Mr. Speaker, today we are debating Bill C-53, the Small Business Loans Act.
Right now we are debating an amendment at report stage. The bill has been examined by the committee, has come back to the House and some amendments have been proposed. This is Motion No. 1. It is an amendment to restate the purpose of the the act. It states:
The purpose of this Act is to increase the availability of financing of small businesses, which would not otherwise have access to financing.
I think that what motivates this bill and this amendment is a recognition of the fact that capital is in short supply for small businesses in this country. Of course, capital is what allows businesses to put infrastructure in place, to put inventory in place, to have proper computerization, to hire qualified people and to succeed.
It has long been a concern in this country that for a variety of reasons small businesses have had difficulty in obtaining the kind of financing they need. Some people point to the fact that the big bad banks refuse to a large degree to take a chance on small businesses. Unless a small business can secure a loan or prove it does not really need it, a bank will turn down the loan application. There have been cases that would give merit to that concern.
The banks have made some strenuous efforts over the last while to try to address that problem. Many banks have ombudsmen who re-examine loan application turndowns which are felt to be unfair and too harsh by small business applicants. There has been some action on the part of the banks to be more proactive in this area and to be more responsive to the concerns of small businesses. The proof of how serious banks are about being more open and more responsive to the concerns of small business in their need for financing to some degree remains to be seen but the problem has been recognized.
This amendment proposes to essentially force banks and lending institutions to provide loans to small businesses. It states that the purpose of the act is to increase the availability of financing of small businesses which would not otherwise have access to financing. I assume that means banks would have to make financing available to small businesses that would not be a good credit risk in the ordinary prudent course of business. We have to question whether that is a fair and reasonable requirement to place on the banks. If lending institutions are forced to provide financing to dubious or shaky business ventures then everybody will pay the price.
Banks are not some enormous monster in a cave. The banks are us. Banks are people who own bank stocks. Banks are unions. Unions have a huge amount of their pension funds invested in bank stocks. They are pensioners in this country. They are all kinds of people who have bank stocks. If banks have to essentially give away money in the form of bad loans or unwarranted loans, we will all have to pay the price. I do not think a lot of us, our pensions or our RRSP investments can take that kind of hit.
While I am sympathetic to the plight of small businesses and their need for financing, the answer is not to have a forced draw or confiscation of bank moneys in order to finance small businesses with no ability to convince a reasonable lender of the merit or soundness of their enterprise or of their ability to repay loans. Most reasonable Canadians would probably agree with that.
The question remains of what we should do for our small businesses that are obviously struggling, that do not have the necessary resources to keep up with technology or to rent good premises where they can do booming business. There is a line in real estate that location is everything. Another is hire the top people. We all struggle with that almost every day in one way or another.
My suggestion to this House and to the proposer of this amendment is that other factors can be addressed to assist small businesses in this dearth of capital and financing which is a real problem and a fact rather than forcing private institutions to cough up money against their better business judgment.
As other speakers have, I suggest that the biggest problem for our small businesses is that government stands by hovering over their profits, ready to pounce on them and confiscate a huge chunk of them as soon as they appear. It is pretty hard for small businesses to pay the freight when government is sucking away their proceeds. A large part of the answer is for the government to examine why small businesses do not have the capital and finances they need to succeed. A large part of it is that government is taking too much in taxes.
I would like to concentrate on two taxes which are sucking the life out of small businesses. These are two payroll taxes, the CPP payroll tax and the EI payroll tax. Those are the two taxes the finance minister when he was younger and more objective said were a cancer on job creation. All of a sudden when the finance minister wants to look good and wants to look like he is getting out the red, he decides that putting small businesses in the red is better than him being in the red. So he takes money from small businesses partly in the form of payroll taxes to make his books look good.
Let us look at the facts. By the time the CPP payroll tax is phased in will cost every business roughly $700 more per employee. That is in addition to what it will cost the employee. Let us look at the EI payroll tax. The business will pay $500 per worker more than is required to meet the benefit claims of the system. In other words, the employer does not pay only the $500 per worker, but $500 of that is an overcharge necessary to meet the requirements of the program.
What does the finance minister do? He wants to keep that money. Why does he want to keep that money? He wants to make his books look good. He wants to hoard it against an election so he can dole out to Canadians some nice goodies and say “Are we not wonderful? Vote for us we will give you everything you want”. That is the way politics works. What does this do to small businesses? It sucks the lifeblood out of them. They are paying $500 per worker more for EI than they ought to. They pay $700 per worker for CPP premiums which may or may not keep a shaky system in place. Those charges discourage businesses from doing business. They take money from businesses.
One of my colleagues talked about how his house building business would lose 25% of its profit because of the CPP payroll increase alone.
We have small businesses starved for cashflow and starved for finances. What does the government do? It sucks more money out of them.
I challenge the government. Rather than put some piece of legislation in place that has a hearts and flowers approach to helping small business financing, let small businesses pay reasonable taxes, keep a lot more of their profits and prosper as will everybody else. That would be a dimension of this debate which should be seriously considered by the House.