Mr. Speaker, it is appropriate that we discuss Bill C-99, an act to amend the Small Business Loans Act, at this time because this week is small business week.
We know that small business is the lifeblood of our economy. Statistics tell us that 99 per cent of businesses in Canada have fewer than 100 employees. Because of their numbers in small businesses they tend to drive the economy. Growth in small business means economic growth, but the bottom line is that the government does not create jobs, businesses create jobs. Small businesses create almost 80 per cent of new jobs in Canada.
Government plays a very key role. It creates the climate and builds the framework for economic growth. The Liberal government has taken important steps to create the right climate.
We have reduced regulation. We have eliminated 250 regulations already and amended another 300-plus. The process continues to eliminate paperwork and regulations and streamline the cost of doing business.
We have improved the access for small businesses to technology through programs like the technology partnership program.
We have reduced the paper burden and red tape that small businesses struggle with. Ten business service centres have been opened up across Canada from coast to coast, which provide 24-hour a day services.
We have just announced the business networks initiative, which brings businesses together. Networks and working together with people makes things happen and makes business grow. We have introduced a single window business number at Revenue Canada so businesses can make one call instead of four.
We have introduced new legislation like Bill C-102, which creates the equivalent of free trade zones in Canada and allows Canadian businesses like those close to the U.S. border in my riding to compete against the U.S. companies head on. This bill will also assist businesses throughout Canada, wherever they may be.
We have the team Canada trade strategy aimed at helping businesses export. SMEs produce only 10 per cent of our exports, and only about 4 per cent of the small business sector exports. We need to improve this record. We need to make continuous improvements in assisting small and medium size entrepreneurs to export. This is where government can play a key role.
As a member of Parliament I have been able to work with a committee in the St. Catharines-Niagara area to help small business understand what it takes to export and how really easy it is if you know the system. By teaching this system the committee is trying to assist some 350 small exporting companies in my area.
This leads us to a problem, because we know it takes money for small business to expand. Business needs access to capital. One of the largest problems facing small business people and entrepreneurs is financing. Here too government has played a major role. The industry committee of the House has studied this issue extensively. It was very interesting to see the participation of all parties, the Bloc, Reform and the government members, working together on improving the system within the industry committee, such that we could make more improvements for all businesses no matter where they are located in Canada.
Banks have responded to introduce codes of conduct and an alternate dispute resolution system and some have ombudsmen. Maybe there has been some picking on the banks and maybe it was required, but they are also working with many of the small businesses and many of the community committees to really get at making things happen.
Government also plays a direct role in lending to small businesses. We do this through the Business Development Bank and the Business Development Corporation. We lend through the Small Business Loans Act.
The Small Business Loans Act creates an economic development tool for the government. The act was first passed in 1961. Since that time more than 420,000 loans have been made, totalling over $15.5 billion.
Recently the SBLA has been running at a cost of $20 million to $30 million per year. This is a cost the government incurs; in other words, it is a cost to taxpayers. As lending has increased over the last couple of years, we are now looking at a loss of over $100 million annually. Over five years the program will be tripled, from $4 billion to $12 billion, and then we are looking at a potential liability of $12 billion plus. That represents a problem for the government and for the taxpayer. That is why the government initiated a review last year and consulted with borrowers and lenders from across the country and the various agencies and institutions involved.
For a government that is tackling the deficit and the debt, we know that we cannot sustain this SBLA program on taxpayers' backs forever. The government has had to reduce its spending. We have cut overall expenditures by 19 per cent, the public service by 14 per cent, transportation subsidies across this land by some 97 per cent, business subsidies by 60 per cent. This is only a small sample of our cuts to reduce the deficit.
The important item I would like to bring forward to the House is that while we have been doing this cutting, we have done it in a progressive manner. We have done it by getting input from all the people involved and understanding the facts that are required as we go through these cuts.
Yes, we are making changes, and for the last number of weeks changes seem to have really hit the House. We have been making those changes a little at a time, not going from one extreme to the other but making those continuous improvements that are so important to industry.
The reason we have Bill C-99 before us today is to make the small business loans program revenue neutral for the government over time. When this legislation is implemented, we will be able to recover the cost of the program and the burden will not be placed only on taxpayers.
As has been mentioned, several actions have already been taken as of April 1, 1995. There is a new 1.25 per cent annual fee levied on lenders' average outstanding balance of loans made after March 31, 1995. The maximum rate a lender can charge increased by 1.25 per cent, the prime interest rate plus 3 per cent for floating rate loans and for residential mortgages it is rate plus 3 per cent for fixed rate loans. This means the program has been put on a cost recovery basis for all loans made after March 31.
Bill C-99 makes further changes to the Small Business Loans Act. The amended act will grant authority respecting the release of security, including personal guarantees taken by lenders for the repayment of the SBLA loans. It will grant authority to make regulations for the establishment of a claims processing fee. The bill will also improve government guaranteed coverage for low volume lenders.
The bill will enable the SBLA program to respond more quickly in the future to changing economic and program circumstances by allowing the guaranteed percentage to be adjusted by regulation, to be adjusted as mentioned as the future unfolds. As things change around the world, we are in the global economy and we will be able to adjust and make those changes on an ongoing basis. As has been said over and over, in this world nothing stands still; everything changes slowly and continuously.
The amended act will potentially accelerate an already legislated decrease in the percentage of an SBLA loan which is guaranteed by the government from 90 per cent to 85 per cent.
The theme for small business week this year is: New Markets-Opportunities for Growth. The government wants to help small businesses grow and expand. I have outlined the many ways in which we are doing that. However, we are not doing a favour to businesses if we hand them money while increasing the deficit which thus reduces the strength and growth of our economy.
We are working to get the basics in place. We are providing several sources of income to small businesses which have difficulty attaining access to capital through other sources. We are improving and refocusing these programs so they will better target those who really need them.
Without the subsidy in the SBLA program's present interest rate the higher cost of these loans will mean financially strong businesses will switch to lower cost commercial financing. More funding will be available to small businesses that really need the programs. We will be doing this in a revenue neutral manner which will not cost taxpayers extra dollars they do not have.
This is important legislation which builds on the government agenda to help businesses succeed. We want a strong and vital growing economy and we need businesses to grow to accomplish that. This bill means financing will be available to help the small business person and it will be provided without an additional cost to taxpayers.
The government has put forward many programs to assist small business. Community groups, of which I have one in my community called the FMP group, are excited about the changes this government is bringing forward to help small business.
I urge all members in the House to join me in support of Bill C-99, an act to amend the Small Business Loans Act, so that we can work together across the country. We have shared across this country and have made improvements across this country. Likewise, I hope that when the people of Quebec, including Quebec's business people, come forward on Monday they will vote no in order to continue to share and make improvements in this great country of ours.