Mr. Speaker, I wish to enter the debate on Bill C-21 with a series of questions designed to give direction to the government in the administration of this program.
We on this side of the House have been accused of being totally and unalterably opposed to granting capital to small business and making it available for them to access business. That is not the point at all. There has been a total and complete misrepresentation of what we are talking about.
We are talking about the 40% or 50%—in fact the most recent study says about 46%—of the loans granted under the SBLA that would have been granted in the normal course of events. I am talking about the other part and will ask questions about it.
The study on access to capital by small business asked whether the Department of Industry would do a cost benefit analysis of the Small Business Loans Act. Why is it that since 1995, when the first set of amendments were proposed by the Department of Industry, no such study has been done? That is the question.
The particular program is supposed to increase jobs. I have a question to ask that is similar to the one asked by the auditor general. He asked how many jobs were created. Is the number of jobs created simply the number that the applicant writes on the piece of paper, or have they actually been verified as the number of jobs created? How many jobs were lost because a particular loan was granted to one business and not granted to another? These are very significant questions.
The program is supposed to help small business improve. How does the act propose that the business be measured? What is the improvement? There are no statistical indicators of what constitutes improvement.
Some obvious measures could be level of sales. Has the level of sales risen? Is the profitability of the company a little higher? Is its productivity higher? Is it more competitive? What is the level of exports compared to before the loan was given and later? How many products were developed? What is the net employment impact? What is the overall business success? These suggestions ought to be made and ought to be included.
I want to raise another point which has to do with a grave injustice and grave abuse of the provisions of the program. The program was supposed to be there to help small business. My colleagues across the way have made a big point about small business. I draw attention to a paragraph found in the auditor general's report. It is a rather significant one.
The Small Business Loans Act puts a ceiling of $250,000 on an individual loan. In his sample of loan files the auditor general noted some cases in which a number of individual corporations with substantially common ownership had collectively obtained more that $250,000 in loans to operate the same business. In one particular case a group of 23 corporations obtained more than $4 million in SBLA financing.
That is a blatant abuse of the provisions of the act. Yet there was no indication as to why this was done. Nor was there any action taken to prevent this from happening. Nor was there any consequence as a result of it having happened. The least I would suggest to the Minister of Industry is that kind of a thing should not happen again.
The Income Tax Act has a provision that does not make it possible for corporations with essentially the same ownership to bundle together to get particular advantages. Why does this act not have that provision? That was well known since 1966 yet there is not even a hint of that happening.
Instead of us perpetuating the act indefinitely, the Department of Industry should have a year to study it in great detail. It should have done it already. Since it has not been done we will give it the benefit of the doubt and give it another year.
In no way should the department be given any authority to spend more money than is already in the provisions in the act, which is $14 billion. It does not need the $1 billion. We heard the minister this morning say that the commitment at the moment is $12.7 billion.
There is a cap now of $14 billion, which is a $1.3 billion difference. The government wants another $1 billion on top of that. If the pattern remains the same as it was 46% of that would be granted anyway. If we take that out, there is more than enough money left to meet the real intent of the Small Business Loans Act. I suggest that we change the act so that it does one thing and not the other. That is the gist of that provision.
There is more. We need to ask ourselves why the SBLA program has not been adjusted to be more accurately reflective of the economy around us. It is interesting that there is no change in this regard at all. The program still focuses on land, premises and equipment. Yet where is the economy going? The economy is going into high tech, into knowledge based industries. It is not going into land, premises or equipment in the first instance.
If the minister were really concerned about meeting the needs of small business, he needs to do not only the things that have been discussed already with regard to tax reduction but to make money available in those areas that will bring forward our competitiveness as a nation. I think that needs to be addressed as well.
I also want to ask the minister if his officials have projected the possible risk of new failures. About 75% of the defaults of the loans under the SBLA come from businesses that are new enterprises. Three-quarters of the defaults are in new enterprises. Has that been figured into the risk situation? We have no indication that is in fact the case.
The auditor general goes so far as to say there is no figure that we as parliamentarians can look at to say what is the projected default rate or cost in terms of actual dollars of this program. The auditor general's estimate stands at $210 million. That is a figure of cold, hard cash which he believes the taxpayers of Canada will have to fork out.
Why does the Department of Industry not come clean and tell parliamentarians that Canadian taxpayers are on the hook for a minimum of $210 million in predicted defaults in this area? That says nothing about some other areas that could come into question.
Another thing really bothers me. Does the department have enough information? What happens if a lending institution, say one of the big banks, says that a loan is in default? The auditor general makes a rather interesting observation in section 29.64:
Industry Canada does not request access to the complete loan file when it receives a claim.
This means that the department does not know whether the lending institution observed all the requirements of the act. There is some indication that some lending institutions did not. They charged the borrower fees, which was contrary to the provisions of the act. These very serious questions have to be addressed. That is why we are not prepared to give to the Department of Industry one cent more than it already has.