Mr. Speaker, I am pleased to comment on Bill C-5, an act to amend the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act and the Income Tax Act.
Many provisions in Bill C-5 are commendable but this legislation could have been greatly improved if more Reform amendments had been accepted by the Standing Committee on Industry. Before I discuss the positive provisions of Bill C-5, however, and how Reform is willing to help to improve the bill, I will comment on the general state of bankruptcy in Canada.
Bankruptcy is a very serious problem in our country. Consumer bankruptcies have soared in the past 10 years from approximately 20,000 in 1986 to a new record of over 60,000 in 1995. Sadly, analysts estimate that Canada is heading for another record level of bankruptcies in 1996 as there have been 46,827 consumer and business failures so far this year across the country. That is up from 37,937 in the same period in 1995. I repeat that bankruptcy is a very serious problem across Canada.
Why are consumers and businesses failing financially? The answer can be found in a recent report by Industry Canada. It states:
Bankruptcies are a critical indicator of the country's economic health and at the same time the key indicator of the economic difficulty facing individuals.
The government study goes on to point out that high unemployment is the main reason for bankruptcy rates. When people have jobs they can pay their debts. When they do not have jobs they cannot pay their debts. It is that simple. Therefore, the way to help people stay solvent is to give them jobs. I know that members opposite understand this very simple equation. I also know that members opposite probably do not want to see Canadians go bankrupt. Why are members opposite not doing something to help create jobs in the country?
On October 15 the Prime Minister said: "Canadians don't need to read my lips, they can read our record". Let us read that record today. There are 1.4 million people presently unemployed; two million to three million people are underemployed; four million workers are worried about losing their jobs and it is the longest stretch of unemployment above 9 per cent since the great depression. It has been like that for a long, long time and it has not been addressed by the government.
The Liberals would have us believe they have a plan to create jobs but we have not seen one. The finance minister's message to Canadians is that low interest rates are the best medicine for the economy. Despite the lowest interest rates in years, unemployment increased last month from 9.4 per cent to 9.9 per cent. It is quite clear you cannot push the economy up a hill with interest rates. There must be income growth and job growth.
On top of giving Canadians high unemployment, the Liberals have dished out more pain through social program cuts. They have cut transfer payments by 40 per cent. They have cut health care payments by $3 billion. They have cut benefits to seniors. They are dismantling social programs to pay the interest on the $600 billion federal debt. All Canadians receive from the Liberals is pain and pain and more pain, not jobs, jobs and more jobs.
To create jobs and reduce bankruptcy rates the government must reduce taxes. A reduction in taxes means more money in the pockets of consumers, small business people and investors. Consumers that spend more money will create the permanent well paying jobs that Canadians needs. What consumers need is a tax cut, not another interest rate cut.
As far as I know there are no provisions in Bill C-5 that would directly create jobs in this country. There are, however, some commendable aspects of this legislation which I will discuss next.
First, in the Bankruptcy and Insolvency Act spouses are not considered creditors for the purpose of proving claims for spousal and child support in bankruptcy proceedings. Bill C-5 would amend the act so that claims for spousal and child support accrued in the year before the bankruptcy took place would be claims provable in bankruptcy proceedings.
This means that a person who is receiving support payments from a bankrupt individual who is in arrears in his or her payments will be treated as a preferred creditor in bankruptcy proceedings. Ranking spousal and child support claims as preferred claims is a positive amendment to the Bankruptcy and Insolvency Act.
Second, clause 93 of Bill C-5 amends paragraph 157.1(1)(b) to extend the range of persons for whom the trustee may arrange counselling. Counselling may now be arranged for those persons who are financially associated with the bankrupt person. This means that not only can the bankrupt person be given professional help so that he or she does not become bankrupt again, but others such as common law spouses can also receive counselling.
Third, paragraph 105.2 of Bill C-5 makes student loan debts non-dischargeable where the bankrupt has ceased being a full time or part time student or within two years of ending their studies. This clause means that people can no longer graduate, declare bankruptcy and then walk away from their student loans. Bill C-5 would close a major loophole in the BIA which costs the federal government $60 million a year.
Some people argue this amendment is unfair because most students declare bankruptcy out of need rather than for convenience. They also assert that students must have the right to be discharged from all of their debts when they declare bankruptcy. Both of these arguments may have some substance but we all have an obligation to pay our debts.
Moreover, Bill C-5 recognizes that students may experience genuine economic hardship and it allows a student loan debt to be discharged after two years where the bankrupt has acted in good faith and is experiencing financial difficulty. This is a fair and equitable position.
I have just discussed three positive provisions of Bill C-5. There are more but the most laudable sections of Bill C-5 are those that were amended by my hon. colleague from New Westminster-Burnaby, clauses 1 and 105.
The amendments made to these clauses by my hon. colleague provide greater protection to the victims of crime. Under the Bankruptcy and Insolvency Act, criminal offenders could be released from having to pay damages arising from assault which have been awarded in a civil suit when they declare bankruptcy.
With my colleague's amendments to Bill C-5 an order of discharge does not release the bankrupt from any award of damages by a court in civil proceedings in respect of bodily harm intentionally inflicted or sexual assault or wrongful death resulting therefrom. With these amendments victims of crime now have greater protection.
I have outlined many of the commendable provisions of Bill C-5. Overall it is a good piece of legislation but, as I have mentioned, it could have been even better if the Standing Committee on Industry would have accepted all of the Reform amendments.
For example, Reform proposed that Bill C-5, in clause 6, be amended by replacing the word "may" on line 12 with the word "shall". In this instance the Superintendent of Bankruptcy has too much discretionary power. It is only fair that when applicants for trustee licences meet the superintendent's criteria they should be
issued the licence. It should not be up to the superintendent's discretion.
An argument against our amendment came from the hon. parliamentary secretary. He said that the inclusion of such words as "shall" creates nothing but an increase in the size of the bureaucracy necessary to administer the act. I do not know how this can be possible. It seems to me that our amendment would decrease bureaucratic activity.
Exchanging words such as "may" with "shall" reduces the amount of consideration the superintendent must give a trustee application. For example, if an applicant meets the criteria set out by the superintendent a licence is issued. The superintendent does not have to think about whether the licence should be issued after an applicant meets the criteria. Bureaucracy is reduced, not increased.
The Superintendent of Bankruptcy also opposed our amendment. He said: "Mr. Chairman, the issuance of a licence requires an individual assessment or evaluation of the character, the competence and qualifications of the individual. The other thing that may not always set out criteria are grounds of public interest, which may not all be spelled out specifically. All the criteria require a level of appreciation, a level of discretion in the decision of issuing the licence. Some of the criteria may, by itself, require the use of some discretion".
By the superintendent's response we can see that the word "may" actually allows a certain element of capriciousness to enter into the issuing of trustee licences. This should not be the case. There should be no avenues for acts of favouritism in any legislation.
The superintendent should follow a specific and objective set of criteria in issuing licences. If an applicant meets the criteria the licence must be issued. There should be no discretionary power given to the superintendent.
I have been hearing lately that the granting of discretionary power is becoming a favourite activity of the government. For example, a few weeks ago a lawyer who works closely with federal government legislation told me that he has seen the government use the word "may" to replace the word "shall", which we just talked about, and the phrase "in the opinion of the minister" more often than ever before. Why is this the case? Why is the government placing more discretionary power than ever before in the hands of the minister and government appointees?