Mr. Speaker, before I begin my comments I should note that I was listening closely to the member for Kamloops. I know of his interest in the banking industry, of his lengthy experience here in the House and I believe on the finance committee.
In his remarks he used words such as deeply disappointed and pathetic and other kinds of language. However, I recall being in Toronto recently with the Standing Committee on Industry where we heard from the banks. I believe the testimony was in July or August. In the promotional material from either the Royal Bank or the CIBC, in which the hon. member had spent six weeks, it was using comments of his praising the banks. I was disappointed to see that.
It gives me pleasure to speak to this bill. The provisions of the bill are the result of consultations with leading Canadian business people such as the Canadian Federation of Independent Business. Equally if not more important to the undertaking was the report of the Standing Committee on Industry "Taking Care of Small Business". I had the privilege to sit on that committee as a government member from western Canada.
The legislative measures introduced in Bill C-99 are ultimately about access to capital for small business. Following the recession which began around 1990 small businesses in Canada had undergone unprecedented restructuring for a new and emerging global economy. These challenges have been more difficult because of the impediments and constraints to access to much needed capital.
Bill C-99 through amendments to the Small Business Loans Act will provide a more predictable relationship between the banks, the Government of Canada and the business community. I will not reiterate here the specific provisions of the SBLA but will merely state its intent and purpose is to enhance that financial environment and relationship between borrowers or small business and the Canadian financial institutions.
Stated very simply, the Government of Canada agrees to stand with small business and where the banks have refused to take the risk on new or expanding businesses, the government will partner and stand with small business to ensure small business loans are available to those who need it the most.
It is instructive to state that legislative changes are, in addition to reacting to the recommendations of the business community, in keeping with the government's belief that small business wants this government, and indeed all governments in Canada, to reduce their
expenditures including those which include direct and indirect subsidies to small businesses.
In recent years the SBLA program has cost taxpayers almost $20 million to $30 million a year. However, the loan loss coverage for the year 1994-95 is estimated to run at close to $100 million, threatening the sustainability of the program itself.
Of equal importance is the fact that 40 per cent of the loans covered by this insurance program would have been made regardless. We are told by outside experts analysing the loan applications made through the banks that 40 per cent of those loans would have been made anyway. They did not need this expensive coverage that government was providing.
Without the high cost of the subsidy these firms would now be seeking financing at a much lower cost than under the provisions of this bill. Furthermore, this will allow those firms that really need financing to have those 40 per cent move out into the traditional lending areas and those new small businesses will occupy the space at the bottom or the top of the lending priorities and we hope creating new jobs.
During the presentations made to the committee on industry the witnesses told members that they would be willing to pay higher premiums, for instance, in the knowledge based industries if they could get the capital needed. Repeatedly the 60 interveners and witnesses that we saw and an equal number the presentations that were submitted to the committee were saying to us that they did not mind paying 1 or 2 per cent more on a loan because if they have a knowledge based industry they are prepared to pay that kind of money to the financial institutions if they are willing to take a risk on them. The point spread was not the real issue.
It is quite interesting to note that the small business community continually talks about the importance of the cost of borrowing money. They were so convinced of their product, so convinced of their market access, so convinced of their success in those small businesses, that they did not mind paying another point or two. They needed an opportunity and somebody to stand with them to take a risk on those businesses.
I would like to talk for a moment about western Canada and in particular of my riding of Provencher in Manitoba. Farming and small business is really the backbone of that constituency. Increasingly I am told by finance officials in the department of finance in Manitoba that small business in the agricultural sector is going to increasingly in the 21st century provide the cash receipts for the finance department as well.
This reflects the fact that in western Canada the number of people employed in small businesses is almost 40 per cent. What is really striking, and a lot of folks perhaps do not realize it, is that in Ontario it is only 32 per cent. These statistics are quite revealing and demonstrate clearly to me, as a member from Manitoba, the importance of small business in western Canada and in the next five or ten years how important this sector will become in our area.
During the first quarter of 1994 in Manitoba, for example, companies with up to 50 employees accounted for almost 20,000 jobs, far in excess of those larger companies with 300 employees or more. In 1994 companies with less than five staff also accounted for many of the growing small businesses in Manitoba. I am told 4,737 new business name registrations were filed in Manitoba in 1995.
A profile of these is very important. I speak to this issue as a member from rural Canada, from rural Manitoba. A profile of the start-up businesses in western Canada demonstrates that a typical new firm, 87 per cent, have less than five employees and for the most part, 57 per cent, are located in rural areas and run out of the homes of the operators. In other words, most of the small business growth is probably a young or middle aged couple who have started a small business out of their home, are looking for a loan, probably less than $25,000 to start. This is what we are told in the data we have received from the banks. These small businesses are creating the jobs in rural Manitoba and indeed in my riding of Provencher. There have been great gains made in terms of the start-up of companies. In 1990 there were almost 600 registered bankruptcies in Manitoba. In 1995 there have been 96. That demonstrates quite clearly what is happening. The economy and the dynamics of capitalism are restructuring. Larger companies are laying off people but young entrepreneurs are stepping up to the plate, trying to get access to capital in order to start a small business.
Here we see a profile of the 21st century entrepreneur who is younger, working out of the home and more likely to be involved in agriculture related small business.
What is the federal government doing? In addition to the changes to the SBLA and the Small Business Development Bank of Canada, what other kinds of measures is the government employing, particularly in western Canada, to help these people?
Through the auspices of the Department of Western Economic Diversification the government will provide a fund of $30 million for debt capital. These resources will be directed toward biotechnology and agri-biotechnology with loans ranging from $50,000 to $500,000. There is also an innovative ten-year program creating a $100 million capital pool to assist Canadian agricultural value added processing firms through patient debt capital. The government will partner these agreements.
The banks have complained both publicly and to the standing committee that in responding to the needs of the business community the government was bank bashing. I want to make it clear this was never the intention of the committee. It was merely to prod the banks, as the hon. member for Kamloops suggested, to open up their gates for small business to have access to capital.
Congratulations to the banks for doing that. The Royal Bank of Canada and the Canadian Imperial Bank of Commerce have joined with the western economic development fund to provide this patient debt capital and they should be applauded for that. However, there is a lot of work to do and a long way to go.
What the government is prepared to do through these public and private instruments is reach to the small business community, to stand with it and encourage it to take the necessary risks.
There have been a number of recent initiatives in my riding which are important and give testimony to the growth in the agricultural and small business sectors. There is a great change going on not only in the small business sector. As we have heard many times, the government is cutting back on its expenditures. That is what the Canadian people have asked it to do. The government has made changes to the Western Grain Transportation Act and those subsidies to business pursuant to its obligations under the WTO.
What has been the outcome of these programs in western diversification? Recently I had the privilege with the Minister of Western Economic Diversification to join with 25 farmers from the Altona region of southern Manitoba, where we produce some of the best durum wheat in the world, to provide them with a $1 million loan for a pasta plant.
These are the initiatives young farmers are asking the government to undertake with them. They intend to build a $5 million plant. They will put in $1.5 million of their own money and hopefully there will be a financial institution, perhaps in southern Manitoba, which will step up to the plate and say it believes in the process as well. It will create jobs in the community of Altona and St. Jean.
It is vital to not only ship our raw resources out of the country but to keep them within our borders, to create the value added, to create the jobs, to keep the wealth and the technology in Canada. This is increasingly important.
Recently there was an announcement by McCain of a $55 million expansion of its potato processing plant. I had the privilege of joining with some private sector investors and my colleagues in the province of Manitoba, the provincial government, to make an announcement for a $55 million canola crushing plant.
Farmers, rather than paying $800 to ship their canola to the west coast or through Thunder Bay, can now drive their trucks 50 or 100 miles down a two lane highway to deliver that product to that plant. The jobs and the wealth from the value added of that product will stay with those farmers.
The pasta plant provides such a dramatic example of that. Farmers last year were getting about $160 a tonne for durum wheat used for pasta. Astoundingly, Canadians had imported 77,000 tonnes of pasta, packaged, at a price of almost $1,600 a ton. It is a great idea that the Government of Canada would stand with those 25 farmers and say: "Instead of shipping your product to the U.S. where it is being processed and shipped back to Canada, we will provide you a loan, not a grant, not a giveaway, a loan". Through that loan and working with those people that $1,600 will stay in our communities. That is a good thing, a positive thing.
We are expecting within a few months, after the announcement of the changes to the Crow, close to $500 million of investment in Manitoba alone. The banks have a role to play in this. The government cannot repeatedly be the instrument and the primary catalyst for these kinds of undertakings. The banks have a fiduciary responsibility, having the privilege of banking in this country, to act and react and join in partnership with small business. This is the one of the key areas they have forgotten.
I conclude my comments on a recent initiative in my riding of Provencher, again through the auspices of the minister responsible for western economic development, with the francophone communities in Manitoba. The francophone communities have developed a francophone chamber of commerce with ten different communities, six of which are in my riding.
We have said we are willing to stand with those communities and work with them to utilize their capacities of their French language, their entrepreneurial skills, their low labour costs, their style of living which is outside of Winnipeg in wonderful communities. If they choose they can send their children to an English school or to a French school. There are both there. We have stood with these mayors and reeves and people in the French communities to provide funding of up to $1.5 million over five years to work with them.
We hope and believe that people from across the country and indeed the world will invest in those French communities and capitalize on their capabilities in precisely the same way thatMr. McKenna in New Brunswick has been doing over the last two years.
This is a clear example of a French community in western Canada, in rural Manitoba, whose origins are from the St. Maurice valley in Quebec, Lagimodière and the first settlers who came from the St. Maurice valley and settled in the west, whose descendants are Louis Riel, the first member of Parliament for Provencher, the seat I now occupy.
I am here to report to the House that these French people I service and have the privilege of servicing in the riding of Provencher in rural western Canada are doing very well indeed. They have their French language. They have their French culture. They have their French communities.
They are not asking to remove themselves from Canada. They are not asking to tear themselves apart from the people of Manitoba. They are telling me to tell the House they are doing very well and that they are joining with the Government of Canada in these kinds of initiatives.
They are not abandoned. We are with them. The Government of Canada is with them and I believe all Canadians are with them.