with that relationship the ability to appeal what is going on to an independent panel. This is a positive step. It was long overdue. I was pleased to see that it was with the initiation again of this House through the industry committee that the banks are in fact doing that.

We still have many challenges. One of the things that we know as parliamentarians is that in order to evaluate whether or not there is sufficient lending to the small business sector, whether there is indeed proper access to capital, we need to know exactly what is being lent and how much that is either increasing or decreasing. One of the things we have worked on in the last four to six months with the chartered banks is in fact that they will provide statistics on how much they are lending. And that is not just a gross amount of how much they are lending, but broken down by region, by industry, and by a number of other factors, so that we as parliamentarians and representatives of the Canadian public, and in this particular case the small business community, can in fact tell whether or not small business is experiencing a credit crunch.

One of the greatest difficulties we had in examining this issue in the last two years is we did not really have access to good statistics. We had a lot of anecdotal evidence, and when we called the banks they often said that was the exception rather than the rule. By insisting that we get these statistics, by insisting that this information be provided to us, we will have an opportunity to see not the exception to the rule but in fact what the rule is and whether in fact there is more capital out there available to the small business sector.

Complementing the private sector and their lending to small business, the government also has a role to play. The bill we are talking about today, Bill C-99, is one of several components of the government's interaction with the small business community in terms of access to capital. We have the Business Development Bank, formerly the Federal Business Development Bank of Canada, which lends to small business, we have the business development corporation that used to be part of the human resources development department and now is part of the industry department, which is lending to small business in rural areas, and we have something that is a very important project, something called the Small Business Loans Act.

I am probably one of the few if perhaps not the only member of this House who has actually used that program as a lender-not as a borrower but as a lender. I can say unequivocally that in the 20 years during which I operated in a private financial institution, this program helped provide capital to the small business men and women of Canada. Indeed, there were incremental loans that happened as a result of the existence of this program. It was not simply a duplication. It was not simply providing loans that would have otherwise been made. It actually allowed for loans to be made under this guarantee program that otherwise would not have been able to take place.

It is an important program. It can really help people in very meaningful ways. For instance, if you are a long-distance trucker and you want to buy your rig-they sometimes cost well over $100,000-this program will help finance that. It will finance that type of equipment up to $250,000. It will allow somebody to get into business who might not otherwise have been able to.

If you are a retailer, one of the things you have to do when opening a retail shop is the leasehold improvements in the business. This program allows for financing of leasehold improvements. That is a tough thing to get financed in the private sector. Through the Small Business Loans Act, a lot of people who otherwise might not have been able to get the credit to do that, who otherwise might not have been able to open their shops, are able to. It is because of this program and the good this program is doing.

If you are a manufacturer, ofen you have to go out there and buy the equipment. It might be a stamp machine, a conveyer belt, some sort of equipment. Again, this program can help that business do it.

This is not, as one of the members of the Bloc mentioned before, a duplication of an existing program in Quebec, the Paillé program. It is not a duplication of that. That program provides credit up to $50,000. This program provides it up to $250,000. That program is for start-ups. The small business loan is for start-ups as well, but it also allows us to finance existing business expansion. That is an important source of new wealth creation, an important source of new job creation. Not only are we helping start-ups, but we are also helping existing businesses find capital for their expansions.

In addition, the Small Business Loans Act has a longer amortization than the Quebec program. They have a relatively short amortization of three years, whereas under the Small Business Loans Act you can amortize up to ten years. For the small business person who is starting off with a new business or with an expansion, it is important to have that longer amortization so that their payments, at least in the beginning, can be relatively low and their cashflow can be reserved for expansion and to keep the company going in what usually are the most difficult years, either at the start-up or after they have just had an expansion.

I want to talk a little about the cost of this program. I believe government has a role in creating an environment for small business. I believe government has a role in certain circumstances to assist directly, such as in the Small Business Loans Act. I also think it is important that we do this in a way that is revenue neutral, that recovers costs and is not going to place a large burden on the Canadian taxpayer.

We have seen this work. The Federal Business Development Bank, now the Business Development Bank of Canada, has for many years worked on a mandate of cost recovery. It has to structure its programs, its guarantees, its collateral, its fees, and its interest rates so that it recovers cost. It works, and it is proven that it works.

This SBLA program now is moving along the same basis. It is going to be a cost-recovery program. There is always going to be a certain amount of loss that is going to be created with any loan program. If you lend money, you are going to have a certain amount of loss. The objective as a prudent lender is to make sure there is a provision for that loss and there is the revenue to carry that.

I know that one of the members opposite talked about the great liability that was going to be incurred by the government through this program. In a five-year timeframe this program is going from $4 billion to $12 billion. That is $8 billion more capital for the small business men and women of this country. That is important to remember. It is happening over five years.

The potential liability is 10 per cent of $12 billion. To suggest that is the true liability of the government, that that is what is at risk, is like going to a chartered bank and saying that the risk is the total loan portfolio. Of course we do not say that. We do not suggest to any lender that the risk is the whole loan portfolio.

What lenders do, what we are doing as a government and what the Department of Industry and the Minister of Industry are doing is figuring out through prudent assumptions that the loan loss history is likely to be based on historical data and on economic performance. It is the same thing the banks do. They make a loan loss provision and as a government we ensure that the revenue stream is sufficiently large enough to cover potential losses.

In reality it is not a burden on taxpayers. It is a cost recovery program that ensures capital is provided to the small business sector.

I will comment on a couple of things that were said about how we will go about recovering the costs. The program has always had a 2 per cent fee that is paid up front. It can either be paid in cash or it can be amortized over the length of the loan.

In doing that examination and trying to ensure that it is a cost recovery program, it was determined that additional revenues would be required. Therefore a new fee was put on, an administration fee of 1.5 per cent.

One of the members of the Reform Party was complaining that the administration fee was being passed through not as a direct fee but rather through the interest rate. A small business person will prefer that it happens that way because the fee will be paid on a declining balance, as opposed to the full amount at the time it was borrowed. In reality the fee will be less, because it is on a declining balance calculated through the interest rate, than if the 1.5 per cent was paid up front.

The minister acted prudently and in a way where business people can have some control over their fee based on the speed at which they pay back the advance. That was a good way of doing it. The minister structured it so that the banks pay the administration fee. Then they have the option to collect it from their clients. I hope the

chartered banks, as part of their commitment to helping the small business sector, would absorb a part or all of that fee.

When the plan was originally amended back in 1993 the maximum rate was 1.75 per cent, but the banks charged prime for the most part. They were anxious for the business. They went out there and they got it. Even though there was a maximum rate they did not charge it. They charged prime.

Now that we have added another 1.25 per cent or 1.5 per cent to allow for the fee and put the maximum rate up to 3 per cent, I do not understand why all of a sudden it was not good enough to charge prime or prime plus a half or prime plus one. They seem to be jacking up the rates to the maximum. I do not think that is what they should be doing. They have to take care of their profits. They have to take care of their shareholders. However I believe they have a responsibility to the small business community, and one way they can show that is by absorbing a portion of the fee.

The way they have structured the fee is appropriate. It allows for small business people to save some money through their declining balance.

In summary, it is a good piece of legislation. It is an act that has been in place for many years. It has helped a lot of small businessmen and women. There are many businesses today. All we have to do is walk down Main Street in my hometown of Gravenhurst or any other community in my riding, and I dare say in any community in any member's riding, to see businesses operating today that would not be operating if this loan program did not exist. It does its job. It creates and helps small businesses. It creates and helps employment.

Not only does it do that. With these amendments it will do it in a way that will not cost the taxpayers of Canada anything because it will be a cost recovery program. I applaud the Minister of Industry for the bill. I applaud the Minister of Industry for the changes. I know they will be good for Canada.

[Dianne Brushett, Liberal, Cumberland—Colchester, NS]

Mr. Speaker, we all know that small businesses exist throughout Canada, both in rural and urban centres.

In Atlantic Canada, small business is the backbone of the economy. It sustains the economy. The majority of small businesses, whether they are in Nova Scotia, New Brunswick or Quebec, is owned by local people employing young people and older people. The businesses have been there a long time, are part of the community and are sustainable.

My question is for the hon. member from Parry Sound-Muskoka. From his experience in the lending side of financial institutions and his experience with the Small Business Loans Act, could he elaborate on the value of small business to the Canadian economy to ensure the money stays in Canada for Canadians and provides a sustainable economy that supports our future?

[Andy Mitchell, Liberal, Parry Sound—Muskoka, ON]

Mr. Speaker, I will try to be as brief as I can.

The hon. member makes the excellent point that small businesses tend to create employment locally, tend to purchase locally and tend to form part of the local economy. The profits earned from those businesses are retained within the community as opposed to going elsewhere.

As someone who was involved in economic development initiatives in a rural area, organizations would look for the big hit. They would look for the big 500 to 600 person plant to come in and create employment. Those days are long gone. That is just not in the cards any more, or if it is it is a rare occasion.

We have to build the local economy one small business at a time, one job at a time, and this act provides an important tool to allow that to happen in rural communities.

[Murray Calder, Liberal, Wellington—Grey—Dufferin—Simcoe, ON]

Mr. Speaker, last summer I had the opportunity of driving around with the member for Parry Sound-Muskoka. We were on a little mission called the access to capital for small business task force.

Over the past two years I have been here, I have seen that the federal government only has the capability to create the atmosphere for the creation and the enhancement of small business. We do not have the money any more to throw at jobs because of deficit reduction, et cetera. One thing we have done is establish the small business centre in Toronto to cut through the red tape.

Bill C-99 is only one part of the overview. The Federal Business Development Bank and business development corporations play very important and crucial roles in the formation and enhancement of small business.

Could the member give us any information on what is being done with them to improve that part of the overview?

[Andy Mitchell, Liberal, Parry Sound—Muskoka, ON]

Mr. Speaker, I will address a couple of examples the member mentioned. One is northern Ontario where we have a regional development fund called FEDNOR that is able to provide funding for small businesses.

One way to be creative is to combine the money from FEDNOR with the money available from the Business Development Bank of Canada. If FEDNOR is able to provide funding to cover contingencies, for example losses of 5 per cent, the Business Development Bank of Canada can lend with a higher risk profile. We are looking at taking approximately $500,000 from FEDNOR and levering that

through the Business Development Bank, or through a private financial institution, up to $20 million.

Government has the ability to use some creative tools in the way it finances and uses some of our programs. It is the same with the Small Business Loans Act that we are talking about in Bill C-99. It can work in conjunction with other credit facilities provided by private lenders. The term credit can be covered by the Small Business Loans Act and the bank or the private institution can come along and be happy to provide an operating credit. In a lot of cases we work in conjunction with various programs.

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

Mr. Speaker, I take this opportunity to congratulate the hon. member for Parry Sound-Muskoka for his efforts on the bill. As part of the industry committee and as part of various task forces, he has travelled widely in Canada to receive information from small businesses.

Actual consultation with small businesses is an area that has been overlooked in the past. They do not have a large staff or a lot of money to spend carelessly. Every penny they spend in their budgets is very important to them.

My question to the member concerns communication and information to small businesses once the bill is passed. It is very important that the consulting process and improvements continue to go forward. Getting the information out to the many small businesses around the country is very important. The member might want to comment on that.

[Andy Mitchell, Liberal, Parry Sound—Muskoka, ON]

Mr. Speaker, I thank the hon. member for the question because it makes an excellent point. Not only is it important to have the programming. It is also important that the small business sector knows the programming exists and how to use it.

One initiative of the government, the Minister of Industry, is the single window approach to providing information so that instead of having to go to maybe five or six different offices to gather all the information, small business people can go to one location to talk to an individual and learn the various programming aspects they need to know to help their small businesses. There are many vehicles for doing that. It can be done through chambers of commerce. Most communities have a chamber of commerce. It can also be done through economic development offices.

The idea of a single window approach to provide information to the small businessmen and women is one that we recognize as a government to be important and are working on to ensure it takes place.

[Philip Mayfield, Reform, Cariboo—Chilcotin, BC]

Mr. Speaker, it has been a pleasure for me to participate in the work of the Standing Committee on Industry. With a businesslike attitude committee members have gone about their work for the benefit of all Canadian small businesses and of assisting them in competing in the world economy of today.

I was particularly appreciative of the comments of the Parliamentary Secretary to the Minister of Industry regarding his concern for the amount of red tape, the paperwork and the difficulties with taxes faced by small businesses. It is with this kind of attitude we approach many of the difficulties our business people are facing with a view to assisting them to make our Canadian economy as competitive, as viable and as profitable as any in the world.

Small business is the cornerstone of the Canadian economy today. Using a definition of small business being a concern with less than 100 employees, there are about a million small businesses registered in the country. This means that small business makes up nearly 99 per cent of all business enterprises in Canada. Small business accounts for about 60 per cent of the economy's private sector output. These are substantial figures.

As well, small business entrepreneurs presently create eight out of ten new jobs. In a day when we depend on new ideas being translated into new jobs, and new products and new services being translated into a larger market share of our highly competitive business world, we do not need to argue the value of small business to the Canadian economy. Rather we need to learn how to encourage entrepreneurs to develop new ideas and new products.

As a nation Canada has historically been highly creative. We have learned how necessary it is to adapt to both the economic and physical environments. However, we have been less successful in taking our ideas and inventions from the laboratories and basements of entrepreneurs and getting them into the national and international marketplace.

It was extremely educational for me before I was even on the committee to attend some of the hearings and listen to the difficulties small business people were having in securing loans, securing the capital they needed to get their ideas and concerns off the ground. In some instances there were business people with many orders in their order books, ready to sell but with no money to work to produce the product. One very significant reason for this lack of success has been the shortage of loan capital, of equity capital, available to someone to take a well developed idea or an advanced product prototype and make it a commercially viable asset of the Canadian economy.

So often we have heard stories of how someone had this great invention but after years of struggle to get it marketed they finally

gave up and went to the United States where there was capital, resources and an invitation waiting, all that was necessary to make it a marketable product. These are sad stories, sad because they tell of a loss to our country not only of the product, but more important, the loss of the people who took what they had and left.

The Small Business Loans Act was an initiative by the federal government in 1961 to help remedy this situation. By and large this has been a successful intervention by the government. The Small Business Loans Act has provided a 90 per cent government guarantee to banks, credit unions and other lenders who make loans to small business people. Loans that are properly made and placed under the umbrella of this act will not be a write off to the lender if they are not repaid.

The Small Business Loans Act guarantees loans made to small business interests that qualify. There is an interest by government for which I want to offer some congratulations in supporting this sector of our economy. Today about $6 billion in loans to small businesses is guaranteed in this manner. Under these proposed amendments to the act, the amount of money available with this government guarantee would substantially increase.

However, in the real world where not everything works out or goes quite as, planned there are some aspects of the Small Business Loans Act that do need updating from past experience. There need to be corrections; there need to be some changes.

The amendments brought forward in Bill C-99 are being proposed by the government. One of the problems the government faces is there is about a 5 per cent failure rate in these guaranteed loans. Estimates are that without some means of recovering these losses, this loan guarantee program could cost the government in the order of $100 million each year which would be an unacceptably high cost. To its credit, the government is proposing amendments to the act to rectify this problem.

One amendment would reduce the size of the loan guarantee from 90 per cent to 85 per cent. In this move the government quite properly is telling the money lenders that they have to bear some of the risk in lending to small business enterprises. This should not make a significant difference in the willingness of lenders to make loans under the Small Business Loans Act for in many instances, lenders have already said that they are including fully secured loans under this act when it is hard to explain why this need is there.

A second amendment which I support is the establishment of a 1.25 per cent annual administration fee that can be passed on to the borrower in the interest rates that are applied. It has already been said that this would increase the premium on the interest rate to about 3 per cent, which is significant. After listening to people looking for capital, it seemed to me that more often it was not the interest rate which was so important to them but the fundamental access to capital which they needed.

It is my opinion that it is completely in order for the borrower to bear some of the cost of this guaranteed loan program. The borrower is perhaps the one who will benefit most from it. When the lenders are competing with one another for loans, the interest rate is always a negotiable matter. Therefore, when competition is keen and the lender really wants to get the money out into the marketplace, the borrower may get the benefit of a loan interest rate which is significantly lower. I do not have the same difficulty with this amendment as do some other members of the House.

A third amendment which Bill C-99 would make to the Small Business Loans Act would allow a borrower who has repaid one-half or more of the loan to be released from the personal guarantee held by the lender. This would not leave the loan unsecured by any means. The collateral and physical assets held by the lender would remain in place until the loan was repaid.

Often a loan is made to a partnership and over time the partnership may dissolve. In an instance such as this, where a former partner is no longer part of the business, there may not be a strong desire to stay and there also may be a serious financial need to free the guarantor of the burden which he has taken on. These amendments would conditionally allow that to happen. They would also allow a borrower in some way to separate his or her corporate and personal interests.

My interest here is not to add more burden or more risk to the government. Far be it from that. However, with the withdrawal of the personal guarantee, the borrower is free, which allows more opportunity for the expansion of business and of commercial activity.

There is an amendment regarding a claims processing fee which is troublesome for me in that it is poorly defined. How would it be implemented? When would it come into place? These amendments need careful attention and further revision before they can be supported.

Bill C-99 has one essential flaw. The bill gives the Minister of Industry the power to make future regulation changes without the consent of Parliament. The Minister of Industry will argue that this transfer of power allows the department to act more expediently in response to the rapid rate changes of the financial markets.

Parliament could transfer every policy change away from the elected members to senior bureaucrats and ultimately to cabinet ministers. Then we would not be called a democracy, would we? This trend by the Liberal government is a very serious challenge to the authority of Parliament.

This portion of Bill C-99 must be amended to respect the rights of Canadians to have future regulatory changes soberly examined by their elected officials and not left in the hands of the executive or the bureaucrats. Without the amendment of this portion of the bill the Reform Party cannot give its support to this otherwise sound piece of legislation.

There are over 4.2 million Canadians employed by small and medium size businesses in Canada. The Canadian Federation of Independent Business recently surveyed their membership on job creation. Catherine Swift, vice-president of the organization, recently claimed that small firms and new businesses are the ones which have created all the new jobs over the past couple of years. This is an accurate claim. In the 1980s, 85 per cent of new jobs were created by small and medium sized businesses. This trend is continuing to grow as more and more Canadians explore the possibility of starting their own businesses.

The Liberals must make good on an election promise they made in their red book. They promised "to focus on small and medium sized businesses because they can and must be the determining factor in turning around what has so far been a jobless recovery". By creating a more efficient financing model for small businesses, the government is becoming more responsible for the development of small and medium sized businesses in Canada. The long term financing of these businesses becomes even more assured with these cost recovery amendments.

The minister needs to amend Bill C-99 to give Parliament the right to make future regulation changes. Parliament must not give this power away. This is necessary because losing the right to make future changes could in the long run harm not only the democratic process but even the small business loans program itself.

Members of Parliament are elected to examine programs such as this one in the interests of their constituents. To lose that ability would be inexcusable. I encourage the Minister of Industry to cease seeking such executive control. With this aspect of the bill eliminated, the small businesses of Canada can get to work and access a plan that is working well and could be improved on to make its viability assured even during these highly competitive times.

[John Williams, Reform, St. Albert, AB]

Mr. Speaker, I am pleased to rise to speak on Bill C-99, the amendment to the Small Business Loans Act.

The summary of the bill concerns me. The bill states: "This enactment amends the Small Business Loans Act with the objective of moving the small business loans program to full cost recovery". I thought that the whole concept of the Small Business Loans Act was for the government to try to provide some underlying guarantee of picking winners and losers, because let us face it, it has been in that business for a long time, through grants, subsidies, contributions and giving away money by the millions and billions. As an aside, did you see my waste report where $11 billion in grants and contributions are given away by this government every year?

Getting back to the bill, the concept of the Small Business Loans Act was to provide a guarantee to higher risk businesses that had the potential to generate jobs and economic growth. The government was prepared to underwrite that program to try to foster development. It is not a bad idea, although we Reformers always felt that a dollar in the hands of an investor was far better than a dollar channelled through a bureaucrat and back into the economy. Nonetheless, the government is now going to channel this money through the bureaucrat back into the economy on a full cost recovery basis. The first question which comes to mind is: Why are we doing this?

[Dennis Mills, Liberal, Broadview—Greenwood, ON]

That is not the bill.

[John Williams, Reform, St. Albert, AB]

Bill C-99, an act to amend the Small Business Loans Act, is the one I am talking about. That is the bill that is on the agenda at the moment. My hon. colleague from the Liberal Party says that is not the bill. I am quoting right from the bill. Does he not know what we are talking about right now and what the bill says? The bill states "small business loans program to full cost recovery". Let us talk about this full cost recovery.

The government has lots of power. It is going to establish an annual administration fee to collect money from the lenders, put it in a pocket and it is going to restrict the lenders from passing on the fee to the borrowers, except through interest rates. The government is going to say to lenders: "We are going to charge you an administration fee of maybe 1 per cent or 2 per cent of the amount of money that you are lending out. You are prohibited from charging your borrower an administrative fee but you may include it as a mark-up on your interest rate". Remember full cost recovery.

The lenders will have to pay to the government 1 per cent or 2 per cent of the total money they lend out. The government will take this pool of cash and reimburse the lenders who make bad choices because they are the ones who are going to collect the guarantee from the government.

I scratch my head trying to figure out the logic because I cannot find any in this particular bill. It says that the government, by skimming money off the prudent, intelligent lenders who made intelligent, prudent investment decisions are required to pay a premium to the government so that it can build up a pool of cash to reimburse the lenders who made poor and irrational decisions. It does not make sense. We are penalizing good and competent lenders and subsidizing incompetent lenders. The poor business-

man does not get one nickel's worth of a break because this is on a pooled cost recovery basis to the government.

I cannot understand the logic. That is why the Reform Party says that a dollar in the hands of an investor, a businessman, an entrepreneur, a consumer, is far, far better than a dollar in the hands of a bureaucrat. The amendments to this act are living proof of the justification of Reform Party policy.

I cannot understand the government which talks about creating jobs, jobs, jobs. I recall that was its slogan during the election. The Liberals were going to spend $6 billion on the infrastructure program. Let us take the money, channel it through bureaucrats, lend it out or give it away to try and create jobs. It did not work.

The President of the Treasury Board appeared before the government operations committee trying to justify the infrastructure program. After spending $6 billion, by his own admission he has created 8,000 permanent jobs. That works out to $875,000 per job. He would have been far better off putting the money in the bank, taking the interest and giving it to the people, saying: "Do not bother going to work" because they would have had a lot more money. Ten per cent on $750,000 is $75,000 a year just by writing a cheque.

This type of policy is no good. It is not going to generate economic growth. It is not going to do anything for the lender. It is not going to make the lender more willing to give money to the small businessman. It is not going to make the small businessman accept any more risk because the successful small businessman is now going to end up paying an insurance premium through the lender into the government's pocket so it can bail out the guy who does not make it. That is just another tax on the competent and the successful small businessman who is trying to create jobs, pick the country up and generate some economic growth so we have a chance of digging ourselves out of the economic morass that the Liberal government and the Tory government have put us into.

The government talks about moving from this House and into cabinet the opportunity to make regulations. This is an affront to the powers of this House. We have seen a continuous and continual erosion of the powers we have in this House being passed over to the executive, to cabinet. Pretty soon the House will be an irrelevant debating society where we talk about these bills but have absolutely no control whatsoever over them.

If we approve this bill as it is being proposed, we are passing all the authority to cabinet. What good is that? When will the bill come back for public debate? When will we be able to find out that this bill is not working, that it is not creating jobs, except bureaucratic jobs? When? That is why this type of bill must be opposed at every opportunity.

As Reformers we believe in having accountability and responsibility. It is about time this Liberal government introduced some cost benefit analysis to tell us what in its opinion will be the outcome of the amendments it is proposing. How many jobs is it going to create in the civil service? How much is it going to cost the taxpayer? How many jobs will be created through this in the private sector? How much tax revenue will it produce? How many new jobs will it create in the small businesses that it intends to help?

Conversely, is this actually going to shut down jobs in the private sector? That is going to happen as we find it detracts from the motivation of small businessmen to borrow money through the Small Business Loans Act. The whole concept is recognizing that there are opportunities. A chance has to be taken. A risk has to be taken.

That risk is going to be avoided because the government says it does not have the money any more. It is going to skim the money off the successful entrepreneurs, channel it through the lenders back to use as write-offs on the bad loans and bad decisions. That is a dreadful decision.

In the last decade small business has accounted for the largest share of the net new job creation in the country. It employs almost half the labour force. Small businesses create eight out of every ten new jobs in Canada. They do it because of entrepreneurial spirit, not channelling money through the bureaucracy back out in some complex formula that Liberal members want to bring into cabinet so they can change and modify it if they so desire.

Give entrepreneurs freedom from rules and regulations. Give them freedom from red tape. Let them go out there and create jobs. By giving them the motivation and incentive to do so, unemployment will come down. New jobs will be created. Additional taxes will be paid without any tax increase. The deficit will come down. Our competitiveness will improve on the international stage. We will have all these things by getting the government out of the lives of small businessmen and women and not into it more at their expense.

The Department of Public Works and Government Services has found that small companies accounted for 79 per cent of the suppliers to the federal government in 1993-94 fiscal year. At least we are glad to see that the federal government recognizes that small business provides products that compete with the best in the world and are worth buying for the Government of Canada.

However, despite the excellent contribution small businesses make to the Canadian economy, the Liberals have not come through on their electoral promise to create a better environment for small business to work in.

I heard some comments from the other side of the House. I am sure they were not too complimentary on our position but I hope my remarks will cause them to think about the spirit of the bill. I would love to talk to them afterward and find out how they can see the logic and benefits in here.

These are the points I would like to make on this bill. I do not think that when it gets into committee and we hear witnesses-the banks that are going to be paying the fee to the government-that they will be complimentary. Some small businesses that use the program will be sceptical about why they should pay the premiums. Therefore, I hope the government will give some serious thought to redrafting the amendments to recognize that small business wants to provide the motivation.

I agree with the idea that the government should be involved in creating an environment for small business to create jobs. That is great. But the underlying philosophy here is that the government wants to be seen doing that but with the small businessman's money. On that point, I totally and absolutely disagree.

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, I was somewhat astounded by the discussion of the member for St. Albert about the aspect of guarantees somehow being circulatory moneys that small business has to pay in order to support these loans.

Most of us understand the concept of bad debts. I understand the member is an accountant. We all understand that small businesses have accounts receivable and usually make provision for bad debt losses. Indeed, bad debt losses under the Small Business Loans Act have been very small. I think they average out at about 2 per cent.

The member does not seem to understand that in order for the government to protect itself from bad debt losses it needs to find a method to recover a certain amount of cash flow from successful loans. This is no different from any other normal business operation. These are the things I thought the Reform Party would applaud the government for because it is taking a business approach to lending.

The member does not seem to be able to understand the whole concept. It seems to elude him that somehow we are taking money from one pot and putting it into another at the behest of small business operators. Quite frankly, it is normal business practice and something for which the government should be applauded.

The member talked about creating jobs. This program has been around for a considerable length of time. We are now fine tuning it, allowing it to expand. The jobs the member talks about being created by the small business environment, in fact, were assisted by this program. Some of the great jobs he spoke about which have increased over the last number of years have been as a result of the small business loans program.

The member also talked about infrastructure spending and how it is a terrible waste of government money. If we look at the public assets and the whole concept of why there is public administration in the country, it is to build certain public assets that for whatever reason businesses did not want to build, such as airports, roads, sewer systems, et cetera. The member does not seem to understand that is still a commitment of government in most places in the country and it does create jobs.

I would like to ask the member whether he understands fully the concept of guarantees and of making provision for guarantees?

[John Williams, Reform, St. Albert, AB]

Mr. Speaker, I will be glad to respond to the member who I understand is also an accountant.

The point I am trying to make is that the small business community is being provided this guarantee courtesy of themselves. It will have to pay for the guarantee. The successful entrepreneur will pay higher interest rates to the bank, which will in turn pay a fee back to the federal government, which will use the pot of money collected to reimburse the lenders for the bad decisions they make or for the loans that go sour and the small businessman who does not make it. The successful businessman will pay a premium to underwrite the bad debts incurred by the lenders.

This will no longer be an underwriting by the federal government. It states "loans program to full cost recovery". Therefore there will be no underwriting except a great paper war by the federal government. That is the point I am trying to object to. There is no guarantee by the federal government. It is only a guarantee to be paid by the guy who wins to pay the guy who loses.

I know that up until now the federal government has picked up the tab for the losers who have not paid back their loans, and the winners have gone on to create jobs and build this economy. Now they will to be asked to do that with another chain around their legs as they try to climb up above high taxes, high interest rates which will be even higher now because they now have to pay the federal government, the high Canadian dollar and so on. How can we expect them to compete? That is the idiocy of this bill.

Getting to the member's other point on infrastructure, of course taxes pay for infrastructure. Of course we need infrastructure. However, the promise at the last election was jobs, jobs, jobs through the infrastructure program. The President of the Treasury Board said: "Six billion dollars netted us 8,000 permanent jobs". That, by simple math, is $750,000 per job, which is far more expensive than any job costs in the private sector.

[Dennis Mills, Liberal, Parliamentary Secretary to Minister of Industry]

Mr. Speaker, I was listening attentively to the member. I could not help but get frustrated when he kept referring to the small business men and women who failed as losers.

I would like to know how the member would propose that the banks, which administer this program, would chose who would get these small business loans in a way that there would be an absolutely perfect track record? What special insight or ability to judge entrepreneurship, what special formula does the member have that would allow him to never make a mistake on judging a small business person's ability to absolutely be-

[The Deputy Speaker]

The hon. member for St. Albert.

[John Williams, Reform, St. Albert, AB]

Mr. Speaker, again the hon. member really has not applied his mind to the subject matter at hand.

Bankers incur losses and bad debts every year, billions worth. Their customers have to pay that through lower interest rates on deposits and higher interest rates on loans and they are required to make a profit in the meantime.

Let us take two lenders. One is a prudent lender who can make solid investment decisions and the other is careless and reckless and invests money not nearly as wisely. The one who is prudent and careful and analyses the lending applications his or her losses will be less. He or she may still have losses but they will be less.

[Dennis Mills, Liberal, Broadview—Greenwood, ON]

How do you know?

[John Williams, Reform, St. Albert, AB]

Because they are prudent and more careful and analyse the applications. Their losses will be less. They will pay a premium and will have to charge the customers the premium, passing it on through the interest rates. The borrower will pay a higher rate. The money will flow into the government coffers.

On the other side there is the reckless lender who is not too careful about the application he approves. His losses skyrocket. It will not cost the reckless lender any more money because he is reimbursed from the fund the government has. Now we are separating the risk and the reward because the prudent lender who analyses the applications will have lower losses, hence higher profits, and the reckless lender will not suffer any consequence of his recklessness with lending because he will be reimbursed by the successful entrepreneur who borrowed at a different bank.

That is the whole point I am trying to make. We are just moving this money from the successful borrower through the lender into the government's pocket to subsidize and reimburse the lender who makes the bad decisions, who lends the money to the business that may fail. That is the point I am trying to make. It is fairly clear, it is fairly simple and I hope the hon. member realizes that.