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.