Debates of March 17th, 1997

An Act To Amend Certain Laws Relating To Financial Institutions

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, I do not appreciate the answer I was given. I asked two questions. On the first issue the member gave a nice political speech about foreign banks and what is not in the legislation.

He said that I am confused. Yes, maybe I am confused. I am confused because the government shoves legislation down our throats, does not even give us a copy of the legislation and expects us to debate it.

The press release to which I referred was issued by the government on February 14. That was four weeks ago. It said what it was going to do. It said that it had listened to everybody. It said that the matter had been reviewed, that it was different from the June 1996 white paper and that it was going to include a new regime allowing foreign banks directly into Canada. That is where I obtained that information. If the government can change its mind in four weeks, maybe it should give all of us notice.

The member did not answer my second question on tied selling. The question was: What safeguards are in the legislation for my benefit as a person who has not had a chance to read the final version of Bill C-82? I wonder how many Liberals have read the final version. What is in the bill that will satisfy the concerns which some Canadians have about the issue of tied selling? What is in there to protect the consumer from undue pressure and coercion? What is in the bill which allows the banks to hold their heads up high and claim they are not doing it? What is in the bill? I would like an answer to that question.

[Barry Campbell, Liberal, St. Paul's, ON]

Mr. Speaker, I am sorry if I offended the hon. member opposite. He has not done his homework by his own admission. When I rise to ask questions on questions and comments I have usually read the sections I am asking about, read the press releases properly, and know generally what I am talking about.

The foreign branching regime will be the subject of additional legislation in place by the end of this year. It is not in the bill. The press release makes that perfectly clear. That was his first question.

His second question was on our banks abroad. I answered it.

His third question was on tied selling. I am tempted, as lawyers say in court sometimes, to respond to all three questions by saying asked and answered.

Specifically on tied selling, we have proposed a change in the law with respect to coercive tied selling in direct response to the testimony we had. We would welcome the member's input at the finance committee on what he thinks should be done.

[The Deputy Speaker]

The motion of the hon. member for Calgary Centre is acceptable as to form.

It is my duty pursuant to Standing Order 38 to inform the House that the questions to be raised tonight at the time of adjournment are: the hon. member for Frontenac-agriculture; the hon. member for Mackenzie-railways.

[Roger Pomerleau, Bloc, Anjou—Rivière-Des-Prairies, QC]

Mr. Speaker, as my hon. colleague from the Liberal Party indicated, in 1992, the federal government conducted a comprehensive review of the legislation governing the operation of financial institutions and changed things that had remained unchanged for 50, or even 60 years, in some cases.

At the time, the industry asked that the act or amendments thereto be reviewed after five years to see what, if anything, had gone wrong with the 1992 reform. That is why we are doing this now, in 1997.

We have before us Bill C-82, an act to amend certain laws relating to financial institutions. My hon. colleague from the Reform Party referred to this bill as a highly technical 250-page bill, which it is indeed. These amendments will affect a fair number of acts. It will affect the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act, the Trust and Loan Companies Act, the Canada Deposit Insurance Corporation Act and the Canadian Payments Association Act, to name a few.

This bill is very much a symbol and an object lesson for Quebec. A symbol because, once again, it contains provisions that encroach upon Quebec's jurisdiction-but I will get into that later; we have used the word "encroachment" so often in the past three and a half years that it is beginning to stick in my craw-encroachments that fly in the face of the Canadian Constitution.

It is kind of funny to see Quebec being taken to the Supreme Court of Canada to find out whether we have the right, under the constitution, to take a democratic step in this country, while every day, the Liberal Party, the government in office, encroaches on, invades provincial areas of jurisdiction without even bothering to ask permission, thus violating its own law. It even amended the Canadian constitution in 1982 without asking Quebec's permission. In fact, it did so in spite of the unanimous opposition of Quebec's National Assembly, which included federalists. The federal government uses the constitution when it wants to and the way it wants to, while forcing Quebec to comply with it.

I want to take this opportunity to stress that the decisions to be made in the next Quebec referendum will not have to take into account what the Supreme Court of Canada thinks, what the Minister of Justice thinks, or what the Prime Minister of this country thinks. Quebecers will make a decision that concerns them alone. I am reminded of a famous line coined by Mr. Bourassa, who was a known federalist in Quebec. He used to say: "Quebec is, today and forever, the master of its own choices and of its destiny".

The bill is also a great object lesson in that it tells us a lot of interesting things I will get back to later.

Generally speaking, we can live with the bill in its present form. However, we deplore the fact that the federal government is trying to interfere, as I was saying, in areas under provincial jurisdiction, through the back door as it were, as is often the case. That is why our main amendments-and I give advance notice, there will be a few covering the bill as a whole once we have gone over it in depth-will be along the lines that the federal government should just require federal institutions to respect, which they do not do, the provincial legislation in effect where they conduct their activities, when these activities come under provincial jurisdiction; insurance being strictly a provincial matter.

In a joint brief mentioned by my colleague, the member for La Prairie, some twenty minutes ago, which was signed by a number of people, including the Canadian Life Insurance Association, the Canadian Bankers Association, the Insurance Bureau of Canada, Canada Trust, the Trust Companies Association of Canada, and Credit Union Central of Canada-we are talking about a lot of people here-they all asked the federal government to allow, with the minister's approval, life insurance policies in Canada to be transferred from a federal to a provincial underwriter. This is not in the bill, with the result that the injustice to provincial underwriters and specifically those in Quebec continues to exist.

A provincial underwriter may not buy blocks of insurance policies from a federal underwriter under the law as it now stands. What exactly does this mean? It means that when underwriters want to obtain a charter, they are better off going for a federal charter, which lets them buy up blocks of provincial insurance policies, because the reverse is not permitted under law. In the long term, underwriters in Quebec and elsewhere will always be better off obtaining a federal charter, while Quebec already has legislation covering this. In the long term, underwriters will gradually switch over to federal charters, with the result that, in a few years, the federal government will be able to say that the legislation we

have in Quebec covering these fields of activity is redundant, without purpose, and should be abolished.

This is how the federal government has gradually taken over the provinces' and specifically Quebec's fields of jurisdiction. In the long term, the purpose of this interference is to increase Ottawa's powers. This has been going on for a long time. People have been talking about it as far back as 1867, well before my time. This is how they have gradually turned Canada from a confederation into a federation.

The term "confederation" has an extremely specific meaning. First of all, it is the name that was given to Canada: the Canadian confederation. A confederation is a group of virtually autonomous states which decide to provide themselves with a central government less powerful than the sum of themselves, to pool certain things. That is what we are seeing in Europe. Europe will be a confederation.

But, gradually, the central power has taken over certain jurisdictions, or taken over from some participants in this power, and the circumstances have gradually turned Canada into a federation. In other words, the central power is now greater than the power of the provinces, not what the Fathers of Confederation initially planned. This has led to the political impasse we are now at, going from one referendum to another, until the next one.

The goal of all of the federal government decisions is to transfer more and more power to Ottawa, more and more political power, while the economic power is being transferred, generally speaking, to Ontario. To refer to Gordon Gibson's famous book, Plan B , which I think my Reform friends have read, he says that the major problem in Canada is not Quebec, the problem is Ottawa.

I recommend that my colleagues, who think we are the only ones saying this, read Gordon Gibson's famous Plan B , where he states that the federalists are the problem. The problem is Ottawa, and the senior public servants, the bureaucracy that exists here, which is perpetuated by inertia.

I will return later to a discussion of the invasion of jurisdictions, but this act is one of the many we have spoken out against since coming to this House. I could not begin to list the laws we have spoken out against as invading Quebec's areas of jurisdiction, as gradually transferring powers that belong to Quebec to the central power in Ottawa.

We know very well that being a political minority leads inevitably to being an economic minority. The one with power over the purse strings has control, and vice versa. The more power, the more control. Ottawa is gradually assuming all of the power by invading Quebec's areas of jurisdiction, and it is making the decisions. This bill represents a decision to invade one area of jurisdiction: insurance, which belongs literally to the provinces. It has been decided to pass legislation to cover all insurance, whereas Quebec already has a set of laws governing this.

So this is a minor decision in a 250-page piece of legislation that will have long term consequences for Quebec insurance companies.

I would like to give a few examples of minor decisions made in the past that have had disastrous economic consequences in the long term. Take for instance when they dug the St. Lawrence Seaway. At one point it was decided to dig the St. Lawrence Seaway. What have the consequences been for Quebec? Well, Montreal lost its basic economic infrastructure. As you know, ships used to stop in Montreal before the seaway was built, and all the plants were there. The government wanted to shift the economic centre to Toronto to have direct access to the core of the U.S. market: Chicago, Detroit and Milwaukee, via the Great Lakes.

So they created the St. Lawrence Seaway, which took away Montreal's basic economic infrastructure, and you do not have to take my word for it. Mordecai Richler said as much himself in his book Oh Canada! Oh Quebec! My dear friend Mordecai tells us:

"Once the St. Lawrence seaway was in place Montreal's slippage was inevitable".

Once the St. Lawrence Seaway was built, Montreal's decline started. It was inevitable. A minor decision made in Ottawa which had disastrous consequences for Quebec, in the long term, exactly like those we find in Bill C-82.

Another example, much more recent, is the Borden line. In 1963, the federal government started to regulate the sale of crude oil by establishing the Borden line. All oil sold in Ontario had to be western oil, and the pipeline built from the west to Sarnia ended in Sarnia. At the time, the petrochemical industry was in the east end of Montreal, in my riding, in Montréal-Est, in Anjou. That is where the oil companies were. We were refining the oil.

So what happened as a result of this minor political decision? The oil companies in Montreal that were refining oil had to get the oil in Sarnia, refine it and return it to Ontario. In the long run, the oil companies realized they would be better off if they transferred their refineries to Sarnia, got the oil locally, refined it and then delivered the finished product to Quebec. We lost 8,000 jobs when four of our six major oil companies moved out.

A minor decision was made in Ottawa, with disastrous economic consequences in the long run for Quebec, like the decision we see in Bill C-82.

What about the auto pact? The entire automobile industry was established in Ontario. Quebec never got any of the tens of thousands of jobs in that sector.

Air transportation: more minor decisions were made in Ottawa.

They decided one day to build the Mirabel airport, because Dorval was busy and had too much air traffic. Once the Mirabel airport, which cost an arm and a leg, was built, and tens of thousands of people were moved out of their homes, a minor political decision was made: the requirement that air carriers arriving from the east serve Montreal ahead of all other Canadian cities was lifted. The requirement was eliminated.

What costs airlines the most is not flying time, but take offs and landings. So it is to their advantage to land in only one place to serve Canada, and of course they chose Toronto.

Once Mirabel was emptied, hundreds of millions of our dollars were allocated to expanding Pearson airport in Toronto. Money was spent to empty the place, because a decision was made in Ottawa, just like the decisions that appear in C-82.

What happened as the result? Ottawa could then question the use of having the air traffic controllers' school in Montreal, when Toronto was where the action was. So the school was moved to Toronto, and the head office of Air Canada was moved to Toronto, because that was where the action was. A minor decision to transfer things to Toronto had dreadful economic consequences.

In the energy system, what about the billions of dollars that were spent? I think $12 billion was spent in all over 20 or 25 years in Ontario to create 40,000 jobs in atomic research, whereas Quebec all on its own developed the single it controls, hydro electricity. One quarter of the $12 billion came from Quebec and went, because of a government decision, to the development of atomic energy in Ontario, which will eventually become a competitor.

Then there was the tobacco debate. Today in Oral Question Period, we saw that the federal government has been doing research up to now to increase levels of nicotine. I worked in the tobacco fields in Ontario for a number of years, and the research centre is in Delhi. I know this city well, because I spent some time there.

They did studies for about ten years in order to increase the nicotine content in tobacco and then they turn around and, choking with emotion, make decisions in the House to show their concern about smoking among young people and they abolish tobacco company sponsorships.

Where does most of the tobacco sponsorship occur? In Quebec. In two to three years, we may lose the Montreal Grand Prix, the Jazz Festival or the Benson & Hedges Symphony of Fire because of a government decision. All this is happening because the government has decided to pass laws and make decisions encroaching on our areas of jurisdiction.

All those cases are examples of small decisions with catastrophic consequences, the same way a small provision in Bill C-82 encroaches on Quebec's jurisdiction. The government is trying to justify this-and what an object lesson it is-by claiming that the transfer of insurance blocks between a company with a federal charter and a company with a provincial charter raises a problem of civil law and common law by virtue of what is called "novation", an extraordinary word.

This means that someone cannot transfer his debts to another person without the agreement of his creditor. In other words if I borrowed, for instance, $6,000 from a bank, I cannot tell the bank that my brother will pay my debt. Under the principle of novation, a bank will never accept that, and the peculiar thing is that this principle is being used in bill C-82 to encroach on one of Quebec's areas of jurisdiction.

Double standards again, if that principle applies-and, as I just explained it largely does-a debt is not transferrable. The government has used this principle in a bill to encroach upon Quebec's areas of jurisdiction and has failed to specify that the same principle would apply to the transfer of Canada's debt.

You will remember, I am sure, that the Bélanger-Campeau Commission received three studies. One was conducted in France, the other in England and the other, if I am not mistaken, under the aegis of the C.D. Howe Institute. They all came to an extraordinary conclusion saying that Quebec is not legally required to take on part of Canada's debt if it becomes a country. These studies were conducted by people outside the government.

We all remember what Ross Perot said. During the presidential campaign in the United States, he said: "Poor Quebecers, you do not have to carry that debt". Those are the words of Ross Perot, who was then in the running for the presidency of the United States. He did not get in, but he did say that.

These studies tabled before the Belanger-Campeau Commission explained the principle of "novation", and they were taken up by English columnists across Canada. I will briefly read from one of those texts to show that whenever you refer to principles in a bill, you have to recognize that these principles apply everywhere and at all times. The principle is the following; I am quoting in English

from a December 13, 1994 article by David Crane. As you know, David Crane is the financial editor of the Toronto Star . He said:

"Canada's foreign creditors would not want to transfer part of Canada's debt to Quebec. This is money they loaned to Canada, not Quebec. There is no way in the world you can go to an international banker and for every $100 Canadian bond get a $75 Canadian bond and a $25 Quebec bond. In a way that helps Quebec because it means that Canada would have to reach an accommodation with Quebec. Since Canada cannot force Quebec to take its share of the debt technically Quebec could walk away from its share of the debt".

That is all. I yield the floor to my friends. However, William Johnson has a similar text.

[Yvan Bernier, Bloc, Gaspé, QC]

Madam Speaker, once again we are witnessing in this House an attempt on the part of the Liberal federal government to meddle in an area of provincial jurisdiction, as my colleague from Anjou-Rivière-des-Prairies so ably proved. He gave several examples. What is the federal government trying to do?

We have every right to believe that we will have an election in the spring. During the last referendum, the Liberal government promised it would recognize distinct society. It is so distinct that as soon as we turn around, it tries to step into yet another area of provincial jurisdiction through its spending power.

One may well wonder if the Prime Minister gets it. He knows full well though that when it comes to provincial powers, Quebecers are adamant. We would like to repatriate the powers Ottawa took away from us, and now he wants to interfere in areas that come under our jurisdiction. It is very rude on their part. If we are on the eve of an election, why are they doing this? They know full well that Quebecers are going to say: "This time you will not get away with it".

It is supper time, young people at home are watching us; I would like my colleague from Anjou-Rivière-des-Prairies to quickly go over what he explained earlier so that people really understand what is at stake here, the dark side of Bill C-82, and why it is so important for Quebecers to pay attention and remember how the Liberal government is intruding. People must understand this and let the government know what they think come election time.

I would ask my colleague to repeat the examples that clearly show how the Liberal government, the Prime Minister, the member for Shawinigan, are once again trying to pull the wool over our eyes.

[Roger Pomerleau, Bloc, Anjou—Rivière-Des-Prairies, QC]

Madam Speaker, I do not know if I should repeat everything I just said.

[Yvan Bernier, Bloc, Gaspé, QC]

Give other examples.

[Roger Pomerleau, Bloc, Anjou—Rivière-Des-Prairies, QC]

There is indeed no lack of examples showing that, every time Canada's and Quebec's interests come into conflict, our friends opposite, originally from Quebec, francophones from Quebec, are the first to come down on Quebec and vote in a way that serves Canada's interests at the expense of Quebec.

I think that my hon. colleague can fully understand that, any time nationwide issues are discussed, Liberal members from Quebec, who are a minority in their own caucus, will eventually toe the line of the Canadian majority, and put Canada's interests before those of Quebec.

Take for example the tobacco issue. Every single member on the other side, including those from Quebec, voted with the government, knowing full well that this legislation directly affects all festivals held in Montreal. They all voted with the government.

We will recall that, when we were dealing with the raw milk cheese issue, in a fanciful departure from reality, the Minister of Health decided it was harmful to people's health, even though people have been eating raw milk cheese for ages and no one has ever died from it. All of a sudden, the minister decided that raw milk cheese, which just happens to be sold, made and widely sold in Quebec, was bad for our health and that its production should be discontinued. The Bloc Quebecois then had to organize a sampling of this "poisoned" cheese in this House to show the public and those voting on the other side that there was nothing wrong with it. Not one member from Quebec on the other side took a stand with us on this issue.

These two recent examples show that members from Quebec elected under the Liberal banner inevitably stand on the side of Canada, for the interests of Canada, as opposed to those of Quebec.

Before I conclude, I will remind you of the famous words of the Minister of Interdepartmental Affairs who, just a few months before the referendum, and that is why he was made a minister, said in Toronto-I heard him myself and could not believe my ears-that the best way to resolve the Quebec issue was to make Quebecers suffer.

A member from Quebec, paid by Quebecers and sent here to look after their interests, comes here with only one idea in mind: to make Quebecers suffer. That is what Quebec members on the Liberal side are like.

[Andy Mitchell, Liberal, Parry Sound—Muskoka, ON]

Madam Speaker, I am pleased to have an opportunity to rise in the House today to debate Bill C-82 and to discuss its provisions and some of its impacts on consumers.

Having just listened to the previous speech in the House I will try to address the bill as opposed to having a diatribe about something that was not relevant to the bill.

The bill is about making important progress to ensure that our banking regime, our financial institution regime, is more responsive to the needs of consumers wherever they live in Canada, be it in Quebec or elsewhere.

This is part of an ongoing process undertaken by the Liberal government. We are trying to combine the best of our financial institutions. There are some positives we want to maintain as a society and as a government.

Our banks are successful corporations. They are strong. They are world leaders in finance. They provide financial stability to the country, far more so than the banking industry in many other countries.

Today the banks in Canada employ 500,000 people. They represent 3.5 per cent of the whole Canadian workforce. The financial services industry in Canada represents about 7.5 per cent of GDP. These are all important aspects of financial institutions in Canada and something we as a government and we as Canadians want to ensure continues.

However, we need to balance that as well. We need to balance that with the need to ensure that these financial institutions are serving consumers. We need to balance that with the need to protect consumers who use our financial institutions from potential abuses. Regardless of their socio-economic status, we also need to ensure that consumers of all stripes have access to our financial institutions.

What this bill is about is combining those two things, maintaining what is best in our financial institutions but also ensuring that we have the appropriate protection for consumers built into legislation.

This is not something that is just happening today. It is something we have done all along. I had an opportunity, when we dealt with the issue of access to capital as part of the industry committee's examination of the banking industry, where we worked as a government to institute changes with the banks so that there would be better protection for consumers. Coming out of that process was some progress. We were able to put in place a number of tools to help our small business community to have better access to capital. One of the tools was ensuring that the banks would have to establish a code of conduct that governs how they deal with their small business customers.

I would say to all of those small business men and women who may be watching today, when they are talking to their account manager at their local branch they should ask for that code of conduct. It sets out the rules on how the banks are going to deal with their accounts.

A second tool that was put into place was an alternative dispute resolution system. If someone is not pleased with the process that is taking place with their account manager there is a mediation process available at their banks and they should ask to use it.

As a third tool, all the financial institutions, the banking institutions anyway, have an ombudsman in their operation to whom the consumer can appeal his or her problem if they are not pleased with the decision of the account manager. The banks have come together now and have an industry-wide ombudsmen consumers can appeal to if they are not satisfied with what is happening in the institution.

The fifth tool that we have been able to put in place is the requirement that the banks provide to the government and to the people of Canada quarterly statistics on their small business lending. In fact, I believe it is close to 19,000 different stats that are provided each quarter on small business lending.

Some of these tools that we were able to develop through the industry committee and working with the financial institutions are finding their way into the legislation that we are debating in front of the House today. The code of conduct is one where the rules have to be set out up front and in writing so that the consumer understands exactly what the rules are and that the institutions understand exactly what the rules are that they are going to play by.

We see those types of tools coming out in the privacy code that is being suggested in this piece of legislation. We are seeing, in the whole issue of tied selling, that there will be a code of conduct that outlines what is and what is not permissible, that it is public and that the consumer knows in advance.

We also see the use of the ombudsmen in this piece of legislation where if the consumer is not satisfied on the issue surrounding tied selling, that the institution is following its code of conduct, then the consumer should appeal it to the ombudsman.

The third tool that we see coming out in this piece of legislation as well is the whole issue of reporting. The financial institutions will have to report the number and nature of the complaints they are receiving on the issue of privacy and on tied selling so that there can be public accountability of what they are doing.

It has been mentioned by a number of speakers in the House that this bill is fairly technical in nature in the changes that it is proposing. However, there really is some important application to what everyone will actually see in dealing with their financial institutions.

First is the whole issue of privacy and privacy protection. Most consumers who deal with financial institutions are concerned when they see the array of computers and the massive amount of information that banks have on individuals. They are rightly concerned that the information is going to be maintained in a confidential nature. None of us would like that type of information to be exchanged with phone marketers or whoever else it might be given to.

This bill calls on the financial institutions to develop a public code of conduct as to how they will deal with privacy issues. It calls on them to publish that code. It calls on the financial institutions to establish a method by which consumers can complain and put forward their concerns that the privacy code is not being maintained and to make those types of complaints and concerns public. That is positive. Consumers want to see their privacy protected.

Another issue that is being addressed in the review of the banking and financial services industry is disclosing the cost of credit. Over the years Parliament has moved and financial institutions have moved on the need to disclose the cost of credit. That is very important to someone who is obtaining a loan or a lease, although I believe more work has to be done in terms of disclosure. The consumer needs to know what will be the actual cost.

Although we have had disclosure laws for some time, this will make those disclosure laws more uniform so that a consumer can make an informed comparison between the disclosure of one company and the disclosure of another company, or between one industry and another. That is something which is being taken on with this review and it is positive.

Then there is the whole issue of tied selling. That is of real concern to consumers. All of us would agree that it would be inappropriate if somebody from a financial institution said to someone "I will approve this loan only if you buy something else from me". That is the type of tied selling which we do not want to see. It is different from cross selling and up selling, which is quite appropriate and a normal business function. However, we do not want to have tied selling.

That is why I am pleased to see that this legislation contains an amendment to the Bank Act which would prohibit tied selling if the self-regulation that I talked about a little earlier was not enough, that being the development of a published policy, a public complaints procedure, an appeal mechanism to an ombudsman and a reporting by the ombudsman on what he or she believes are infractions. If we find that is not going to be enough, if we find that is not going to ensure that this practice does not become widespread, then there is some legislative fallback position that we are able to provide ourselves.

This legislation will lead to an entry policy review, which the minister has committed to completing in this calendar year. We will take a look at streamlining the procedures by which foreign banks can operate in Canada. Most of us would see that as being positive. If we can increase the amount of competition in the financial services industry in this country, most people believe that will lead to improved service, improved access to capital and a whole range of good things that will come through increased competition. Most people in Canada would see that as being positive. I am pleased to see that the Secretary of State for International Financial Institutions is proceeding with that review and will complete it in fairly short order.

There are a couple of things the minister was able to announce which came out of the review he has been undertaking and the discussion paper which he put forward some months ago. One of them has to do with the access to basic financial services.

I think there are a lot of consumers who have been frustrated in dealing with their local financial institution when they try to cash a cheque and do not happen to be at their own institution or they try to deposit a cheque and then find out that the funds will be held and they cannot get access to the funds for a week or two. Perhaps they are trying to open an account and for some reason there are arbitrary rules in the institution and they will not be allowed to open an account.

Often it is low income Canadians or those who are not in the workforce who have great difficulty accessing these financial institutions. It is not appropriate. There should be equal access to financial institutions.

I was pleased to see as part of the discussion paper and in discussions with the financial services community that a number of standards have been put forward and the institutions have agreed to work toward and implement within their branches things like lessening the identification requirements, explaining clearly whether a hold funds will be placed on the individual's account, eliminating employment as a condition of opening an account, ensuring that there is no minimum deposit requirement in order to open an account, training of staff to be more sensitive when dealing with consumers who might be opening a small account. I think these a positive things that needed to be worked out and I am pleased to see that has been done.

As part of the discussion paper some important work has been done which has been discussed in the House, the need for the banks and other financial institutions to proactively advertise their low cost services. We heard that in the discussion on credit cards where

many institutions have low cost credit cards. When it is pointed out some would say they did not even know that existed.

I was pleased to see that in response to the discussion paper the financial institutions have made a commitment to proactively advertise their low cost services. I look forward to seeing that implemented and the changes taking place.

In conclusion let me say that with the legislation the government is moving along the road to find a balance between keeping those things about our financial services industry that are strong and helpful to the country and to the citizens of our country. We want to make sure that financial stability is maintained and that employment opportunities that are presented by financial institutions are maintained.

We also want to make sure it is done in a way which will protect individual consumers and will give consumers the right to access those services.

This has been an ongoing process by the government over the last three and a half years and progress is being made. I am sure the task force which was struck to look at future changes and at our financial services sector going into the 21st century will continue. I look forward to its findings.

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Madam Speaker, I would like to take this opportunity to congratulate my colleague, John Chant, for having been named the director of research for the task force on financial services which was appointed in response to Bill C-82 and some of the difficulties that were raised in that context.

Professor Chan is a trained economist who was for a long time the chairman of the department of economics at Simon Fraser University. I have spent many hours with him in seminars, tenure committees and various other official functions. I am very pleased that the government has appointed him to this position.

As a result of my acquaintance with him, I am sure that the report which will come out will be superb. All the research papers will be of the highest quality. What the government does with it is another question.

The white paper on financial services was tabled in June 1996. The first draft of Bill C-82 was discussed in the finance committee. We heard from many witnesses. My special interest was on the restraints to be put on foreign banks because I had written and done research in that field. It was of great interest to me to see what innovation would take place.

There is a lot of scepticism about what committee hearings do, whether or not they are a waste of time, and in the end the government does what it wants to do anyway.

After this experience I must say I am very encouraged. At the same time I am also somewhat concerned about how it was possible the white paper of June 1996 could do what it did. What did this paper do? What did we find out was wrong in Bill C-82 with respect to foreign banks?

It turns out that foreign banks in Canada are now required to operate at all times as subsidiaries of their foreign parents. That imposes a huge cost on the operation of foreign banks in Canada. It has prevented the establishment of a lot of banks. In recent years it has driven out a large number of them. The owner is required to have capital of at least $10 million, to have a board of directors, and to issue every six months very large and onerous reports.

We were told in the finance committee hearings that this was a serious detriment to the expansion of further foreign competition in the country, which almost everybody agrees would be to the benefit of consumers.

That is not all. I was even more disturbed when I heard witnesses telling us that they had been providing services of extreme importance to Canadians. For example, a company told us that it was about to introduce a new credit card system under which it would be possible to charge an interest rate of about half the current normal charge under bank cards issued at the moment.

The company has developed a computer program which allows it to investigate the credit worthiness of large blocks of people. As a result of that and the experience of operating in the United States, it is able to break even and make a normal profit on a much lower interest rate. It would be a great innovation if such a system were introduced in Canada. It would put downward pressures on all interest charges on credit cards. At any rate if Canadians do not want it they do not have to go to that company.

Bill C-82 suggested in its first draft that the company wanting to introduce the new credit card would have to incorporate itself, spend $10 million on a capital base, have a board of directors and have all kinds of onerous reporting requirements.

Similarly there has been a company in Canada for many years specifically aimed at making loans to people who have been turned down by conventional banks, people who cannot get credit anywhere. This is often the last recourse for certain borrowers.

The company happens to be owned by an American company. The first draft of Bill C-82 suggested that this organization would have to incorporate with a minimum of $10 million. We were told that if the company had been forced into doing that it would simply have left Canada, to the detriment of the Canadian public.

I find very disturbing how these ideas got into the first draft of Bill C-82. I asked very pointed questions of the witnesses, especially people, namely the representatives of the big banks who argued that those rules were in the interest of Canada.

The answers received from the representatives of the big banks were not very good. They did not look very good when they tried to answer my questions in a rhetorical fashion without going into details on why it was taking place.

While there is this disturbing aspect about how this could have been put into the bill in the first place, it raises questions about the power of banks and their influence.

The people of Canada should feel confident that the second reading of the bill has eliminated this onerous requirement for foreign bank subsidiaries. Now they can operate as branches. Those companies that provide a limited range of financial services even if they are owned by a foreign banks will not have to incorporate.

This is a great victory for the parliamentary system and the functioning of the finance committee. To anybody wishing to read the blues or the reports of the finance committee on what went on I will take a little credit for complaining about how bad this part of the bill was. It was removed in 18 months.

The task force will report. I hope and trust, knowing John Chant and knowing the quality of the people on the task force, we will get more competition from foreign banks or from other financial intermediaries. That is the only way to make sure there is no concentration of power in the banks or in the financial system.

This ends my discussion of Bill C-82. I welcome the changes. However I would now like to turn to an issue raised by John Geddes in The Financial Post last weekend. The story has the potential of hurting the credibility of the government on an issue on which it invested a great deal of credibility going into the next election.

When the 1997 budget document came out there were tables, summaries of transactions, what money was coming into the government over the next two years, what was going out and where it was being spent.

In 1995-96 in that same document there were tables outlining the size of departmental spending. It was broken down separately. These numbers are almost impossible to obtain except if one goes through the onerous job of looking at the estimates.

In the past departmental spending in 1993, 1994 and 1995 was always there. There was a lot of bragging in the document of two years ago about how the program review undertaken by the head of the Treasury Board would reduce departmental spending from $51 billion to $42 billion or by 19 per cent. I wondered why that was not there this year.

In previous documents the yearly target for each department was clearly outlined. The yearly obligated spending cuts in the departments of defence, transport, native affairs, natural resources, heritage and culture were outlined, but for this year they were not there. I did not think through why the information was not there. I asked someone who said it just was not done this year.

This week the Senate finance committee is holding a hearing in which it will ask the government precisely what happened and why. The government is supposed to be cutting 19 per cent of departmental spending and is not on target. It is way off target at only 9 per cent. Less than half the proposed cuts have been undertaken.

The article goes on to discuss how the people in the Treasury Board are trying to spin this scandal. The scandal is not just that they did not meet the target. In the eyes of the Liberals there was a certain fairness in the way in which they distributed the burden of fiscal restraint. They claimed they would download a certain percentage on the provinces because everybody has to share 24 per cent. They said that was okay because they cut their program spending by 19 per cent. They did not and they will not. Let us see how they will fix it up over the next two years. If they do not fix it in this year's budget, when will they do it?

I remind the people of Canada that the government came in with a deficit of $42 billion. By 1998-99 there will still be a $6 billion deficit, which means that the Liberals have projected to eliminate $36 billion from the deficit. I ask viewers to test themselves as they listen to this debate. What percentage of the $36 billion total came from cuts to government spending? I have what is alleged to be $9 billion from departmental spending. Now we find out that is not true. Instead of $9 billion it will only be $4 billion.

How did government members break the back of the fiscal crisis? It was by increased revenue. They say that it was the gross dividend but nevertheless it is higher taxes. Some $28 billion worth of higher taxes is the main instrument used by the government to eliminate the deficit. It was supposed to have cut $9 billion in departmental spending. Now it turns out the government is way off target by $4 billion.

Let us look at that in the context of what the government asked the provinces to absorb. It has reduced transfers to the provinces by $7.5 billion. The government was supposed to have cut its departmental spending by now and it is not even delivering on this. I believe this is really a major scandal. This raises major questions about the ability, the seriousness and the integrity of the government on its highly touted fiscal plans.

It is true that the Minister of Finance has set hurdles about one inch high, jumped over them, cleared them by a large margin and then bragged that he is hitting his targets, that he is doing better than his targets. I must congratulate him on the ability of his spin doctors to so fool the people of Canada into thinking that he is doing the right thing, that all of the attention in the aftermath of the

budget release was focused on hitting the targets, exceeding the targets.

That to a very large extent was due to circumstances over which the minister had no control. One of them was lower interest rates. We know there were lower interest rates, not just in Canada but throughout the world. It was the world interest rates which came down.

I am prepared to admit that there were also some reductions in the gap between the U.S. and Canadian interest rates which should be attributed to the deficit reduction progress made. I do not deny this. Nevertheless, the attention on this low barrier that the minister set for himself, and was exceeded and was very easily exceeded, was due, first, to the lower interest rates created outside of Canada. Second, it was created by economic growth which resulted in bracket creep and higher tax take. That is how the government came to the position of being able to brag as it did.

Because of this excellent, superb spin doctoring by the minister and his department, nobody noticed until the Senate finally got around to it that the government is away off target on the spending for which it is directly responsible, namely what is known as departmental spending. It is supposed to be $9 billion when it is only $4 billion. I say shame.

[Barry Campbell, Liberal, Parliamentary Secretary to Minister of Finance]

Madam Speaker, I find myself in the rather awkward position of thinking that we had heard the last from the member for Capilano-Howe Sound last week and standing up to thank him on that occasion for his even-handedness in giving credit where credit is due. Now to my great chagrin I see that he will not stay dead and I am going to have to put a stake through his heart once more.

I did mean what I said last week about him doing politics a little differently but today his colleagues seem to have got to him. I think he has been a little unfair in his comments today.

There are two targets that matter, the targets for reducing the deficit and reducing overall program spending. We are on target for both. In fact, we are doing better than we projected for both. There has been no increase in program spending as today's article that the hon. member referred to claims.

Projected program spending would amount to $106 billion in 1997-98 and $105 billion in 1998-99. With program review the 1997 budget forecast program spending was revised downwards, as the member knows. As with our deficit reduction targets we are ahead of our original projections.

I will use this time to say that. It is in the nature of a comment because I care not to ask him a question.

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Madam Speaker, this is spin doctoring at its best. However, as I have great respect for the hon. member, I do not think this is the cause of his problem.

There is a difference between program spending and departmental spending. I am not talking about program spending. Sure, the downloading went ahead as expected. The problem I have is with something that is called departmental spending which is part of program spending.

Since this was not stated in the budget, I can only rely on the graph that has been provided here. For example, government services were supposed to have gone from about $6 billion to $4 billion in the 1997-98 fiscal year. Where is it? It is still at $6 billion. This goes on and on. The only department that hit its target is the Department of National Defence.

I would be happy to learn from the hon. parliamentary secretary if he has in his briefing notes a page dealing with this issue. His comments concerned program spending, which I have no problem with. However, the issue that is being discussed this week in the Senate committee deals with departmental spending. I would love to hear why this article is wrong. I would love to be able to tell my people in the next election that the government is really on track but these numbers suggest it is not. I wonder what went wrong.

[Jim Silye, Reform, Calgary Centre, AB]

Madam Speaker, I always listen with great interest when the member for Capilano-Howe Sound takes the time to make a speech. I especially listen when he goes off any written text because I find then he gives us the benefit of what he is really thinking and it comes out a lot clearer.

I would like to get something straight. I have never read that newspaper article to which he referred. I do not have a clue what he is talking about.

Therefore, as an individual MP sitting here, I am hearing for the first time that the government is behind in its departmental spending cuts. It has not made the size or kind of cuts in departmental spending that it had projected it would when it bragged about how it was going to eliminate the deficit. It did that by downloading 25 per cent or 29 per cent on to the provinces. The member for Capilano-Howe Sound told me that we also had to get our spending under control. We are all going to share this equally.

What the member just said is that the government indicated it would cut departmental spending by 19 per cent, which means $9 billion. It has not done that. Nor does it appear that it is going to be able to achieve that. I just want to get this perfectly straight and clear because I know this member does not say things just to win political brownie points like members on the opposite side do. He does not take cheap, political, partisan shots like members on the other side do.

[Lee Morrison, Reform, Swift Current—Maple Creek—Assiniboia, SK]

Like you do.

[Jim Silye, Reform, Calgary Centre, AB]

Like I do sometimes. However, he does think things through. I would like to know, as a taxpayer, will the government be able to achieve what the master of myth, the finance minister, set out in budgets? Where is the government on its $9 billion in spending cuts by departments now? Has it cut anything at all? How much has it cut? What is there left to cut? How much time does he have to get there?

Over a four year period has the government pulled the wool over Canadians' eyes? Has the master of myth led the Canadian taxpayer astray again by not coming clean on where we are on departmental spending?

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Madam Speaker, if I may read from an article from the Financial Post , dated March 15-17, authored by John Geddes, it states that according to figures published last month by Treasury Board, with the government's main spending estimates: ``The government projects that its departments will spend about $50 billion in fiscal 1997-98 beginning April 1, compared with the target of just under $42 billion set out in Martin's landmark 1995 budget''. This budget said the spending cut would be 19 per cent. In fact, it will be only 9 per cent. This is a true scandal.

The only department which has met its 1995 target is the defence department. Even the department headed by one of the most effective managers in the government, namely the department of transport, has fallen by a steep 38 per cent, but that still does not equal the 51 per cent cut which was targeted in 1995.

I urge anyone who is interested in this to have a look at this table. It raises serious questions about the integrity of the government. It keeps on talking about how far it has exceeded that one-inch target it set for itself. What really counts is smaller government. What really counts is doing what is right but is politically hard, namely to undertake the cuts in departmental spending.

Why has that not taken place? What is going on? How much more is missing from the 1997 budget as we go into an election?

I hope that the other House in its committee work will make sure that if there are other skeletons in this closet they will be dug out and the government will be held accountable for not carrying through with the grandiose plans it had. We will not be diverted by spin doctors from what is going on in government.

[Jim Silye, Reform, Calgary Centre, AB]

Madam Speaker, I thank the member for his answer. I guess what he is really saying is that over the last four years the government has cut $7.5 billion in transfers to the provinces and only $1 billion of departmental spending and that the reduction in the deficit has come from increased taxes. Is that correct?

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Madam Speaker, that is correct. If I may repeat those numbers, of the $36 billion improvement, $28 billion came from increased taxes through bracket creep.

[Jim Abbott, Reform, Kootenay East, BC]

Madam Speaker, it has been interesting listening to the debate on Bill C-82. We have had the government interpretation and we have had the Reform interpretation. We have not heard a lot of interpretation by the Bloc.

I thought that it might be of value to read into the record a totally independent interpretation written by the law firm of Gowling, Strathy & Henderson in Ottawa. It is entitled "Financial Institutions Legislation and Foreign Branch Banking". It states:

In mid February the Secretary of State for Finance-tabled legislation to strengthen consumer protection, ease the regulatory burden on financial institutions, and "fine tune" certain provisions in the financial institutions statutes. Bill C-82, an act to amend certain laws relating to financial institutions, responds to proposals set out in the June 1996 consultation paper, the 1997 Review of Financial Sector Legislation: Proposals for Changes, and to comments received during the consultative hearings. The legislation establishes March 31, 2002, as the new "sunset" provision for all federally regulated financial institutions.

The government has given itself expanded authority to make regulations governing privacy and enhanced cost-of-credit disclosure. The Bill also introduces tied-selling safeguards, and provisions to improve dissemination of information about fees.

To update and fine tune financial institutions regulation, banks that do not take retail deposits will be allowed to opt out of the Canada Deposit Insurance Corporation coverage, more flexibility will be provided to financial institutions seeking to enter into joint venture arrangements and access to capital for mutual insurance companies will be enhanced.

Changes to the provisions governing the operations of the foreign banks in Canada include: "near banks" (entities which do not generally take deposits and are not regulated as banks in their home jurisdiction but do provide one or more banking type services) which have received approval under the Bank Act to enter the Canadian market will no longer need to seek further approvals, provided their unregulated activities do not include taking deposits;

Removing the requirement for regulated foreign banks owning Schedule II banks to own their own financial institution subsidiaries through the Schedule II bank; and

Permitting near banks to own non-bank financial institutions.

Mr. Peters also announced that separate legislation will be made public before the end of the year to allow foreign banks to branch directly into Canada. The easing of foreign bank entry was a priority recommendation contained in separate reports released last fall by the Senate Committee on Banking, Trade and Commerce and the House of Commons Committee on Finance.

The government's decision to act in this area prior to receipt of the report of the Task Force on the Future of the Canadian Financial Services Sector was "noted" in the Finance Minister's February 18 budget when he stated: "the increased competition this [foreign branch banking] should produce will increase the financing options-that is, the increased access to capital required by small- and medium-sized Canadian businesses.

Before I go on to conclude this analysis by the law firm I might say that any action that the government, indeed any government, can take which will increase access to capital required by small and medium sized Canadian business surely must be a positive activity. What is stopping so many operations in Canada from being able to survive, let along thrive, is a lack of access to capital. If in the judgment of our industry critic this bill turns out to be a tool that will work in that direction, then if for only that reason I would be inclined to support it.

Carrying on with this analysis:

The main characteristics of the new branching regime would be as follows:

Foreign bank branches would not be allowed to take retail deposits.

The ability to operate branches would generally apply to foreign banks with at least $25 billion in assets on a world-wide basis, a limit that would permit most foreign banks operating in Canada as subsidiaries to operate as branches.

The Superintendent would have the power to require the maintenance of assets in Canada with an unrelated approved financial institution to cover liabilities of the branches.

A capital equivalency deposit of at least 5% of branch liabilities would have to be maintained at all times with a recognized financial institution.

The foreign bank would have to be regulated on a consolidated basis in its home jurisdiction in line with internationally recognized regulatory standards acceptable to the Superintendent, with appropriate co-operative regulatory arrangements in place.

Branches would be subject to appropriate Canadian reporting, auditing and taxation requirements. In cases of branch liquidation all assets in Canada of the foreign bank could be seized to satisfy the obligations of the Canadian branches.

The government will also review all other aspects of foreign bank entry policy. Pending completion of this review, foreign companies offering a limited range of financial services which now operate unregulated in Canada as well as new entrants that meet certain criteria, (i.e., non-deposit taking with a $200 million ceiling on the assets of Canadian operations) will be allowed to carry on their activities without being regulated, but will be required to disclose to creditors and customers that it is not regulated as a financial institution in Canada.

A final decision on the status of those unregulated foreign companies now operating in Canada and of those intending to set up operations during the interim period, will be taken once the branching regime and review of the foreign bank entry policies have been completed. It is expected that once the banking regime is in place a number of these companies will convert their Canadian activities to branch operations.

I wanted to put on the record an independent analysis or evaluation of what is a very technical bill. I recognize that not infrequently members end up in some fairly partisan sparring, and various things are said sometimes in jest and sometimes in the heat of the moment. However, with us having the unfortunate title of politician, sometimes we act like politicians.

The bill is probably one in which each of us would do well to rise above the normal partisan discussion which is going back and forth because it is so key to what ends up impacting Canadians in every day of their lives.

As I understand it from a summary that has been given to me by our industry critic, the bill will provide that more detailed information will be available to the consumer regarding cost of credit disclosure.

I recall that very frequently, almost on an annual basis, there is discussion in the public domain about the cost of credit cards of banks as well as credit cards of the financial institutions. I note that in the current Eaton's difficulty that the credit card section of the Eaton's empire is one of the strongest assets it has. It is reported to be a part of the corporation that does not require support and ends up contributing to the bottom line of the Eaton's group.

We also note that most of the banks issue credit cards with 18, 20 and 24 per cent interest rates on an outstanding balance. While Canadian consumers have a personal responsibility for what they do and must not always be looking to the government to be protected, on the other side of the coin there is a clear understanding that the Canadian consumer who has a piece of plastic, a credit card by which he or she can access all sorts of goods and services, has a responsibility in the way that credit card is used.

Clearly, as the credit card balance goes up and particularly where there is a very high interest rate, it is important that there be detailed information available to the consumer so that he or she may understand what the cost of constantly carrying a balance will be. I wonder how many Canadians are really aware if they have a $2,000, $3,000 or $5,000 balance on their credit card, that as long as they leave it on their credit card, just how much more interest they will actually end up paying for the use of that money? It is the equivalent of a very high cost loan.

A second part of Bill C-82 requires a simplified and improved dissemination of information to consumers about basic financial services, low cost options and fees on products and services.

It works to the the advantage of some of us to pay a $25 monthly fee or whatever the fee is where everything is rolled in whether it is inclusive of a safety deposit box, perhaps a credit card with no further fee, perhaps overdraft protection that is available on the side that simply needs to be activated. But all of these financial services end up costing money.

In a lot of instances when people started to use their bank card, they were drawn into the practice of using that card on the

assumption that their transaction was not going to cost them money. Indeed, some banks actually did that.

I applaud what the government is bringing forward where there is a simplified and improved dissemination of information to consumers about what the services are and what the costs are.

Allowing non-deposit taking institutions to opt out of the Canada Deposit Insurance Corporation and loosen subsidiary requirements makes sense. This becomes a user pay kind of a situation of which the Reform Party is completely in favour. We believe that people who are making use of any service, whatever the service may be, it is their responsibility to make sure that the service is properly and adequately funded.

If non-deposit taking institutions are required to pay into the Canada Deposit Insurance Corporation the danger is much the same as the danger that we have realized with both the Conservatives and now the Liberals leaving people with no option. Both have told people that they have to pay into the unemployment insurance fund, for example. Where there is a mandatory requirement, where there is a sucking in of money we can count on the fact that there is a government somewhere in the background.

In this instance the fact that the Canada Deposit Insurance Corporation will permit non-deposit taking institutions to opt out is only fair, right and proper.

It introduces regulations to allow financial institutions to enter into joint venture arrangements and proposes changes that permit mutual insurance companies to issue participating shares. This gets into a slightly trickery area in my judgment.

On the surface it appears to be a very sound move. Not infrequently people will end up in a business situation where they require someone, some corporation, some financial body, some venture capital. That venture capital has to come from an organization with very deep pockets. Quite frankly, I cannot think of a better description of banks than an institution with deep pockets.

It would allow the bank entering into joint venture arrangements for that bank to be able to get into the boardroom, into the decision making process should it so choose if the venture is going off track. One of the difficulties in my constituency, and I suspect with a lot of businesses all over Canada, is that when they enter into an arrangement with the bank, almost invariably the bank ends up making sure that it is triple secured for any of the money that it actually extends in the form of a loan.

When it is triple secured it ends up falling back on a feeling of comfort. Perhaps they do not have to look over the shoulder of the entrepreneur to the same extent. Not looking over the shoulder of the entrepreneur in itself ends up creating some difficulty or some problem. More often than not, the financial institution, the venture capitalist, having a vested interest, will be able to foresee difficulties.

Madam Speaker, I note that you are giving me the high sign. I will sit down. I know that the House will just be waiting with bated breath for me to continue my intervention the next time this topic comes up.

The House resumed from March 13, 1997, consideration of the motion.

Canada Labour Code

[The Acting Speaker (Mrs. Ringuette-Maltais)]

It being6.30 p.m., pursuant to order made Wednesday, March 12, 1997, the House will now proceed to the taking of the deferred division on the motion for time allocation at third reading stage of Bill C-66.

Call in the members.

(The House divided on the motion, which was agreed to on the following division:)

[The Acting Speaker (Mrs. Ringuette-Maltais)]

I declare the motion carried.

[Jim Gouk, Reform, Kootenay West—Revelstoke, BC]

Madam Speaker, could you confirm that this is in fact the 37th time that the Liberals have invoked closure with this motion?

The House resumed, from March 13, 1997, consideration of Bill C-32, an act to amend the Copyright Act, as reported (with amendments) from a committee.

Copyright Act

[The Acting Speaker (Mrs. Ringuette-Maltais)]

The House will now proceed to the taking of the deferred divisions on report stage of Bill C-32.

The question is on Motion No. 1. A vote on Motion No. 1 applies to Motions Nos. 8, 11, 39, 42, 43 and 46.