Yes, because television goes everywhere.
This program was used, particularly during the 1981-82 crisis when we had a very marked increase in interest rates, coupled with a slowing economy. In Quebec, within the space of one year, 200,000 jobs were lost, the highest number in both absolute and relative terms of all the provinces.
Then in 1980, some reforms were tried. Finally, in 1983, the program was liberalized in order to help small and medium size businesses get off the ground, or improve their situation. And what was the result of these reforms? Two years later we could see that there had been some success, but that it was time to impose restrictions because there might have been some abuses of the system. Restrictions were therefore imposed, starting in 1985. I could have gone further back in time, but I have stayed with the relatively recent past.
From 1985 to 1993, no changes were made. Why did we make them in 1993? Because the economy plunged once again in 1990-91. So, this program was again used to stimulate and promote job creation by the establishment of small businesses.
Here again, the government played with the parameters of the program. In two years, the loans tripled. Naturally this was not noticed at the start, but it was later on. The federal treasury had to provide guarantees to clear up the debts resulting from various problems and bankruptcies. In the early years, when the program was starting up, these negative consequences were not apparent.
I would point out that this type of program cannot be frozen forever. It must be regularly submitted to parliament and regularly evaluated against approved indicators.
It seems to me that after this experience, there should necessarily be a consideration, which should not just examine the recovery of costs, but also the effects on employment, effects that could be called macroeconomic. There could be times when it is appropriate to stimulate the economy by promoting job creation in the knowledge that an increased number of bankruptcies will follow. On the whole, it is better to have small business people moving the economy than staying at home collecting employment insurance.
This is that sort of program. I think it is with this sort of consideration in mind that we parliamentarians should have pushed and should push for continued analysis of the effects, not only in terms of the recovery of costs—the auditor general wants that and that is understandable—but also the effects on job creation. Let us ask them about the real effects and about the effects on the economy.
The program worked and needed reviewing because, in 1993, the machine was opened up further and then in 1995 it was closed down somewhat. Nobody knew exactly where it was all leading. So, when the auditor general sounded the alarm, not only did he recognize the importance of the legislation, because of the great need of small and medium size businesses for credit, particularly for start-up and expansion, but he also said that the program had to be tightly run, that unscrupulous individuals could not be allowed to take advantage of the system and stick taxpayers with the bill.
But it is not just the auditor general who is calling for a review, because the Canadian Federation of Independent Business, which, as we know and should point out, represents over 90,000 small businesses throughout Canada—the very active Quebec branch of this federation represents over 16,000 small businesses—was also heard from. At the time of the review early in the year, the president of the Quebec branch said that 29% of SMB owners consulted in 1997 cited the availability of credit as one of their most pressing needs or concerns. That is almost one third.
The president concluded as follows “This means that lending institutions still have some way to go to meet SMBs' needs”. She added that the amount of credit available had increased for the group, but that these so-called gains had benefited primarily businesses with 20 or more employees. This means that businesses with fewer than 20 employees are still in dire need of credit.
This press conference was held in English and I will quote from it in that language:
“Economic growth is compromised when businesses do not have access to a sufficient financial lifeline. The fallout hurts everyone”.
As for the Canadian Federation of Independent Business, it insists on the glaring need for credit. It stresses that some small and medium size businesses do not even dare go to lending institutions, because they know these institutions are not always receptive to their needs.
Surely, there are members here who have had entrepreneurs, both men and women, come to them because they have major credit problems and do not dare go to lending institutions, because they do not want to tarnish their reputation. They are hesitant.
The entrepreneurs who start a business do not all have easy and free access to advice that they can follow with confidence. Starting up a business is no easy thing. The business world is merciless. If one is not big and do not have support, one's application may be turned down flat. Alternatively, they will take one's shirt by demanding collateral such as one's house, one's pension fund, everything one owns.
It is only normal that Mrs. Swift would ask for improvements to financing for very small businesses, which are the emerging businesses and which are responsible for economic renewal in several communities. Naturally she adds that governments must be concerned about the effect of the various payroll taxes, especially on small and medium size businesses, which are often in service and non-capital-intensive sectors.
The Canadian federation knows it needs a program, a sound law on loans to small businesses. There is an interesting letter from the Canadian federation, calling for loans, written to the Minister of State for Small Business in 1993. I mentioned that the strings were loosened a bit in 1993.
The federation said “The federation expressed its concern about one point early on. The modified program may likely encourage financial institutions to simply shift the figures to another column, in other words, to move the highest risk accounts into the government guaranteed loans folder”.
Like my colleagues, I have heard them a number of times. They want a program available to businesses most in need of it—specifically for them, they say—but one that is neither a subsidy nor a gift—a program that permits businesses to develop at reasonable cost.
Another passage dates from 1994. It was shortly after the November 29, 1994 election. The federation wrote to the Minister of Industry that “According to international statistics on this type of program, no more than 5% of the total number of term loans to small businesses should be given under this program”. So the target is businesses that would not otherwise have access to credit.
The federation added “When this percentage is exceeded, it is because the banks are manipulating things considerably by including in the program loans that do not require a government guarantee. The program as designed at the moment is overly generous to the banks, which draw maximum benefit from it, because they try to appear to support small business at taxpayers' expense”.
I stress, and I will probably do it again since the learning process is based on repetition, that it is not a coincidence that the Bloc Quebecois proposed that a clause be added to the bill dealing with small and medium size businesses that would not otherwise have access to credit. We could have seen, in the regulations, what this meant.
If we do not try somehow to target businesses that would not otherwise have access to financing by helping them in any way that we can, we may create a situation where banks could conceivably grant loans that are more risky, without really meeting the needs of new and growing small businesses.
The Canadian Federation of Independent Business made representations on the bill itself. However, to follow the outline I made for my speech, I must go on to say that there was a need for a reform. That reform was dictated by two considerations. The first one was to correct the magnitude of the flaws in the legislation as amended in 1993 and again in 1995, or at least to see whether it was possible to better ensure cost recovery for the Department of Industry and to control spending. This is what I call the accounting component, which is looked at by the auditor general.
But there was also an obligation to see under what conditions we could ensure that small and medium size businesses with credit needs have access to financing. These two considerations had to be dealt with together.
This is where the disappointment occurred. The disappointment is the bill. It is, of course, a new version of the SBLA and the general framework is still the same. In a financial package I look at with young entrepreneurs—and I am sure members come to the same conclusion when they do it—we look for a small business loan, because such a loan is needed for buying or renting equipment. This is one component of the financial package.
I regret that it was not improved, that the government concentrated only on cost recovery and did not concern itself with the second component, except through a pilot project that I supported but whose success I am not sure of. Since we will certainly be in this House for some months still, we will have an opportunity to raise this issue again.
Instead of being a new version of the Small Business Loans Act, this bill is called, and I quote:
An Act to increase the availability of financing—
That caught my attention when I read the bill. Great, I said, they are going to meet needs. It goes on:
—for the establishment, expansion, modernization and improvement of small businesses.
It says “small businesses” not “small and medium size businesses”.
The problem, and it is a big one, is that there is no provision for this in the bill. This is quite a problem. The minister may have had good intentions, but they are not borne out anywhere in the bill. Yes, availability should be improved, but how? We are told by officials that the funds available will be largely the same, $15 billion over a five-year period.
So we find ourselves with a bill that is supposed to be a reform, but that is really, given all the consultations, a big to-do about nothing. If the Small Business Loans Act were left essentially intact, we could at least be sure that SMBs that needed financing would have access to it. But I am not sure that those most in need of financing will qualify.
I am not sure that others who do not need such loans will be excluded. I am not sure of this, because the bill, to my knowledge, contains no provisions for such exclusion.
There are other very tiresome aspects to the bill. Of these really quite unacceptable aspects, the main one is that the minister, or the department, has removed from the body of the bill the criteria for identifying eligible lenders. A few indicators remain, but the type of loan is not mentioned.
The contract as it were that used to be in the legislation has been removed from the bill. Right now, we cannot tell. In fact, since regulations depend on him, the minister could come out and say that, from now on, under the Small Business Financing Act, loans on equipment are excluded. And, legally, there is nothing we could do about it.
Of course, when the members across the way hear opposition members suggest that this is illogical, that it makes no sense, that the core message of any legislation ought to be stated in the body of the act, and not in its regulations, they respond by saying any odd thing.
They should consider this suggestion on the face of it, so that the department is not left with all the power. I have nothing against this minister in particular. I knew the human resources development minister fairly well, and if he knew anything at all about what was going on in his department, that in itself was something. This apparently is an advantage of this government from coast to coast to coast. I rather see it as a disadvantage.
While regulations used to be included in the act, they no longer are. I want to tell the House what impact this has had at committee. First of all, I would say it was a major source of embarrassment for the parliamentary secretary; bank officials who declined to testify until they had had a chance to take a look at the draft regulations.
Then they showed up in a panic, saying “Look, if passed as they stand, these regulations will preclude lending to such and such small business category”. A franchiser came and told us “This would spell the end of our line of business”.
As members can see, the new draft regulations caused a great deal of trouble. We also found ourselves in a rather embarrassing situation as parliamentarians. We suspended our proceedings and asked the department to go back to the drawing board. But instead of slowing things down, things happened fast.
We in Parliament found ourselves faced with a fait accompli. Representatives of banks and franchise holders—and not of small and medium size businesses—met with department officials. We parliamentarians got a letter stating that the bank representatives were satisfied with the assurances they had received. It is not reassuring to parliamentarians to see a bill where the most important part, called for by the Canadian Federation of Independent Business, is not in the bill itself but in the regulations. For me, this is the most significant problem with the bill. It is even rather surprising to see such a thing happening with a piece of legislation.
There are two types of legislation we pass. In a former life, I worked a lot on legislative texts such as labour codes.
A labour code is the type of text where every word, every comma, every colon, counts because it affects the hiring or laying-off of an individual, determines an entitlement or a non-entitlement. The text of the law itself must be substantial and detailed. That is the type of legislation I am accustomed to. But the latitude being taken with the law and with what has to be done in this case is unacceptable.
Some legal experts may feel offended, but I have no bone to pick with them.
The type of law we are dealing with here is a form of governmental decree announcing policies that do not always reflect the utmost of care, the utmost of concern for democracy. In reality, even if the policies are hard to read, citizens' rights are covered. What kind of small and medium size business can say that it is entitled to a loan under the act? This is not possible, because it is not stated that capital or equipment loans are included. This kind of information can be found in the regulations.
I moved an amendment in committee, and it was of course swept aside. “Just an opposition member trying to stir up trouble”.
There is another clause I want to address, one that I see as favourable and one we supported, while trying to get an addition made to it. It is the one which states that the minister may establish a pilot project to guarantee loans to the voluntary sector and capital leases.
If this is done as a pilot project to see where the difficulties and advantages lie, I believe this is good. I would have liked to see a third element brought in, about capital funding.
I am in favour of the fact that the voluntary sector, what is called in Quebec and elsewhere the sector of the social economy, is included in those able to benefit from this legislation. I think, moreover, that there will be fewer problems with this sector than with the small and medium size businesses in sectors where the risk is higher.
This sector of the social economy, a growth sector for some time now, has some highly competent and eloquent spokespersons in Quebec. This sector is part of the market economy, and therefore financially autonomous, but its goal is not to generate profits but to create employment and deliver services.
A typical example of this is a work co-operative. A work co-operative is designed to be part of the market economy, to produce and sell products. The money it receives goes to salaries and business development, not to profit. The job co-operative sector is a growing one, and we have seen some of these co-operatives, these different types of businesses, come through the crisis and provide their workers with a very different environment.
This does not mean there is no authority in these co-operatives, but that the workers themselves own the business. Therefore, it is in their interest to make it a successful venture and to share the duties and responsibilities accordingly. It is their security, their business. There are also housing co-operatives, whose members are co-owners.
There are other types of socioeconomic businesses that can provide services. For example, there are co-operatives or non-profit organizations that provide services to the elderly.
Funeral co-operatives have recently been developing very quickly in Quebec. This is a steady business. In fact, it is growing, given our demographic realities. Funeral co-operatives help fight the invasion of American multinational companies in the funeral service sector.
We agree with having borrowers from the voluntary sector—as mentioned in the bill—or in the social economy, as we would say in Quebec, be part of the pilot project that could eventually make them eligible under the new Small Business Loans Act.
Why was working capital included? When I read the background document prepared by the Department of Industry, I realized that, after 1983, there was very strong pressure to include in the act the authority to guarantee the working capital of a business. I can understand.
I introduced this amendment attaching a condition that I saw in a board of management regulation because, in this life and my former life, I have seen all too often businesses that had everything they needed for success run out of money. I have seen business owners borrow from a brother-in-law, a sister-in-law, and so on, and find themselves unable to survive the two or three months before money came in from sales to businesses or individuals when they had to pay their suppliers. I am sorry this amendment met the same fate as the others.
Finally, there is one last provision I would like to mention even though it is not in the legislation either. In this regard, parliamentarians must renew their attack in committee and elsewhere. I am talking about the provision that does not require the examination of the application of the law take job creation and macroeconomics into account. In other words, up to now, there has been interest only in cost recovery, in expenditure control but no interest in the effect on the economy of the businesses created, even if they are bankrupt within two years. Every effort must be made to prevent them from going bankrupt after two years, because there has been too much pain, too much sweat, too much effort, too much investment and too much everything. But even if they do go bankrupt after two years, even if we have lost $50,000, was it still not amply worth the effort in economic terms? It seems to me we must introduce this approach in the analysis of the new law. I add one final concern.
The minister plans a review within a year, and then not for another five years. As I read the history of the SBLA last night, I said to myself we could be facing another recession in a year or a year and a half. This Parliament or this government will want to use this legislation again, as it has done in the past, in a countercyclical fashion in order to stimulate a weak economy. When things are tough, are the bankers prepared to make it easier to obtain credit, as would be a reasonable thing to do economically or macroeconomically? No. They do not do that, they do the opposite. They limit credit and make it harder to obtain.
Hence the importance of a loan guaranteed by the government, which says that, even if the banks tend to be tight fisted at present, that is not what is needed. The economy still needs help to recover.
In this part of the bill, therefore, I think that the minister and the department ignored their own experience. Although it is well drafted, the bill may well have to be reviewed further before the anticipated date of 2004.
The front page of the last issue of The Economist , an extremely serious and not at all left-leaning publication—I imagine that some of my colleagues must delve into it from time to time—featured a balloon showing the rise in stock markets. For some time now, The Economist has been saying that the greatest short-term risk is not Asia, but the United States, whose inflated stock markets could take the same dive, with serious consequences.
Canada was not mentioned. As members know, The Economist is a British publication, but it is interesting to hear these experts draw comparisons with the situation that led to the 1929 stock market crash. I do not wish to scare anyone, just to say that the minister was unwise not to provide for a more periodic review of the legislation, given its past effect in counteracting cycles, even if the purse strings subsequently had to be tightened each time.
The Bloc Quebecois is in favour of the bill because it nonetheless gives SMBs access to loan guarantees that they would otherwise have greater difficulty obtaining. But this is not a good enough reason for changing the title of the bill which, I repeat, used to be the Small Business Loans Act. The new short title is the Canada Small Business Financing Act. The Small Business Loans Act was much more to my liking.