Mr. Speaker, I am very pleased to speak to Bill C-99.
Since taking office two years ago the government has created an economy of employment that has grown. Good fiscal management is the foundation of the government's jobs in a growth agenda. The 1995 budget marks a decisive turning point, making $7 in cuts to government spending for every new $1 of tax revenue raised. The deficit is being reduced, as planned, and the red book target of 3 per cent of GDP by 1996-97 will be met.
Small business has been the engine of job creation in Canada in the last decade. To fulfil its promise to help them compete, the government has cut red tape and has increased access to government services, financing new technologies and export markets.
Our trade missions to China and Latin American led by the Prime Minister brought home $10 billion in trade deals for Canadian businesses and positive jobs for Canadians. Barriers to trade within Canada are dropping, thanks to the agreement on interprovincial trade. These efforts help Canadian businesses find markets for their products and services at home and abroad.
Changes to the Small Business Loans Act is one of the most significant efforts of the government toward a strong economy and creating opportunity for growth. The changes made by Bill C-99 will enable the completion of the process of modernization and improvement that has brought the SBLA program to full cost recovery. This renewal will relieve the financial burden of the program on Canadian taxpayers while enabling the SBLA to continue to provide its benefits to small business.
Over the years the program carried out under the Small Business Loans Act has been very successful. The SBLA was passed in 1961, and since then more than 420,000 SBLA loans, totalling over $15.5 billion, have been made to small business.
The benefits of SBLA are widely recognized. It provides needed help to small businesses, which are so important to the Canadian economy. The program is open and simple to administer. It is delivered by private sector lenders who have great expertise in the granting of credit and the monitoring of loans.
The program's success both as an economic development tool and as an example of public sector and private sector co-operation has inspired similar guarantee programs at both the federal and provincial levels in Canada.
In recent years the SBLA program has been running on an annual government cost of $20 million to $30 million. However, following a significant program change effective April 1, 1993 the annual activity increased from $500 million to $2.5 billion in 1993-94 and to over $4 billion in 1994-95. Assuming a continuation of the historical loss rate, this meant that the annual program costs would increase by over $100 million. Clearly this was a threat to the sustainability of the program.
Both the potential costs of the program and the government's overall need for deficit control required that the program be brought to full cost recovery. Consequently the government initiated a review of the program. Extensive consultations with major stakeholders representing both borrowers and lenders were held in October and November 1994. Recommendations were also provided by the industry committee and the small business working committee of the House of Commons. The views of the federal Liberal caucus task force on small business were taken into account as well.
The major recommendation of all those consulted was unanimous: the government should act quickly to put the SBLA program on a full cost recovery basis. We have responded.
Two major changes were made through regulatory amendments that came into effect on April 1, 1995. First, a new 1.25 per cent annual fee was levied on each lender's average outstanding balance of SBLA loans made after March 31, 1995. Second, the maximum rate a lender can charge under the SBLA was increased by 1.25 per cent to the prime interest rate plus 3 per cent for floating rate loans and to the residential mortgage rate plus 3 per cent for fixed rate loans.
These changes have put the SBLA program on a sustainable cost recovery basis for all loans made after March 31, 1995. Now Bill C-99 will continue the process of renewal by putting in place additional changes to the SBLA. It will grant an authority respecting the release of security, including personal guarantees taken by lenders for the repayment of SBLA loans. It will grant an authority to make regulations for the establishment of a claims processing fee.
Bill C-99 will improve government guaranteed coverage for low volume lenders. It will enable the SBLA program to respond more quickly in future to changing economic and program circumstances by allowing the guaranteed percentage to be adjusted by regulation, and it will potentially accelerate an already legislated decrease in the percentage of an SBLA loan that is guaranteed by the government from 90 per cent to 85 per cent.
The changes that will be brought about by Bill C-99 will complete the transformation process that has made the SBLA program sustainable. Putting the program on a full cost recovery basis has caused the cost of loans made under the SBLA to increase slightly. However, the federal government's consultations with all parties recognize the need for the program to be self-sustaining.
The changes we are making are entirely in keeping with the need to reduce subsidies to business and the overall need to get the deficit under control. These changes actually mean the SBLA will
be better positioned to target its loans toward those small businesses that really need its help.
At present, an estimated 30 per cent to 40 per cent of SBLA loans go to enterprises that are able to take advantage of normal business financing. Without the subsidy implicit in the present interest rate, the higher cost of SBLA loans will mean that these financially strong businesses will probably now switch to lower cost commercial financing.
Even the most successful programs must be kept relevant and responsive and must be run in an effective manner, especially in these days of deficit fighting and limited government resources. The increase in government costs resulting from the surge increase in SBLA activity was a challenge that had to be met if the SBLA was to continue to serve the needs of small business. That challenge was met, and now the changes we are proposing will further enhance the administration of the SBLA program.
I bring to the attention of the businesses and people in Quebec who have been part of this program and who have participated in it in an effort to better not only the economy of Quebec but also the economy of Canada that this is very beneficial to the province of Quebec. Obviously we hope that all those businesses, when it comes to voting on Monday in the referendum, will recognize the importance of staying within Canada and vote with the rest of Canadians with a resounding no.