Mr. Speaker, while we in the Bloc Quebecois are extremely disappointed with this so-called review of the small business loans legislation, we do not agree with the Reform Party.
We must realize how essential the Small Business Loans Act is to small and medium size businesses, despite what I heard. Our criticism of the legislation was not to say we should get rid of it but that, in reviewing it, greater care and attention should be paid to small and medium size businesses.
I am disappointed that, while the legitimate concerns expressed by the auditor general and the Standing Committee on Public Account were taken into account, the need to assess the economic impact of small business and of the effect of small business loans on this economic impact were not.
The truth is that, in Canada and Quebec, small and medium size businesses are crucial and that, even if they sometimes fold 12, 24 or 48 months after having been set up, the economic activity resulting from the creation and growth of small businesses constitutes an extremely important factor. Studies have confirmed this.
However, in the government's logic, the economic contribution of small business is not taken into account. I find it unfortunate that, if he did not wish to amend the act immediately, the minister did not see fit to increase the number of areas where pilot projects could be conducted.
For instance, the possibility of granting loans, in certain circumstances, for working capital funds has been eliminated. In light of the fact that the studies I have come across were not conclusive, why not look at the actual impact of inadequate funding on the death of small businesses? Why not consider growth problems on the basis of inadequate funding?
One could say that, in a way, insufficient funding is worse than no funding because it does not allow businesses to develop as well as they could. The same is true of seed money: not giving enough is increasing the chances the business will not survive.
Loans are not all that is required for businesses to develop. Indeed, improvements are also required with respect to management practices and to the advice provided to businesses. As they are established or expanding, they must indeed be encouraged to visit the financial institutions before they spend all the money they had for their products, design, etc. and find themselves broke before the money lenders and thus forced to accept insufficient funding.
It is true, conditions of management in the growth and expansion of businesses must be improved, but my argument is in favour of adequate funding.
In this regard, I question the title the minister gave to his new bill. He is calling it the Canada Small Business Financing Act. I say it is not the funding act, because with a bill like this one, I know of few emerging or expanding businesses that will not need other financing. I think the title of the existing act is much more accurate. It is the Small Business Loans Act. This is one sort of loan. There will have to be other types of funding to enable businesses to start up in the proper conditions.
I must point out in passing that the minister is pleased to add the word Canada to the bill's title. I realize his attachment to Canada, but I think that there is no need for the government to add the word Canada to every program it sets up, as if it feared that Quebeckers and Canadians might forget. The effect will be quite the opposite, and that is the end of my digression.
The bill also contains a number of problems in its administration cleanup aspect. I hope the minister will deal with these issues.
For example, when the minister says in his bill that Canadians will give out a maximum of $1.5 billion in loans, he is in fact not saying everything, because this $1.5 billion should be called, in jargon, a contingent liability limit. In reality, given the costs the small businesses pay and the rates above prime, the costs of this program could reach 6.4% without costing the government's budget one cent. However, the problem is that this $1.5 billion margin may prevent, in fact does prevent, all the credit that might otherwise be given out from being given out.
I would also like to point out that the minister has given himself increased powers in this bill. The technical provisions in the act have been withdrawn, and the minister will be able to make the regulations he wishes. I agree that part of the regulations needed to be updated. However, the deletion of all of these provisions seems to me to be a major problem, especially since, as the officials in his department have acknowledged, the minister will now have the regulatory authority to reduce the scope of the legislation.
Of course, the regulations cannot go further than the legislation itself; that is normal. But by giving the minister the authority to make regulations and then by deleting these provisions from the bill, you allow him to ensure that the new legislation is not as generous as the current one.
Also, the bill authorizes the minister to launch pilot projects. In fact, the minister has already announced two such initiatives in very specific areas. I think we could and should have pilot projects in other areas.
Although it may be helpful for people interested in capital leases and loans to the voluntary sector, I do not think the new spirit of the legislation can be found in these provisions. In fact, the only good news borrowers will find in this bill is that the small business loans program, where the loans are to some degree guaranteed by the government, is maintained. That is the only piece of good news.
The rest of the bill raises fears that once the banks realize that government officials will now be able to assess their use of the programs, they will start to ask a lot more from borrowers, who unfortunately will go bankrupt. Since the government will not cover more than two years of interest, the banks will be forced to repatriate personal assets more rapidly.
Of course, the principle of self-financing is nowhere to be found in the bill. This could be seen as a means of allowing the minister to factor in the conditions of the economic cycle. But because the bill does not specify current conditions, and it is left to the minister to make regulations, we are left with some concerns.
I must, however, say that the fact that funding does not have to be approved every year, but runs for five years subject to a comprehensive review, meets with our approval. There will thus not be worries about the program coming to an end.
We have questions, however, about the comprehensive review. It should be conducted by a House committee, in this case, the Standing Committee on Industry, and it should look at the cost benefits from a budgetary as well as an economic point of view.
What has perhaps not been brought home often enough is that it is much better for an enterprise to be created, even with difficulty, and to employ X number of people for a few years, to generate wealth in the community, and not just wealth but economic activity as well, even if it unfortunately goes bankrupt two years later for lack of sufficient expertise. This is infinitely preferable to the entrepreneur just working for himself. As often happens, he might recover and get back on his feet without the right advice at the right time.
But, for the economy in general, for the economy of a particular region, it is far better for such economic activity to have taken place than for people to continue receiving the normal and necessary support of social programs, which would serve a much better purpose if these people could contribute themselves to greater economic activity.
Despite what certain economists thought less than one year ago, it would be very surprising if recessions had disappeared from the economic world, and I can now say that they clearly have not.
On the contrary, many of the people claiming a year ago, more than ever, that there would not be a recession are now the ones bringing up the spectre of a world-wide recession. Although the crises being experienced in Southeast Asia, Russia and South America do not all have the same cause, nevertheless the globalization of markets can provide conditions for such a spread. As we know, Canada is not immune, nor are the United States or Europe.
Those in the west are well aware of the heavy impact there of the great difficulties being experienced by individuals and businesses in Southeast Asia.
Under the circumstances, the Small Business Loans Act ought to have sufficient flexibility to allow the minister to inject more money into business loans in times of recession, particularly since we know this $1.5 billion figure for guarantees will never come close to being reached. I invite my Reform colleagues to examine this clause.
I regret that the revision has been done merely from an accounting point of view. It was necessary, but the Small Business Loans Act—which is what I would prefer it to still be called, because once again it will not be a “financing act” for small businesses since this program is insufficient—is an important piece of legislation, but far from sufficient. One need only re-examine the repeated complaints from the Canadian Federation of Independent Business to know that this is so.
The more small businesses are denied credit, as they set up or expand, the greater the risk they face. We know how frequently they go bankrupt and at times it is very clearly because of a lack of credit.
This is what forces the provinces, and especially Quebec, in both the private and public sectors, to develop complementary programs. Once again, according to what I hear from the small and medium size businesses that, in search of help, turn to their member of Parliament as a last resort, there is not enough money for unsecured loans.
And what about the fact that there is no provision for businesses in the knowledge sector? The government makes a big fuss about the knowledge economy. The knowledge economy needs a lot of capital. The only thing the government has done was to announce in the spring that $30 million would be available over five years for products, for content. That is not nearly enough. Canada has expended considerable effort on infrastructure and on electronic highways, but, in the area of content, there is no help for local artists, artisans and industrialists and no provision for these areas in this revision to the Small Business Loans Act.
It is therefore unfortunate that the old SBLA was not tightened up more and that the government felt only an accounting review was necessary without a thought to economic development.
This act is vital to economic development and to job creation. It must serve this objective. When it fails to do so clearly, it fails in its primary goal, and we will continue to go after the government on this point.