Madam Speaker, it gives me great pleasure to enter the debate at report stage of Bill C-99, specifically Motions Nos. 1 and 5 brought forward by the member for Trois-Rivières.
I was interested in the member's speech. He discussed the need to defend lenders. It seems unusual to me. Sometimes when I look at the Small Business Loans Act the question that comes readily to mind is why the Government of Canada has to encourage and guarantee lending to small business, which is the obligation of our financial community.
I was very surprised to hear the member defending moving the guarantee from 90 per cent to 85 per cent. He defended the potential liability for another 5 per cent on these loans to lenders. The banks of the country have reported something in the neighbourhood of $1 billion worth of profits. It is apropos that as legislators and parliamentarians we are concerned about the small and medium size business communities and where they fit.
The question could well be why the guarantee is at 85 per cent. The intent of the legislation is to recognize a liability exists for the Government of Canada in terms of these loans. As far as I can understand, the guarantee has been amended to 85 per cent basically to allow more lending to occur. The growth in the SBLA program has been remarkable. In that sense it has been very successful in channelling investment loans to small and medium
size businesses. By leaving the guarantee at the 90 per cent level, loan losses could well exceed $100 million a year.
As we have heard from the hon. member from Okanagan the government is committed to reducing our expenditures and our risk to loss. He spoke about a maximum liability of something in the neighbourhood of $12 billion. That is erroneous. That kind of risk would be like giving somebody an $85,000 mortgage on a $100,000 house and expecting to lose the entire $85,000. Most of the small business community could look at that situation and realize it is an unrealistic assumption.
Most of the loan loss provisions that have resulted in losses to the government are somewhere in the neighbourhood of 2.5 per cent. That is not unreasonable in the lending business, which gets me back to my original question of why we cannot encourage our financial institutions to be more aggressive in lending to small and medium size businesses rather than require the federal government to guarantee the loans.
The hon. member mentioned a number of other issues, not the least of which was investment in new and emerging technologies. Certainly that is a good point. The history of the loans has been that they are used for capital additions to small and medium size businesses, basically equipment, real estate and so on. The aspect of new technology still befuddles the investment community generally. We need to look for new and different types of sources of capital for small and medium size businesses. I suspect small and medium size businesses and the SBLA program do not look to this source of capital to finance emerging technologies.
About a year ago I had the opportunity to tour the Royal Bank. I talked to some of the portfolio managers and listened to their concerns about emerging technologies. I still believe that the financial community has not come to grips with how to deal with emerging technology. It is still very much focused on the concept of security, based on what it was doing 10 or 20 years ago, looking for hard assets as security for the loans.
The most prevalent asset was real estate. I do not have to tell my colleagues what has happened in the real estate industry in the last five years. The banks, in an effort not to be burned twice, are getting back to using real estate as a security item, which has compounded the problems of small and medium size businesses. The banks are refusing to enter even traditional markets because they do not know from where they will get security.
Through the Small Business Loans Act the government has attempted to inspire financial institutions to come forward and lend to small and medium size businesses. Most businesses will be smaller, based on some of the changes to the act. When we are talking about sales of $5 million and so forth a lot of people in the riding of Durham do not think that is small business; they think it is big business.
The changes to the SBLA will allow it to be more focused on genuine small businesses. The question is how big businesses occur. They occur from the emergence of small businesses that are allowed to grow within the system. The Small Business Loans Act has really been a hand up for some small businesses. As the hon. member for Broadview-Greenwood suggested, it may well be the only hand up that exists between the financial sector and small and medium size businesses.
The second part of the motion deals with the possibility of having the industry committee approve changes in the guarantee aspect of these provisions. One thing that small business needs is flexibility and rapidity in decision making.
I question whether it is in the purview of the committee system to undertake this sort of review process knowing the heavy workload the committee constantly has in this place. I also question whether it is within the competence of the committee to make those kinds of decisions.
In order for the committee to change these kinds of guarantees it would need rapid and up to date information about the experience of loan losses. It would have to be able to understand emerging tendencies within the lending business.
I really question whether it would be a service to small and medium size businesses which would find a great lag in being able to have a flexible relationship with the government. I think the government is attempting to be very flexible in allowing this plan to emerge and foster support of small business.
In conclusion, I am opposed to both of these motions for the reasons I have mentioned.