Debates of Sept. 28th, 1998

Questions On The Order Paper

[The Deputy Speaker]

The questions enumerated by the hon. the parliamentary secretary have been answered. Is it agreed that the remaining questions stand?

[Jean-Guy Chrétien, Bloc, Frontenac—Mégantic, QC]

Mr. Speaker, I rise on a point of order regarding the Notice of Motion for the Production of Papers No. P-10.

[The Deputy Speaker]

Perhaps we could wrap up the points on the Order Paper first.

Shall all questions be allowed to stand?

[Some hon. members]

Agreed.

[The Deputy Speaker]

The hon. member for Frontenac—Mégantic.

[Jean-Guy Chrétien, Bloc, Frontenac—Mégantic, QC]

Mr. Speaker, I rise on a point of order regarding Notice of Motion for the Production of Papers No. P-10.

This motion was tabled on December 9, 1997. I merely wish to make sure that the move of the Lac-Mégantic HRDC office was carried out efficiently and without waste.

I have trouble understanding the Liberal government's delay in responding. Does it have something to hide? I formally ask the government when it will respond to this question, which was first asked ten months ago.

[Peter Adams, Liberal, Peterborough, ON]

Mr. Speaker, I listened very carefully to what the member had to say. Unfortunately I do not have my records with me, but I will look into the present situation of P-10.

[The Deputy Speaker]

I must also inform the House that the matter of these motions and notices of motion will be examined Wednesday during Routine Proceedings and that perhaps the hon. member and the parliamentary secretary would have something to say at that time.

The House resumed consideration of the motion that Bill C-53, an act to increase the availability of financing for the establishment, expansion, modernization and improvement of small businesses, be read the second time and referred to a committee; and of the amendment.

Canada Small Business Financing Act

[The Deputy Speaker]

When the House broke for question period there remained a period of five minutes for questions and comments.

[Rahim Jaffer, Reform, Edmonton Strathcona, AB]

Mr. Speaker, I would like some enlightenment on the issue of revising Bill C-53. I have heard a few comments from members in the House that specifically the revisions to the Small Business Loans Act would increase the ability of small businesses to attain financing within Canada.

However, my question goes to the fact that I have heard this program has been in place for 37 years. If we are actually trying to allow companies to have access to capital and if we are trying to make it easier for companies to have access to capital through this program, why has the program been carrying on for such a long period of time and now finally, after 37 years, we are introducing changes to the program?

Is that not an indication there is a problem with the small business financing approach of the government? Maybe we need to look at an option of creating more competition among lending institutions and allowing them to go that route rather than to continue with a program like this one. Maybe the hon. parliamentary secretary could clear that up for me.

[Walt Lastewka, Liberal, St. Catharines, ON]

Mr. Speaker, I appreciate the comments made by my colleague, but he must understand that in each government program there is always continuous improvement going on to make sure that we are in with the times.

Last spring when Bill C-21 was brought forward it was requested by all parties that extra time be taken in the House to review the Small Business Loans Act. This has been done. During the various committee debates witnesses will be brought forward to review the Small Business Financial Act and to understand the benefits of it. There are benefits right across the country. The Small Business Loans Act has proven in the past that it assists businesses in areas of a little higher risk to make sure they get financing. There has obviously been much improvement over time to this act. Again, we have done an extensive review from the time Bill C-21 was approved until now.

The industry committee, including my colleague opposite, will have a chance to review all the statistics. The report of the Small Business Loans Act was tabled today in the House to allow all of us to take a look at the report and to move forward on the new bill in the House of Commons.

[Steve Mahoney, Liberal, Mississauga West, ON]

Mr. Speaker, I am particularly pleased to talk about the Small Business Loans Act and the impact of the changes.

When a member from the Reform Party asked the previous speaker in the question and comment period about a suggested reform, it was implied that we somehow made the atmosphere more competitive for lending institutions instead of dealing with people in small businesses who need assistance. I guess I should not be surprised that someone from the Reform Party would see that the goal would somehow be to help banks and lending institutions instead of helping people access the money they need to expand their businesses.

Clearly that is one of the fundamental differences between this side of the House and that side. We understand the reason the Small Business Loans Act has been such a success over the past 37 years. It has made available a reserve of capital to people who otherwise would not have access to it.

How does it work? The bank gets a bank guarantee for 90% of the loan. The loan is also targeted specifically to an asset that would be added to the business. It could be leasehold improvements. It could be a die-cast machine. It could be a transportation trailer, something that can actually have affixed a value which could be recovered if the small business were not successful and winds up owing the money.

The vast majority—well over 90% or closer to 95%—of small business loans are paid back, but there will always be as in any economy from time to time the odd problem. As a result we have a situation where some value will be added to the product financed by the lending institution. In essence that is what this bill does.

The member opposite also asks “What are the changes? What is new?” I invite him to take a look at them because I think they are quite significant.

First, one of the changes in this act will allow for the program to continue with a five year review instead of eliminating the ability to lend. That has been one of the problems in the past. There is a little black hole, a spot, a period of time, when it needs to come before parliament to get restarted or kick-started. This will allow for a five year mandatory review, but the lending authority side of the legislation will continue.

Second, and I find this particularly interesting, is that we are looking at a capital leasing pilot project. In some ways this does exactly what the member opposite in the Reform Party was asking. It expands the marketplace to allow leasing companies now to access a loan guarantee from the federal government.

It is an option for businesses in many cases that need to acquire very expensive equipment in the transportation or manufacturing sector. Perhaps they are at their maximum in terms of a line of credit or something of that nature with the bank, or they do not have the personal assets or the corporate assets to back up the loan, so they go to a leasing company. This part has not yet been designed, but it seems to be a positive change that would allow leasing companies across Canada to access loan guarantees and would encourage them to make loans to small business.

The third reform in the bill is a voluntary sector pilot project, which is extremely exciting. People in the voluntary sector who do such good work in the community may from time to time need to acquire something of a fairly substantial capital nature. This will allow them on a cost recovery basis to access money through the Small Business Loans Act.

Those are three of the changes the act will put in place that are very positive. It is not designed to favour big banks or lending institutions but rather to offer them some security when they are in a situation where they otherwise might not make the loan.

The Small Business Loans Act requires that the applicant fill out a very extensive business plan. It requires that the applicant does the homework. That is a positive thing, aside from the fact that it may give the government, the taxpayers and the lending institution more confidence in understanding how the loan will be repaid. To fill out a detailed business plan small business entrepreneurs have to understand their businesses, their problems and their strengths. It is very positive that the application is as detailed as it is.

The city of Mississauga in my riding of Mississauga West is known as a city of small businesses. Many of the businesses will benefit from the changes in the bill. Many of them have benefited over the last 37 years from the Small Business Loans Act which has been put forward by everyone who has held government in the country over the last 37 years.

In 1998 the business directory in Mississauga listed just under 10,000 business. Out of those 33% had between one and four employees and another 25% had between five and nine employees. Almost 60% of the businesses in Mississauga have fewer than 10 employees. When we add in the other 10 to 20 employees it is 18%. Almost 80% of the businesses in my city run businesses with fewer than 20 employees. In an area like mine some understanding of the significance of small business is critical.

I was privileged in 1988-89 to be appointed as the small business advocate by then Premier David Peterson in the province of Ontario. We did some analyses. Every year the small business advocate would file a report with the Ontario legislature on the state of small business. We found that the top three problems concerning small business in those days—and from my prospective in Mississauga they continue to be the top three problems—were access to properly qualified and trained staff and the ability to keep them once they have been trained, the taxation burden, and access to capital.

The Small Business Loans Act improves access to capital for small businesses. It lays out the ground rules so they understand what is involved and gives some confidence to the financial sector that these loans can be made without total fear they will not be paid back.

On the issue of taxation, it is my view that small business, not unlike every other sector of our society, feels that we are indeed taxed too high. The finance minister made announcements on tax reductions in the last budget and there will be more announcements coming on tax reduction. I would suggest to all members, when I hear all the hue and cry about employment insurance premiums, et cetera, that the small business people in this country want to have a fiscally responsible and prudent government. They want to see us tackle the debt.

I have round tables four times a year in my community with business people and the number one issue I hear about from those business people is that we have to get a handle on the debt. The debt alone is a serious problem. These business people want us to have a proper, responsible financial plan and the small business loan legislation is part and parcel of it. It is one of the legs in the stool that will continue to make our economy as great as it is.

[Jim Pankiw, Reform, Saskatoon—Humboldt, SK]

Mr. Speaker, the hon. member for Mississauga West said that under this program the banks would get a guarantee. In other words, taxpayers would guarantee the loan.

Then the member made the point that the money can only be lent for assets. The first example he gave was leasehold improvements.

That is a perfect example of the problem with this government. We have career politicians making decisions for business who are completely out of touch and without any understanding of the realities of running a business.

With respect to leasehold improvements, the member clearly does not have a clue what they entail. A leasehold improvement is an asset to a business. However, if the business fails it may be a liability to the next person. In many instances leasehold improvements are not consistent. They are not what is required of the next business coming in.

Therefore, there may be a liability on the business if the venture is not successful. There may be a requirement for them to remove those leasehold improvements, in which case they would be destroyed and the asset would become a liability.

I have made leasehold improvements to businesses. In fact I borrowed money under the Small Business Loans Act for leasehold improvements. I am an example of a business person who was unnecessarily burdened by government excess regulations.

I would have qualified for a bank loan, but the bank said that the government had a plan which the taxpayer would guarantee, and I was forced to pay a premium on it. That is one of the ways in which the mentality of this Liberal government ends up burdening small business people such as myself.

The reason government members do not understand that is because they are career politicians. The hon. member for Mississauga West said that in 1988-89 he was appointed small business advocate by Premier Davis. That member's connections to politics and getting appointments to different things goes back years and years. I would not be surprised if he was a lawyer.

The member said that we found what the top three problems were. Notice that the member said “we found”. He did not say “I know what they are”. How would he know? He is not a small business person and he is out of touch with the needs of small business people.

He said that taxation was a problem. If that is the problem, then why is he in a government that has increased taxes 37 times in the last four years? That seems to be an inconsistency to me.

The member also said that access to capital or financing was a problem. My only comment to that is, why has the government of which he is a member not lowered EI premiums, reduced taxation or ended the excessive burden placed on business by government regulations? Why is the member part of a government that acts against small business?

[Steve Mahoney, Liberal, Mississauga West, ON]

Mr. Speaker, some of those comments hardly merit a response. The hon. member's personal attacks about my background notwithstanding, if it is of any interest to him or if anyone really cares, I am indeed a small business person. The problem is that while I am here in Ottawa my business seems to be getting smaller because I am spending too much time here. In any event, I found that comment to be somewhat irrelevant.

One of the real issues here is the access to capital for leasehold improvements. The hon. member says that I do not know what I am talking about. I would tell the hon. member that the small business community out there faces extraordinary capital requirements to effect leasehold improvements so they can increase their sales, so they can market their products and so they can do more business. The gentleman from the Reform Party says that is a liability?

It is not a liability. Without leasehold improvements many small businesses would simply not be able to function.

The mentality that is there is just trying to find something wrong with the legislation, rather than recognizing the fact, in a non-partisan way, that indeed the Small Business Loans Act has been a success. This bill will make it more successful, will refine it and make capital available to small businesses. Why does the hon. member not support that?

[Rahim Jaffer, Reform, Edmonton Strathcona, AB]

Mr. Speaker, I am pleased to rise in the House today to speak to Bill C-53 with my hon. colleague from Saskatoon—Humboldt.

Bill C-53, an act to increase the availability of financing for the establishment, expansion, modernization and improvement of small business is the government's attempt to put a band-aid solution on the problem of small business access to financing, a problem the Liberal government has helped to create.

The mandate of the Small Business Loans Act is to facilitate debt financing to small, young businesses that would likely not obtain it otherwise. This mandate, which will be maintained intact under Bill C-53, essentially dictates that the government and therefore the taxpayer should take on more risk than private lenders are prepared to incur. Even with the changes contained within Bill C-53 the taxpayer still covers 85% of any small business loan defaults.

I do not think any member of the House can ignore this point. Whether the members choose to support or oppose this bill, it must be remembered that the essential aspect of Bill C-53 is to provide high risk loans that the private sector cannot or will not provide.

If members of the House believe this is a fair risk to place on the shoulders of Canadian families, they should support this bill. If they believe it is an unfair risk to place on taxpayers, they should oppose the bill.

Two questions immediately came to mind after reviewing Bill C-53: Why should the taxpayer take on more risk than the banks? Is there no other way to ensure that small businesses have access to much needed investment capital?

It is widely understood in economic circles that government intervention leads to a misallocation of resources. This is not free market sophistry, it is the thinking of Nobel laureates like Milton Friedman, James Buchanan, Gary Becker and Frederick Hayek. We can trust the opinions of some of the greatest economic thinkers in the world or we can trust a government that continues to put obstacles in front of business in the form of more government regulations at the cost and peril of Canadian business.

The intervention by the government maintained by Bill C-53 will remove important market forces from the lending processes and will lead to the funding of less viable business ventures. This may help to garner political support for the Liberals, but will continue to do nothing to foster a healthy economy.

To return to my first question about why the Canadian taxpayer should be expected to accept such high economic risks, the answer provided by the Liberals seems to be so they can win political favour. This government seems to have no concern for the average Canadian families who struggle every day under the highest tax burden in the G-7.

In fact, clause 5 of Bill C-53 illustrates the government's indifference to the fact that it is playing politics with the paycheques of Canadian people. This clause refers to the minister's liability should a loan not be repaid. However, it is clear that the liability is that of the Canadian taxpayer. It is not the industry minister's problem if high risk loans are defaulted on, it is the taxpayers'.

The issue of risk should be examined more closely. Risk is a key element in the proper functioning of a free market. If it is artificially lessened or eliminated from market interactions, it leads to a misallocation of scarce resources. That is, lending institutions will be less inclined, despite the provisions for due diligence contained in Bill C-53, to evaluate the long term viability of a business venture.

This situation will lend itself to the financing of unsustainable market ventures and it is the taxpayers under this regime who will inevitably be the losers.

This is supported by the government's own statistics which show that the default rate under the SBLA was about 6%, while the private sector was at approximately 1%. This is substantial when we consider the amount of money at stake.

The Minister of Industry proudly claims that the taxpayer has only a $1.5 billion liability. This is not an insignificant sum of money. The Canadian taxpayers are at their breaking point and someone has to say enough is enough.

Everyone in this House understands the vital role small business plays in the Canadian economy. Both my colleague from Saskatoon—Humboldt and I are small business operators. We both understand the difficulties small business owners face. High taxes and regulations come first to my mind when I think of how tough it is to survive in a small business. If payroll and income taxes were lower, life would be easier for all small business owners. But the government does not care enough to do anything about these problems.

The impact of small business on the Canadian economy is substantial and Reformers have always supported the needs of small business. However, Bill C-53 is not a debate about whether small business is valuable, it is a question of whether small businesses can get access to financing without the government intervening in the economy.

High risk small business ventures can be financed in a competitive banking system provided the lenders are not unnecessarily restricted from conducting their affairs in a manner that allows them to incur risk without incurring losses. The Reform Party is committed to getting government out of the business of doing business and out of the pockets of average Canadian families.

This bill further entrenches the government's role in the banking industry. Bill C-53 and its predecessor, the Small Business Loans Act, allow the government to ignore the real obstacles to small business financing. No more taxpayer dollars should be placed at risk until the government has deregulated the banking industry to create real competition. At this point small business access to financing can be reviewed and new legislation can be tabled if the government can demonstrate a legitimate market failure.

This government just cannot seem to get the fundamentals right. It has tinkered with the Small Business Loans Act and has made improvements recommended by both Reform and the auditor general. However, if the government really cared about small business access to financing it would create more competition in the banking industry, it would lower taxes and reduce the regulatory burden faced by small businesses which now consumes the equivalent of almost 12% of GDP.

Bill C-53 plays politics with the taxpayer's paycheque. It demands that the taxpayer take on more risk than the banks by guaranteeing loans. Let us get the government out of the business of doing business and off the backs of the Canadian taxpayer.

Bill C-53 does not address the problem of small business access to financing and places a financial liability on the taxpayer that is higher than the level deemed acceptable to the private sector.

Now, for a recap in French of the main thrust of my speech for those Canadians whose preference is for that language.

According to the present object of the SBLA, which will be maintained with Bill C-53, the government and consequently the taxpayer are taking greater risks than the private lenders. Even with the changes proposed in Bill C-53, the government covers 85% of any unpaid amounts.

There are two important questions. Does the Minister of Industry think it is reasonable to use tax dollars in such a risky manner? And why should the taxpayer take more risks than the banks?

In economic circles, people are very much aware that government intervention always goes along with poor resource allocation. The government intervention set out in Bill C-53 will do away with important market forces, in the process of making loans, in favour of loans to less viable businesses, and this will do nothing for economic prosperity.

Clause 5 of Bill C-53 demonstrates the government's total lack of scruples about playing political games with the Canadian taxpayers' dollars. This clause addresses the minister's responsibility if a loan is not paid back. It is clear, however, that responsibility falls to the taxpayer.

As for the matter of risk, when a risk is eliminated—one of the key elements of a properly functioning open market—a moral danger is created. In other words, the lending institutions are less inclined, despite the obligations for reasonable diligence imposed by the law, to assess the long-term viability of businesses. As a result, non-viable businesses will end up receiving funds.

Under such an arrangement, the taxpayer is inevitably the loser. Government statistics support this thesis. In fact, the default rate under the Small Business Loans Act is 5.6%, compared to 0.8% in the private sector.

Small and medium sized businesses play a vital role in the Canadian economy, and the Reform Party has always supported the needs of that sector. The purpose of debate on Bill C-53, however, is not to determine the value of small and medium sized business, but rather to determine whether these can access financing without government intervention.

I would like to point out that the importance of small and medium sized businesses in the Canadian economy cannot be under-estimated. The question we need to ask ourselves is the following: Is it possible to use deregulation in Canada to create a framework that will provide financing in a more efficient way? I believe the answer is yes, and that is why I cannot support this bill.

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, I listened with great intent to the member for Edmonton—Strathcona.

I am very surprised the Reform Party has taken the position today to argue against the Small Business Loans Act, an act which has been in place for over 37 years. It has been very successful. I think the member earlier said if it has been around for 37 years, what is wrong with it? Something that has been around for 37 years is a testament to its success and the need for it within our economy.

The member seems to talk about a perfect world. Maybe on the Reform benches it is Christmas every day, I do not know, but the reality is that it is not a perfect world.

Institutions not only in Canada but worldwide and banks often are short term lenders. They lend basically on current assets. This program addresses the concern for longer term assets, fixed assets. We talked about capital leases earlier. This is money that actually goes over a longer period of time.

The member talks about a burden on the taxpayers of Canada but the reality is that these are also the employers. These are the people who get jobs from these very businesses. They are also the taxpayers. We have created jobs. We have created taxpayers by assisting these businesses.

The member seems to think the SBLA program is a subsidy. He talks about the program as if it is a subsidy. I can assure him that people applying for these loans face the same screening devices as for any other form of loans and they are rejected on the same basis.

The member talks about a 5.6% default rate, but he fails to acknowledge the fact that 94% of these loans are successful. I suggest to the member that in spite of what he wants to do in the regulatory environment of banks that without government support in this area of those 94% of successful loans, those successful jobs would never have been created.

I am very surprised that the member and his party would be opposed to the best interests of small and medium size businesses today. I would like him to comment on that.

[Rahim Jaffer, Reform, Edmonton Strathcona, AB]

Mr. Speaker, I think the hon. member hit it on the head when he said that 94% of those loans were actually successful. My question throughout my whole discourse is why is the government involved in that process if in fact the private sector can do it itself. That is the key.

The hon. member even mentioned the fact there is scrutiny placed on these businesses going through the process of applying for these loans. That can be done without government intervention as well. He reaffirmed that.

The hon. member also mentioned that it is not a perfect world. I would say that it is not a perfect world especially for small business in this country because of all the obstacles this government has placed in front of them. What the Reform Party is trying to do is stand up for small businesses in allowing those small businesses to create opportunities for themselves and not try to create this false impression that wealth and jobs are created by governments. As we have seen, there is a limited growth when it comes to that. The taxpayers' money is unfortunately recycled.

One thing the hon. member mentioned which I would like to address was the issue I had brought forth earlier. The program has been in place for 37 years, yet I continually hear from the members opposite that the single most important concern from small business continues to be the access to credit. If the program has been so successful, why are there still so many small businesses that are not achieving the financing for their enterprises or their businesses?

As a small business person myself, one of the biggest problems I had looking for financing was not because the government had created a program that was going to secure financing for me, the biggest problem was the fact that there was not enough competition willing to lend to me and other small businesses across the country. This is why we cannot confuse the issue, as the Liberals have done, in this debate.

It is not an issue of not supporting small business. That is exactly what we want to do in the Reform Party. We would like to support small business. We would like to support the free market. We believe that can be well achieved by getting government out of the regulation that it continues to create and which continues to put obstacles in front of small business.

Let us create an atmosphere of positive competition in this country where real entrepreneurs have the choice through the access to capital. Let us work with businesses to do that not in a way that creates more regulation and unfortunately keeps some entrepreneurs out of the loop, but let us try to widen that so everyone has an equal chance in achieving financing.

[Paul Bonwick, Liberal, Simcoe—Grey, ON]

Mr. Speaker, make no mistake in what the hon. member had to say. Very clearly he does not support government sponsored small business loans. Yet he clearly identifies access to capital as one of the greatest deterrents to expansion and creation of small business. If that is not an obstacle against small business, then I do not know what is. Small business loans work.

As a government we encourage schedule A banks to get involved and create a higher level of loans to small and medium size business, but we also appreciate the fact that when starting out some businesses in fact do require extra support. We do not pretend that we would be setting the exact guidelines on how schedule A banks will extend funds. We see ourselves as a partner. My hon. colleague very clearly outlined that 96% of these do work, 96% of these small businesses that are securing loans work.

I would like to give the hon. member a scenario and I would be curious what his response is. I would also ask him to take some time out and actually visit some of the people, some of the small businesses, the mom and pop stores, the mom and pop businesses around this country that have qualified and succeeded. Tell them that the government should not have been involved, that the government should not have been partnering with the banks and with the small business community to allow that job growth and job creation to take place.

I would be interested in the hon. member's comments on this scenario. An average Canadian has a great idea for a business, an idea which both I and the person think is very viable. The person has the management expertise and ability to carry forward that idea but he or she is missing one small thing. He or she is missing equity and therefore does not meet the basic lending guidelines set in place by schedule A banks.

The banker sees an opportunity. Understanding of course that there is some onus and some responsibility on the banker as well and a certain amount of prudence in regard to lending, the banker sees there is an opportunity to extend funds, and this is typically not the only source of funds I might add, to this small business, to this great idea, to this Canadian to succeed if in fact there is partnering.

If that does not take place, that small business will not get off the ground because traditional lenders require some equity. They require a capacity with respect to 25% or 30% equity. When government partners with schedule A banks and with small business people, it allows some latitude in this area for these small business people to create a business or to expand.

This has been a very effective tool for small and medium size business all across the country. Bankers and branch managers who are very active in the community will tell us that. Small independent business people will tell us that. I am also saying that. I have business people in my riding who have qualified for it and have been successful simply because it would not have taken place if they had to qualify under the strictest of traditional lending guidelines.

When the hon. member was talking about accessing taxpayer dollars for small business, does he not consider small business an integral part of our national economy? If great Canadians with great ideas have small business opportunities, does the member not see a role for the government to play if traditional lending guidelines are not being met?

[Rahim Jaffer, Reform, Edmonton Strathcona, AB]

Mr. Speaker, I will begin by putting to rest the hon. member's concerns. Being a member of a small business association within the area that I did business prior to being elected, one of the biggest concerns people within that organization raised was not so much that they did not think access to capital was an important issue, I do not think anyone is arguing that, but what they did raise was that there was limited choice, as the hon. member mentioned, with traditional lenders. That is the whole problem of our system and the problem I tried to raise.

We cannot fix the problem with band-aid solutions as we have seen in the Small Business Loans Act and the revised version. We need to address the issue of choice within the financial sector. That is the issue we are talking about.

The Reform Party and all its members in opposing this bill are telling the government that it is time to address the issue of access to capital with the issue of choice. Do not continue down this road of government regulation which unfortunately continues to put obstacles and additional costs in the way of small business.

If the hon. member really felt that he was putting business first, I think he would come to see the same light the Reform Party has seen.

[Dennis Mills, Liberal, Broadview—Greenwood, ON]

Mr. Speaker, I have to begin my remarks to my friend from Edmonton—Strathcona by going back to 10 years ago when I came to this House. One of the first things I noticed at that time when we were in opposition is that we only had one member of parliament in western Canada. A little team in our office organized a program called the best of the west. We had some bright, articulate, liberal minded university students come to Ottawa, get used to working on the Hill and develop ideas on public policy so that one day they could come back as elected officials and take some of those thoughts and ideas and represent the regions.

The member for Edmonton—Strathcona was one of those young university students who was on my staff for that best of the west program. I am happy to see him in the House, but I am shocked to see that he did not learn some of the Liberal values, vision and principles that we worked on during that period of time.

I want to be very specific about an experience we had 10 years ago. At that time we were in opposition. The member was around when the then Conservative government brought amendments to the Small Business Loans Act before the House. It was at a time when the banks were doing very little for small business men and women. The Conservative government amended the bill to try to urge and push the banks to provide more access to capital. At that time this was not a Conservative idea but it had the insight and the understanding that it was listening to small businesses when they were saying they were getting turned down on a regular basis. The Small Business Loans Act with the government guarantee was something that would make sure the small business realm would stay healthy.

I stood in this House in opposition and supported the government's amending that bill. We got it through three readings in one day. In opposition we are not there just for the sake of opposing. If the government comes up with a good piece of legislation, which the member knows from experience, then we support the government. To this day we still do not have the banks doing enough for small business.

I challenge the member to stand up in the House and say that he thinks the banks and financial institutions are doing a great job in providing all kinds of capital for small and medium size business men and women. I challenge him to stand up and say that in his own riding. What will happen if he says that? He will be blown out of here so fast that he will not know what hit him. His riding is no different from my riding. Even with the pressure this government has put on banks in the last few years, with the pressure from the Prime Minister and the Minister of Finance and every member of this side of the House, it is still tough to get banks to shift from words to deeds and actions toward loaning capital to small business men and women.

This is what this government has done, what this Minister of Industry has done repeatedly since he has been in charge of this portfolio. This is my third time since we have been in government that we have amended this bill. Each time we fine tuned it. We have been responsible with the fiscal framework. To stand in the House and suggest that the Small Business Loans Act is really nothing more than government intervention and that it is counterproductive to small business defies logic. It defies experience. His words are so distant from reality. It boggles my mind. I am stunned that somebody who used to be on my staff would come up with such stuff.

I have to say to my dear friend that I do not want him to loose some of those great Liberal principles that he once had. He can loose them in certain sectors. I appeal to him not to walk away from small business men and women. It does not matter whether you are a member of the separatist party or a member of the Conservative Party, whatever party you are with, the economy of this country is run by the small business men and women. They are creating 80% of the jobs. If we have to guarantee a float of about $10 billion and if in a bad year $1 billion goes bad but it meant that there were tens of thousands of entrepreneurs out there creating jobs and creating vitality, so be it.

There is a notion of letting banks do it on their own. Is there anybody in the Chamber who believes we should stand back and trust the banks to look after the small business men and women in the country and that they would do a great job? I defy anybody to stand up and say this would happen. I will never desert my core values when it comes to small business men and women. I will never waiver or walk away.

That is part of the reason why I came to Ottawa early today, to support the Parliamentary Secretary to the Minister of Industry. The bill should pass all three readings the same day with all party support, just the way we handled it when we were in opposition. No member of parliament in the House cannot ever be seen doing anything other than putting our shoulder to the wheel for small business.

[Dick Harris, Reform, Prince George—Bulkley Valley, BC]

Mr. Speaker, you can tell it has been a long day when the member opposite stands up and tells the House and the television audience how much his government and minister have done for small business.

There are a lot of small businesses right now that are taking some Tylenol, some Pepto-Bismol because that speech must not only give them headaches but make them absolutely nauseous.

They say they do not want to stand in the way of small business and that they are helping small business. They have breached their obligation to small business. They have thrown up obstacles which small business has to struggle over just to do what it wants, to try to make some money.

I want to talk about the incredible tax regime that the Liberal government has laid on the backs of small business. Where does the money come from that the government says it is giving to the small business program? It rips it out of the pockets of small businesses and then it comes like heroes and tries to give it back to them. The best thing it could do is to stay out of the pockets of small businesses and let them get on with business. That would be better than any program it could put on the table for small business.

How can the Liberals stand up in the House and say how good they are to small businesses while at the same time they are taxing them by over 33% more on their EI premiums? They are ripping it out of their payrolls, their investment capital and their profits. How can they stand there and say how good they are being to small business? It is astonishing and it is dishonest.

[Dennis Mills, Liberal, Broadview—Greenwood, ON]

Mr. Speaker, the member just threw me a lob ball that I do not deserve.

For 10 years we have been talking about the notion of comprehensive tax reform and I will admit that this is a very tough, complex issue.

The member knows that I have worked on this issue in a very diligent, focused way. When the Reform Party came to this House and became Her Majesty's Loyal Opposition, I was excited and said at last we have a group of men and women here who will help produce a critical mass of debate so that we can really shake the tax system in this country and get something going.

This is the first time this member has stood and talked on this issue about tax reform since we have come back. Where is the Reform Party on tax reform?

I have been advocating simplifying the tax system for the last few years. If I had my way, I would abolish federal income tax for small business in this country.

They do not understand how things get done in this Chamber. It is give and take. We have a bill today which Reformers should be supporting us on and they are running the other way. They say they are going to oppose. There is an issue where I think they are on the right track in terms of comprehensive business tax reform.

They hide it. Bring forward the debate and there will be many of us on this side of the House who will support the idea. Bring it forward in a consistent, steady as she goes way. Don't just throw it up every now and again because they find there is something worth saying and the only thing they can throw out is tax reform.

I pray that the Reform Party gets on to the game of comprehensive tax reform. Just like the Minister of Finance said about two weeks ago, we do need it but both sides of the House have to engage in the debate.

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, I have always respected the hon. member who just spoke for his work in the area of small and medium size business.

It was interesting that the members opposite talked about the tax situation. What people possibly do not understand is that with the small business tax deduction available to incorporated small businesses that have incomes of $200,000 or less in Canada, they are treated probably the best of the OECD countries.

I really question whether we could consider that an obstruction. This government and governments before us have recognized the concerns of small and medium size business.

I am concerned by the opposition members who clearly are opposed to the Small Business Loans Act itself, not just to this legislation. They talk endlessly about a subsidy.

I have practised in the small business area. A lot of my clients would have been very surprised to think that what they were doing when they walked to the bank and paid prime plus 3% and paid a 1.5% or a 2% service charge to access the SBLA program was paying a subsidy. I do not think anything could be further from the truth.

The reality is 94% of these loans are effectively repaid under the terms and conditions. Why 94%? The reality is that when there are new start-up companies there is a significant amount of risk involved.

Why are banks not interested in taking those kinds of risks? Some of the members opposite say we should change the regulatory burden and somehow the financial institutions, banks in particular, will become great lenders to small and medium size business.

I point out one obvious factor. When they start talking about banks, they have to think where did their capital come from, where do they get their capital to loan to small and medium size businesses. They get it from the depositors of this country.

Then they have to start asking constituents in their ridings if they want to see all their savings being allocated more toward small and medium size businesses which have high significant start-up costs and risks and the possibility of loss on their deposits. That is the real issue we should be talking about. We can legislate and regulate all we want, but the reality is that there is a dichotomy within our economy that requires some kind of assistance. When I say assistance I do not mean subsidy. I do not mean a grant to small and medium size business. I mean something that will fill that gap and allow small and medium size businesses to access the capital they require.

I mentioned earlier in one of my questions and comments that our banking institutions quite often are more oriented toward short term lending. This is not just true of the small and medium size business sector but also of farms. That is why we have the Farm Credit Corporation. Often the supply of long term capital, patient capital, is missing.

The Small Business Development Bank has given over $21.7 million to about 110 businesses in my riding of Durham. This has created many jobs in my riding. Small business operators are happy about the process and happy they have been able to access that money.

Some members talked about access to capital. The reality is that 85% of those loans are guaranteed. That means that somebody, the banks in particular, are picking up 15% of the liability.

The purpose of the act is to move us more toward cost recovery. I would have thought the Reform Party would have applauded that. Yes, there have been incidents in the past where the program has actually cost the taxpayer some money. However, by reducing the amount of the guarantee by the government, plus the fee structure that is put in place, we are moving more toward not costing the taxpayer one cent.

This seems to be something that is totally missing the Reform Party which keeps talking about subsidies. The reality is in the successful operation of the bill it will not cost the government any money. I note we have restricted our total liability to $1.5 billion. That is a lot of money. I think one member of the Reform Party mentioned that is not small change. I agree. It does not mean we will lose $1.5 billion. In fact, the way the program is structured it reduces the liability on a bank by bank or institution by institution basis.

Some members said they wished there was more competition. The reality is that this act actually breaks down the number of lenders. There are approximately 1,500 lenders in Canada who can access this legislation.

Another thing the legislation does which I find very exciting, very attractive, is that it talks about capital financing or capital leases. Unlike the member who got off on leasehold improvements, what it really means is financing leased equipment.

In Durham, and indeed I believe in most of Canada, 80% of new business formations are service industries. What do they require? They require the technological equipment to make them efficient and productive in the business community. Often that is computer equipment.

Here is a situation where the government is saying that they do not have to put all their money into computer equipment if it takes it over on a long term lease agreement. This gives a very important incentive for small and medium size businesses to be technologically efficient.

We were told time and time again in the House how important it was that Canada be competitive in a global environment and that its small business sector be competitive in a global environment. I am happy to say this legislation addresses that.

Some of the comments and earlier studies done by the auditor general talked about the need for more accountability by parliamentarians. I note that one of the provisions in the legislation is to study the program on a case by case basis and not just the defaults.

Before this legislation we as a government were sent information by the financial institutions on cases where default had occurred. We could then question whether they had met the parameters of the act, et cetera. This legislation expands the whole accountability framework by basically allowing the government to look at the whole range of lending going on within those financial institutions. This is very important because we can monitor whether or not that system is meeting its objectives and the demands of small and medium size businesses.

I cannot stress too much that I believe this act is an improvement. Some members have said that it has been around for 37 years and we still have not accessed the capital problem. That should not be unusual.

Our economy is growing and some of the small businesses have become big businesses and moved on. Fortunately many other businesses stand in their place and continue to expand. That is why we need the constant support of government for the small and medium size business sector. These businesses pay taxes and create jobs. As many of my other colleagues have mentioned, they are the fastest creators of jobs in the country.

In conclusion, I am surprised by the policy of the Reform Party that would object to something that has been successful and which the small business community applauds. On behalf of the small business sector, I point out to the Reform Party that this not a subsidy; it is just good business.

Business Of The House

[Peter Adams, Liberal, Parliamentary Secretary to Leader of the Government in the House of Commons]

Mr. Speaker, I seek unanimous consent for the following motion:

That at the conclusion of this debate we will call Bill C-51 but that we will then hear only the minister's speech and at that point, at the conclusion of her speech, we will see the clock as standing at 6.30 p.m.