Mr. Speaker, it is with pleasure that I rise today to debate the conclusion of Bill C-21 which is known as an act to amend the Small Business Loans Act. We found out during the previous debate last month and on review of the auditor general's report that the bill would be better identified as the small business loans act with need of substantial review and improvement.
The bill was labelled by many as a bill that lacked performance indicators and a bill excessively responsive to lending institutions rather than responsive to the lending needs of small business. This legislation has always operated with a sunset clause to ensure periodic review for improvement and assessment on whether the bill is meeting the needs of small business, not merely renewal.
On our assessment as well as the auditor general's, the bill is in need of improvement and the return to its original focus. This government has yet to make up its mind on what it wants to do with the act in the first place. As a result of its indecision it has requested that Parliament renew the act as is for another calendar year while it continues to review the program.
It is with regret that we support this legislation only because without it as of March 31, 1998 the current lending period would cease and SMEs, small and medium enterprises, would not have access to capital under the SBLA, the Small Business Loans Act.
However this government should not expect the support of my caucus colleagues or for that matter the small business sector unless this government begins to review, improve and update this act to ensure that appropriate access to capital is afforded to the real engine of job creation, that being the small business sector of this country.
I would hate to sound cynical but I am really worried given this government's reluctance to establish specific debt reduction targets. As well as its reluctance to reduce taxation, broad based tax reduction for both consumers and small business, the government's plan to create more small business is to continue to tax us to death so that more large and medium size businesses become small companies.
The government has missed a real opportunity to show SMEs that they are indeed serious about the concerns that SMEs face today. In fact they are not alone as the auditor general has pointed out in his recent report on this piece of legislation. In section 29.87 he states that new lending under the program will end as of the 31st of March, 1998 unless the government decides to renew it.
This presents an excellent opportunity to review the program's contribution to filling current financing gaps and stimulating economic growth and creating jobs. The auditor general goes on to say the review would also enable Industry Canada to assess whether the program meets the needs of the small business sector in a rapidly changing economy.
We should not have wasted this opportunity to improve the act. This government was criticized for the very fact that this red book promise was broken by its own rank and file in the preamble to a priority resolution at the October 1996 convention: “The banks and other financial institutions have not yet taken any concrete steps to alleviate the hardships faced by the small and medium sized firms in obtaining investment capital”. Those are the words of the Liberal Party of Canada, not ours.
In my previous statement at second reading, I outlined a number of observations and recommendations within the Report of the Auditor General. I was pleased to hear during the debate that the industry minister agrees with the observations of the auditor general's report. I would like to take this opportunity to reiterate the minister's statements.
The minister stated “The auditor general's report would be a very useful tool as we review the SBLA and design ways to make the Small Business Loans Act even better in the future. A one year extension of the act will provide the time needed to complete the review of the program”.
Before we further discuss the necessary initiatives required to improve this bill, it would be useful for us to remind ourselves, in particular those on the opposite side of the floor, the impact the small business sector has.
More than 98% of all businesses in Canada are small businesses with employees of less than 50 in number. Half of Canada's workforce is employed by the small business sector. It is widely recognized that the small business sector has had the greater proportion of new job creation in recent years, as the auditor general pointed out.
Small businesses play a very significant role in our economy. They are the heart of economic activity and community development. In addition they sometimes develop into large firms of the future, as long as they are not taxed to death and there is more disposable income in Canadians' pockets.
Small businesses contribute 43% of Canada's private sector economic output. With this in mind it is imperative that as legislators we ensure that small businesses have access to reasonable financing to ensure the growth of this critical sector of our economy.
As the minister stated, the original Small Business Loans Act was introduced in 1961, as I said before, even before I was born. However since then the objective and the focus of the bill has been greatly distorted. The bill no longer serves as a loan guarantee for small business; rather it serves as a loan guarantee program for banks.
The intent of the act was simple: to provide small business with access to capital for loan requirements that would not be considered under normal lending circumstances. The federal government would in turn guarantee these incremental loans. That is the issue in play here, it is a loan guarantee for incremental loans.
Over the years nearly 40% of the loans that fall under the SBLA are loans that would be granted anyway by lending institutions. Those are not my words, they are the words of the auditor general.
The original intent of the legislation was to ensure that incremental loans to small business were approved in exchange for the business sector being willing to pay a higher rate of interest and even a fee for the access to incremental financing.
As mentioned, the two amendments we voted on just the other day relate to the continuation of the bill as well as to increase the ceiling of the total amount of the loans from $14 billion to $15 billion. Four times the federal government has had to increase the ceiling on the total amount of loans. One would think with this kind of exponential increase that small business would actually have access to financing and that small business financing would no longer be a problem. I know the member for Kings—Hants would actually put that logic into play.
However, I would like to state to my colleague that the Canadian Federation of Independent Business stated that the rejection rate of loan requests was actually 2% higher in 1997 than it was in 1987. Who was in government in 1987? It was the Progressive Conservative Party of Canada.
The CFIB also indicated that 29% of business owners surveyed in 1997 said that availability of credit is still the most serious business concern they have. This is double the concern they expressed in the late 1980s, according to the CFIB. These are not just my words.
I challenge the government to return to the original intent of the SBLA in providing incremental financing to small business when they re-enter the bill as the Progressive Conservative Party advocates, as do the CFIB and the auditor general.
The overall theme of the auditor general's report and my principal concern is that Industry Canada does not have the performance indicators and benchmarks to properly assess whether the act is actually accomplishing its original objective, that of providing incremental financing.
The program's raison d'être is to help fill existing financing gaps for business. Without true financial support and adequate financing for growth of our small business sector, growth will be stunted within our economy and the future prosperity of Canada can be threatened.
As I earlier indicated, the principal problem with the act is that it lacks clear objectives and performance indicators and benchmarks to measure the success and effectiveness of the legislation. The government could benefit from the old adage, what gets measured gets done.
As I stated earlier, the bill was first passed in 1961 yet the type of business that would likely have been started back then was either retail based or perhaps light manufacturing. The Canadian economy has greatly changed over that period of time. Now we have different sectors such as the service sector, the knowledge and information sector which form a much greater part of the economy today, with the latter sector having a high net employment growth. It is imperative that when the act is reviewed the government ensures there are innovative solutions and commitments from lenders that address this need.
The greatest concern that we have today is that the original intend of the program was to provide incremental financing and access to capital to start-up ventures or small firms that would not otherwise have been granted a loan from today's lending regulations. The relative size of the loans was intended to be small so borrowers could handle a higher rate or a fee in exchange for a loan that did not tie up their leverage of their personal guarantee.
The result today is that given the expansion of the program it is now beginning to displace traditional lending rather than enhancing marginal loan volumes and filling gaps where small venture loans are required. Given that 90% of the loan was to be guaranteed, the lending institution would then consider engaging in that loan.
Now we are getting to a situation, instead of having small size loans, where some of the loans are actually teetering on over a quarter of a million dollars. I am not advocating that we necessarily hamstring the SBLA in terms of actually having a smaller cap, but the emphasis has to be on more marginal financing, incremental financing, as opposed to getting into these larger type loans. At the end of the day these are the kinds of loans the banking institutions would actually approve.
I will take this opportunity to discuss a lot of other things which affect the small business sector and the SBLA. Unlike the Reform Party yesterday, I am not necessarily interested in tying up a entire day of speaking time on an issue. I would rather talk about issues that Canadians are actually concerned about.
I want to talk about small business. One of the Reform Party's founding principles is its members are here to represent their constituents. If one asks the CFIB whether the small business sector likes the SBLA, it will state it is a program it is very much aware of. It believes it is key to financing within the small business. It is very important. This is whether you are in Atlantic Canada, Quebec, Ontario or the west.
If the Reform Party is truly representing its constituents I suggest it actually votes for the SBLA amendment tonight so we can continue on with the process of this bill. Otherwise one of its founding principles of representing its constituents has been thrown to the wayside.
There are some other initiatives in terms of what this government has to do in order to make the small business sector more competitive. The Canadian economy is very overtaxed. After the budget was tabled the Canadian Chamber of Commerce tabled a press release in response to the budget. In the press release it challenged the government to draw up a detailed fiscal framework for the new millennium based on clear criteria for growth, competitiveness and opportunity rather than arbitrary commitment to allocate half the surplus to spending and half to debt.
The small business sector is still way overtaxed. In our election campaign we wanted to move the small business tax rate from 12% down to 8% which would make some marginal business plans into more profitable business plans and actually put more money back into small business pockets.
We need to lower EI premiums for small businesses. Right now the EI program has a $7 billion surplus annually which actually belongs in the pockets of employees and employers. What this actually does is taxes every new job is created.
In this same communique the Canadian Chamber of Commerce stated that if the EI premium were reduced to $1.95 instead of the present $2.70 per $100 of insurable earnings, every medium size company across Canada would be able to hire at least one additional person.
We know that all taxes kill jobs but payroll taxes at the end of the day are actually more punitive than any other tax initiative.
What we challenge this government to do, when it is reviewing the SBLA, is to review all the issues that affect the small business sector. People may ask if the fund is sustainable if we lower the EI premium from $2.70 down to $2.00. The chief actuary for the government stated that if it were lowered from $2.70 down to $2.00 it would be able to withstand a severe recession. That is an initiative that the Progressive Conservative Party clearly advocates.
We also know that the only economies which have any kind of consistent growth are those economies that have less debt and less tax. In order to reduce the overall tax burden of our country, we need to lower the debt. That is why the Progressive Conservative Party advocates lowering the debt to 60% of GDP by the year 2000 and to 50% by the year 2005. It goes back to my adage of what gets measured gets done. By saying we will put half on new spending, half on new debt and half split between debt and tax reduction, at the end of the day I get very worried about that. Canada will not have a surplus if that kind of approach is taken because at the end of the day we will end up spending it.
We need less debt and taxes. We recently had a budget where the government raised the personal exemption from $6,500 to $7,000. That took 400,000 Canadians off the tax rolls who should not have been there in the first place. What we advocate is that is not nearly enough. We want to raise the personal exemption to $10,000 which would take two million Canadians off the tax rolls overnight who simply should not have been there in the first place.
Budgets are more than just about numbers. They are about values we share as as nation. By that I mean that it is very troublesome from the standpoint that we actually tax individuals who earn $14,000 less than the poverty line.
We challenge this government to develop a plan for growth in this country based on less debt, less tax and putting more disposable income back into the pockets of Canadians.
Mr. Speaker, I know as the fiscal conservative that you are, you can actually understand that Canadians are poorer today than they were approximately eight years ago. I know the hon. members over here will understand that the disposable incomes of Canadians has gone down 6% since 1990.
We need to ensure that we put more disposable income back into Canadians' pockets so that more individuals can have an opportunity to participate in the economy in general. The only way to do that is to provide Canadians with broad based tax relief.
It is with regret that we are voting for a bill because the government did not take advantage of the last five years to seriously look at the SBLA.
The government knew it had to be reviewed, but all of a sudden it came to a stage and said “oops, the bill is coming up for renewal, what are we going to do about it?” Instead it said it would wait for the report of the auditor general.
I find this kind of perplexing because yesterday the finance minister wrote a letter to the auditor general saying that they are not so keen on some of his work. On the other hand right now, they are saying they want to wait for the report of the auditor general.
The member for Kings—Hants made a comment that I will address later. What I am trying to say is that if there is one credo this government can be described by, it is that sometimes it makes it up as it goes.
This Small Business Loans Act really is an example of that. It is oops, do you mean we actually have to review a bill? What we are going to do is ask for another year.
I believe that the government, in good faith, is going to take a serious look at the auditor general's report and act on some of those initiatives as opposed to making it up as it goes. We saw that in Kyoto. Sadly, we also saw it in the unity issue in 1995 during the referendum.
We need more planning and less improvization. We also saw it again with a provocative approach regarding the supreme court reference. It comes down to exactly what the member for Kings—Hants states, brinksmanship.
The supreme court reference kicks a hornets nest. It does not tell us anything that we do not know. The government has chosen to play Lucien Bouchard's game of getting this kind of issue back on the national agenda.
The reason the government is doing that in the absence of plan A is that it tried to come up with a kind of plan B. There is no such thing as plan B. There is no Canada unless we have our territories and all 10 provinces.
I challenge this government to do two things. The first is to develop an approach or a plan for growth for our country based on less debt, fewer taxes, more disposable income into Canadians' pockets so that more Canadians can participate in the economy.
Second, have more planning and less improvization as we saw in Kyoto, as we saw in the unity issue and as we see here in the SBLA or even in the postal strike.
I am looking forward to the bill being tabled in its new form in the coming days.