Mr. Speaker, I thank the hon. member for bringing some decorum back to the House.
The point we need to recognize is that there are some questions above those about goals, philosophy, focus and management style. There are other questions which need to be addressed.
Does the crown corporation complement or does it compete with the private sector?
Particularly significant in light of this question is the recent broadening of the scope of crown corporations to make them self-reliant. The only way to do that has been for crown corporations to go after profitable businesses in the private sector.
Let me give one good example, the Business Development Bank of Canada. It recently published an ad in the Globe and Mail which presents to the people of Canada a guaranteed GIC backed by securities on the Japanese stock market. The bank says that if the GIC is kept to maturity, seven years, the purchaser's capital will be guaranteed. Regardless of what happens to the market, there is a guarantee that the capital will be returned. In the meantime, the interest paid on the GIC will be directly related to the performance of the Japanese stock market.
What has the Business Development Bank of Canada got to do with this kind of thing? It is not a deposit taking institution. It was created to help small business people and, in particular, to develop the knowledge based sector.
Looking at the record of what the Business Development Bank has done in terms of supplying capital to small business and comparing that to what the chartered banks have done, we discover that in proportion to the amount of money it is lending out the Business Development Bank falls short. The chartered banks are actually doing a better job than the Business Development Bank.
It is a crown corporation. What is it doing? It is not meeting the objective for which it was originally set up. It is doing something else. It is getting into an area that is currently being served by other organizations in the private sector.
We need to ask a second question. Does the crown corporation move away from the high risk or low profit areas and enter into more profitable areas? I can talk about a couple of issues.
I want to refer particularly to the credit unions and the Farm Credit Corporation. When the credit unions appeared before the committee they said “Because the Farm Credit Corporation is under so much pressure to meet its own bottom line as an institution, it is going after that kind of business in the very markets in which we have always been doing that. That is a real difficulty for us. It is not that we will not sit down and work with them on this. However it is one thing to talk about partnering and another thing to get down to the nitty-gritty of what partnering means and what role each partner is to play”.
The credit unions, private organizations, are in direct competition with the Farm Credit Corporation, a crown corporation. They are essentially doing the same thing. FCC is now moving into an area that is not as risky and is not doing what it was originally set up to do.
There are all kinds of examples like that. We obviously do not have the time to get into that at this point. We need to carefully think through what the role of crown corporations really is.
I want to focus particularly on the final part of this paper. Two persons provided expert advice and this is to the credit of the parliamentary secretary.
Professor Trebilcock of the University of Toronto told the committee which deals directly with the question before us:
It is not sufficient in most policy contexts, including the one with which you are concerned, to identify simply a case for government intervention and then leap from the premise that some form of government intervention is required to the view that the form of the intervention should be through a crown owned enterprise. Governments have a vast array of policy instruments at their disposal. In every case, we must ask: Is this the appropriate choice of instrument to realize this particular policy objective?
In our 1982 study, we were particularly interested in this institutional boundary issue. Rather than using crown corporations, why does the government not increase its use of tax regulation or subsidization of private sector firms so as to align the conduct of these private sector enterprises with government public policy objectives? To put the question more bluntly: Is there ever a case for a crown corporation in any context? Conversely, could one not imagine governments achieving their policy objectives through appropriate choice of tax, subsidy or regulatory instruments directed at the private sector?
Then he went one step further. He said:
Whether there is a gap which should be filled, (and then what policy instrument is best adapted to filling it) to my mind should turn on serious evidence of market failure, e.g. monopoly, public goods/externalities, information failure, asking in every case (a) whether the government can do better than the private sector in resolving the demonstrated market failure and (b) what policy instrument is likely to do this at least cost and with fewest negative spillovers for other policy objectives. For example, is there insufficient competition among private sector financial institutions for SME business? Can a government agency better assess the prospects of a high technology enterprise than the private sector? Are there positive social or economic spillovers (externalities) from high technology activities that private sector agents cannot fully capture, leading to socially suboptimal levels of private investments in such activities? Can a government agency reduce the fixed transactions costs faced by private lenders in making small business loans?
Those are key questions from a key scholar in this particular area.
Then comes a practical application from Peter Kemball of Acorn Partners who said: “It is a very basic, philosophical problem, if you will, grounded in economics, and I just happen to have concluded, having watched things over the years, that while there are some very good things that have happened as a result of these organizations”—crown corporations—“those things could come about in other ways”.
He went on to say: “In fact, that is what the hon. Minister of Finance was saying in relation to a different environment. We do not need the public sector to make those things happen in a general policy sense. In the specific sense, yes, it is quite true that a particular deal may not have come together in the absence of such an organization. However, by and large, it is a policy failure. We do not have our overall rules right. That is why we now have these organizations”.
The committee recommended that certain public policies such as some aspects of the tax system, public programs such as the Small Business Loans Act and public institutions such as crown financial institutions be reviewed with an eye to changes which could be made to encourage the development of new initiatives in capital markets.
In conclusion, the important thing here is to recognize that the mint is a crown corporation and that there has not been an in-depth analysis of the need to change the act. There has not been a demonstrated need to increase the $50 million to $75 million in borrowing power. Why? Because at the moment it only has a $14 million loan outstanding, $9 million of which is long term and $5 million of which is short term borrowing.
Sure, it has an opening to borrow to quite a degree and it does need to borrow from time to time to meet its cashflow requirements. I agree with that and support it. However, that does not mean it can now borrow $25 million more, except for one thing, the mint is now moving directly into competition with institutions, organizations, private sector businesses like Westaim. Because of that, it has added an addition to the mint in Winnipeg at a cost of $30 million. Lo and behold, if we take the $14 million it has now and add the other $30 million to it, we are up to the ceiling. Now it needs $25 million more for cashflow.
I can understand that but this means that the mint has left its primary focus, that of minting coins, and gone into the manufacture and plating of coins which cuts directly into the business of a private enterprise in Fort Saskatchewan. Constituents object to that.
We expand the power. We have not even talked about how the mint's power has been expanded. By allowing it to have the powers of a natural person it is able to form subsidiaries and buy other businesses. It can do virtually anything it wants. That is fundamentally in error and not consistent with the purpose and role of a crown corporation which is to fill a gap that the private sector is not filling and to serve needs that are not being served in other ways.
That is why I am objecting. It has nothing to do with the administration of the mint or its functioning today.