Madam Speaker, it is a pleasure to participate in the debate on Bill C-21, an act to amend the Small Business Loans Act. The purpose of the bill is to extend the SBLA for another year until March 1999 and to raise the government's total liability to $15 billion, a $1 billion increase.
Under the Small Business Loans Act businesses can apply for a government guaranteed loan up to a maximum of $250,000. Before changes were introduced in 1995, SBLA borrowers were subject to a 2% registration fee and the taxpayer would cover 90% of any loan that had been defaulted. However, changes were introduced in 1995 where an additional one and a quarter per cent administration fee was passed on to the borrower and the taxpayer would cover 85% of any defaulted loan.
These changes were introduced to move the SBLA toward full cost recovery. While that is certainly a laudable goal there is some question as to what effect these fees have had on bankruptcies and whether the program can reach full cost recovery. Concerns surrounding these matters can be found in chapter 29 of the auditor general's report of December 1997. The auditor general has raised serious concerns about the operation of the SBLA, and his analysis of the functioning of the program constitutes the basis for Reform's opposition to this bill.
Reform is acutely aware of the difficulties that face small businesses in terms of obtaining financing. Access to financing continues to be a major impediment to the growth of small business in Canada. However, we must ask will more government funds alleviate the problem? Will putting the taxpayer on the hook for another billion dollars be the surest way to increase access to financing? Will Bill C-21 contribute to growth in the small business sector and help to address Canada's chronic unemployment? The answer to these questions is no.
Government spending programs do little to create employment. Government intervention in the marketplace creates an unlevel playing field and ultimately does more harm than good. Studies examining regional development programs like the Atlantic Canada Opportunities Agency indicate they simply promote and protect inefficient enterprises. They may be handy for the government in buying votes but real long term, good paying jobs are rarely the result.
Jobs created by the Liberals under these types of government programs are always overstated, and the SBLA is no exception. The auditor general found that with respect to the Liberals' infrastructure program job creation numbers were highly inflated. An audit of ACOA found the same problems. The problem is the Liberals simply accept job projections as actual jobs created.
In a press release of November 20, 1997 the industry minister claimed the SBLA created more than 73,000 jobs in the 1996-97 year. However, the actual number of jobs created is probably closer to 14,000. The auditor general found that under the SBLA, like other government spending programs, job creation figures had been inflated by as much as five times. I invite the minister to issue an erratum to his press release given this huge discrepancy.
I also encourage the minister to speak with his SBLA officials considering this discrepancy and the many other serious problems the auditor general has found. It seems as though the Minister of Industry has been asleep at the switch, and it took the findings of the auditor general to prompt a total review of the SBLA. And yet before this review has been completed and given the auditor general's findings, the minister comes before this House and asks for an endorsement of another $1 billion secured with taxpayer money.
We have to say no to this Liberal solution, throwing good money after bad. The errors in the minister's November 20 press release do not end with job creation figures. The release states that government payouts are covered by user fees built into the interest charged to borrowers. That is wrong. While there are user fees, taxpayers are on the hook for $210 million in defaulted loans for the period between 1993 and 1995. The auditor general does not believe that new user fees will lead to full cost recovery.
The minister's release goes on to say that Bill C-21 will allow the SBLA to operate for another year at little or no cost to the Canadian taxpayer. Does a $210 million payout in defaulted loans qualify as no cost to the Canadian taxpayer?
The errors in the minister's release are quite glaring, and I suggest to him that before he issues another one on the SBLA, he may wish to consult with the auditor general and get his facts straight. Clearly the minister is not getting the whole story from his SBLA officials and they are keeping him in the dark.
The auditor general has a great deal more criticism for this program. He stated that studies done for industry found that between 30% and 50% of SBLA loans were unnecessary. These firms would have received loans from their financial institutions anyway.
The minister has known about this since 1994 and a second study was done in 1996, but nothing has been done to curtail the program or streamline its operations and thereby reduce the risk to the Canadian taxpayer.
What this government has done is returned again and again to this House asking for an increase to the liability ceiling of the SBLA. More money, more money, more money. That is the motto of the Liberal when it comes to public funds. They think that Canadians are a bottomless pit of financial resources and therefore they can continue increasing taxes year after year.
Canadians are fed up with tax and spend governments. We have had enough of politicians fixated with continually expanding the size of government and increasing taxes every year to pay for it.
The auditor general also found that the SBLA has been abused by borrowers and lenders. Borrowers have split their companies into subsidiaries so that they can receive more money than the $250,000 SBLA limit. Lenders have charged SBLA applicants additional fees for their loans and they have not exercised due diligence in approving the SBLA applications. Because defaulted loans are covered by the taxpayer, many lenders simply do not care and they approve questionable SBLA loans.
Again, who foots the bill for these abuses? The taxpayers, ordinary Canadian families. Do the Liberals care? No. They come forward with a bill requesting that Canadians cover another $1 billion in liability.
The auditor general was also critical of the SBLA's lack of accountability to Parliament. He states parliamentarians do not have the information necessary to assess whether the SBLA program is managed efficiently and is achieving its objective. The minister himself does not even have this information. That is why we see such a damning report from the auditor general.
His report outlines a program that is inefficient with no clear goals or objectives. It has taken a scathing report by the auditor general to prompt the minister into action to conduct a full review of the SBLA. Why was this review not done earlier? What has the minister been doing while the SBLA has deteriorated to this terribly inefficient state?
I will tell members what he has been doing. He has been cosying up to big business like Bombardier and its many affiliates with grant after grant after grant. Meanwhile small businesses, the engine driving the economy and job growth in this country, takes a back seat to the minister and his chosen aerospace companies in Montreal.
The auditor general has found serious problems with the SBLA, but here are the Liberals asking for another $1 billion in taxpayer guarantees, promising to finish the review later. We know what effect reviews, studies and royal commissions have on this government. None at all.
Since 1994 the Liberals have known that there were problems with the SBLA and yet here we are, four years later, receiving a report like this from the auditor general. Unfortunately it is the taxpayer who ends up on the hook for this Liberal complacency.
If the Liberals had any real concern for small business financing and growth and creating jobs in this country, they would not be asking for an additional $1 billion in public guarantees. They would be asking the finance minister for $1 billion in tax relief.
Survey after survey shows that Liberal taxes are draining the lifeblood out of the economy and it is small businesses that suffer.
The Canadian Federation of Independent Business found in its October 1997 survey that 80% of small businesses cited the total tax burden as too high. In its prebudget submission, the CFIB stated that tax levels continue to be the number one concern of small business.
However, the Liberals have hammered small business once again with a further increase in CPP premiums, a move that everyone knows will kill jobs in our country and force many small businesses into bankruptcy. Indeed, studies done by the finance department show how increasing payroll taxes kills jobs. It is not that the government does not know, it just does not care.
The CPP hike is retroactive to 1997 and changes to employment insurance premiums still ensure the Liberals will collect an extra $5 billion each year from hardworking Canadians. If the finance department knows payroll taxes kill jobs, why are they punishing us with ridiculously high employment insurance premiums? Why not reduce EI premiums to a level where the fund is breaking even?
It is because the finance minister uses this fund to reduce the deficit. Thanks for eliminating the deficit should not go to him but to hardworking Canadians whose quality of life suffers because of the high tax policies of the Liberal government.
The small business deduction limit of $200,000 has not been changed in 16 years. Even just accounting for inflation, the limit should be at $315,000 today. However, keeping the limit low allows the Liberals to extract more tax dollars from more small businesses.
Steadily increasing taxes are leaving small businesses with no retained earnings. All their funds are going to Ottawa. Retained earnings are essential for small businesses to grow.
Rather than demand another $1 billion from taxpayers under Bill C-21, why not leave $1 billion in the pockets of small business owners?
In a January 27, 1998 news release the CFIB called on governments at all levels to rein in forms of taxation that drain small firms of valuable retained earnings. The CFIB sent a pre-election small business survey to all political parties. The Liberal answer to questions on job creation was more government spending programs. The Liberal answer to questions on small business was more government spending programs.
The Liberals just do not get it. Government does not create jobs. Redistribution of wealth does not create jobs. Government spending programs are not the answer to addressing unemployment in Canada. We need to bring in broad based tax relief, lower income taxes and reduce payroll taxes. That encourages spending and prompts firms to hire more employees. That is how to lower unemployment.
Between 1990 and 1996 the CATO Institute in the United States did a study comparing 10 high tax states with 10 low tax states. The tax cutters increased employment by 10.8% while the high tax states created zero net new jobs. The tax cutter economies grew 22% faster than the high tax states.
I know these facts fall on deaf ears within the Liberal cabinet. It has passed up opportunities to cut taxes. It continues to spend and it continues to believe that big government is good, government knows what is best and government programs are the answer.
Small businesses know that Reform is on their side. We want to cut the GST and eliminate the 3% and 5% income surtaxes introduced by the Tories. We will reduce capital gains taxes to encourage investment and reduce job killing payroll taxes. These are the measures that small businesses have been asking for, and Reform has been listening. These policies will leave more of their hard earned dollars in their pockets and create an environment where small business can succeed and grow. These policies will allow firms to retain more of their earnings, allowing them to build equity and therefore provide them with a better opportunity to obtain financing.
The Liberals are way off target in demanding another $1 billion for the SBLA. They should be giving $1 billion to small businesses in the form of much needed tax relief. Given the auditor general's findings, it is incredible that the minister would demand another $1 billion for the SBLA program prior to the completion of an analysis of the effectiveness and efficiency of the program.
Had the obvious inefficiencies been addressed when they should have been, the minister would not be asking taxpayers to cover an extra $1 billion because as much as $6 billion would not have been wasted. Had the Liberal government acted properly, the taxpayer liability could be reduced by $6 billion instead of facing yet another increase.
Accordingly the Reform Party does not support Bill C-21.
