Mr. Speaker, I am very excited about participating in the debate. It is something I felt very strongly about in opposition, as did the whole party.
As most Canadians will remember, the Prime Minister made a commitment even before the red book was published. During the last election campaign he made a commitment in the press gallery across the street that his would be a government that for the first time ever would challenge the financial institutions in the country to become much more sensitive to the small businessmen and women who are employing right now close to 80 per cent of the nation's workforce.
I put a little emphasis on women because it is not just the language that is changing. The facts are also changing by the contribution that women are making in terms of owner operated small businesses today, not just in our economy but throughout North America.
I was reading not too long ago in Fortune magazine that women owned or operated businesses in the United States employed more Americans than all the Fortune 500 companies combined. That thrust of women participating in the entrepreneurial sector, the small business sector of our economy, is no less a dominant factor in Canada. It is very important that all of us recognize that, especially the banks of Canada.
After we were elected the first order of business with the industry committee is living up to that commitment. I must compliment the members of the opposition, the member for Trois-Rivières, and the earlier mentioned member for Okanagan Centre from the Reform Party. Without the unified spirit and desire to really make this committee work, I do not believe we would have the report we have before us today.
Mr. Speaker, you have been around here for a long time. I have not been around as long as you have, but I do know for a fact it is very rare that a committee report has such a unanimous spirit about it.
A second very rare thing is that there are no copies of the report left. We had to order a reprint. It shows the keen interest that all members of Parliament have in looking out for the small businessmen and women in every constituency across the country. We have all said repeatedly that the small business community represents the greatest hope for putting Canadians back to work.
Last week was our recess week and I had the privilege of having lunch with a former parliamentarian, a former minister of the crown, Paul Hellyer. He has just finished publishing a book entitled Funny Money , a common sense alternative to mainline economics. As I read the book on the weekend I noticed there is just one page of his description of the attitude of banks toward small business. For the benefit of the House I would like to read a short excerpt from the book Funny Money by Paul Hellyer.
Nothing irritates me quite as fast as a bank spokesperson saying, in response to the suggestion that they make more money available to small business, "We have to act as guardians of our depositors' money." Such fatuous double-speak! What they are really saying is that we, and we alone, will decide for whom we will create loans and we prefer governments, brokers and big business because that way we can make more money for less work. If they were only concerned about the safety of existing deposits they would have been less cavalier in making loans to Third World governments, large real estate developers and the leveraged-buyout monopoly players. It was the banks' greed, rather than their prudence as guardians of their depositors' money, which ruled the day.
If the whole idea of creating new money is to facilitate the creation of new wealth in the form of increased output, then the entire addition to the money stock should be directed to that purpose. In effect new loans should be made for either investment or consumption because they are the two sides of the same coin! I cannot remember a market for anything that some enterprising entrepreneur didn't try to capitalize on. But if, as in the Great Depression and in one or two recent recessions, existing capacity
exceeds demand, entrepreneurs are unlikely to line up for loans to create additional redundant capacity. So consumption, which creates income and savings for others, and investment are Siamese twins which cannot be separated.
It is the small businesses, which create the most jobs and increased output, that have the most difficulty getting bank financing. In the Spring of 1994, Helen Sinclair, president of the Canadian Bankers Association, cited one of the best known excuses. She admitted that banks have a problem in their relationship with small business but defended their caution by pointing out that federal government statistics show 50 percent of all small businesses don't make it past their fifth birthday. That may be so but an equally interesting and important statistic would be the percentage which failed because their bank took away the safety net just as they jumped off the highwire. As I mentioned earlier, I have never known an entrepreneur, myself included, whose bank didn't try to put them out of business at one stage or another of their development. It would be in the country's interest if a certain proportion of new loans had to be made to small business with limited or no collateral where the investors, as a condition, were willing to risk their own savings. Character assessment might be part of the consideration. It is one which appears to have been pretty well disregarded in recent decades.
Having considered that, the bank should be prepared to lose and write off some proportion of the small loans each year. It should satisfy their irresistible urge to gamble if they were to gamble on people who want to build real products and provide real services for a change.
I recommend the book that Mr. Hellyer put together. It is extremely appropriate when we are debating the recommendations of this report.
The report in question is a very significant signal from the government, and supported by the opposition parties. Less than a month after it was tabled, we are having an all day debate on it. We realize it is a non-votable motion but it is very important because it is the Prime Minister, the cabinet, the government sending a signal that they are truly committed to the work that all members are doing in trying to get the small business community going.
Therefore Canadians have to ask ourselves what is in the report that is going to change the attitude that banks will have toward small business. I would like to begin by sharing with the House and Canadians that starting with recommendation number one in the report the attitude of banks will change.
The first recommendation is that the committee proposes to continue monitoring small businesses' access to capital by calling one or more banks as witnesses every quarter to review their performance in lending to small business.
I can tell the House that never ever in our history have we had a committee complete a report and then institute a recommendation whereby a sitting standing committee of the House agrees that at every quarter it will continue to do the very work that it was doing in the first six months.
What does it mean? It means that probably in February, because the report was tabled last month, the committee members will sit around and say: "Okay, what three or four banks do you think we should invite first to come before the standing committee to talk about the new products, the new services and the performance that they have given to small and medium size business?"
We are certainly not going to let them know in advance because obviously that would not be fair. What we will do is put them all on notice. There are many financial institutions in this country of course. Some might want to come right away. We cannot do that so we will randomly pull three or four and they will come before the committee and report. By reporting to us they are in fact reporting to all the people in Canada. At that time hopefully they will be proud of the accomplishment they have pulled off just since the report has been tabled.
However, it does not stop there. The second recommendation in the report has to do with the reporting structure. Most Canadians do not realize it but the current situation for banks reporting to the Superintendent of Financial Institutions is very haphazard. In other words, one bank will classify a small business loan as anything under $500,000. Another bank will say a small business loan is anything under $1 million. Another one will say it is everything under $500,000 plus whatever mortgages it loans that small business.
The point is there is no standardized reporting structure. It means we do not have a handle on exactly what is going on with the small business portfolios of all the financial institutions in Canada.
I must say that recommendation number two is a very tough recommendation. I am sure that the banks will find it very frustrating to live up to this one. This is what it is. The committee recommends that the Superintendent of Financial Institutions, together with Statistics Canada and the Bank of Canada, develop a new format for the collection, compilation and publication of statistics on bank lending to small business.
These statistics should be based not only on the size and type of loan but also on the nature of the borrower, including gender, according to employment, sales, major sector of operations and-key word here-by municipality. These statistics should be reported quarterly. That seems self-explanatory but one might ask why by municipality is important. Many members of Parliament brought to our attention that they felt their municipalities were not being serviced by the banks.
There might be a remote region of our country where lots of people are putting money on deposit but the bank might not be putting it back into the community. Recommendation number
two will allow members of Parliament to call the superintendent of financial institutions and say that they want to look at the banking activity in the municipalities located in their ridings.
If all of a sudden it is discovered that a bank is doing well with the loans it is putting back into the small business community in the riding, we can let the bank know it is doing a good job. If other banks are only taking out deposits and not putting anything into the municipality, we can also write nice letters asking: "What about our ridings? What about our municipality? The deposits you are taking out of here are pretty large. Why can you not put some back into the small business community?"
I believe recommendation number two is going to have a profound effect. Everyone knows that the thing banks fear most, believe it or not, is not government regulation. The thing they fear most is competition. Banks cannot stand competition. Never mind the schedule III stuff, we will get to that, but just competition among themselves.
If you put the scanner on banks in your municipality and you see that two or three of them are a way up there in their contributions but a couple of them are not doing anything, that does not look good to the depositors and the customers who provide their lifeblood and their viability.
I am really confident that the recommendation which was unanimously accepted will go a long way in stimulating the small business community. There are many other recommendations in this report I would like to deal with.
I would like to deal with the concern the industry critic, the Bloc member from Trois-Rivières, stated in his address. The member talked about his concern of this government's commitment to the Federal Business Development Bank which the committee recommended should be changed to the small business bank of Canada.
None of us supported the condition that exists currently in the FBDB. Most of us believe that the Federal Business Development Bank needs to rethink its policy approach. It has to be much more contemporary. It should look at new instruments to get more financial support, not by going to the public treasury but possibly by looking at the issuance of preference shares which would not have an adverse effect on the treasury of Canada.
However we believe that the small business bank of Canada, if we could rename it that, could act like a supercharger in terms of creating more interest in that field. In other words it would go back to bringing attention to what it was designed for. It was primarily designed to be there when the other financial institutions were not supporting small and medium sized businessmen and women.
We looked at one of the best banking systems in Canada, the Caisse populaire Desjardins. The people from Desjardins came before our committee. They have a fabulous system. We do not have such a system in Ontario but I wish we did. We are run by the paper pushing towers of Bay Street. That is the problem we have in Ontario. We do not have a Desjardins movement. Many of us thought that through redesigning and retrofitting the Federal Business Development Bank we could create a much more aggressive and grassroots approach to banking.
Bloc members should not think this is part of a referendum strategy. It is a genuine approach to making sure that we have more instruments in getting access to capital for small business. I jokingly said to Bloc members that maybe we would set up a couple of hundred branches of the small business bank of Canada in Quebec to accelerate the federal presence in the province of Quebec. I was only kidding when I said that so the member should not think that is part of our design. We merely want to make sure that this bank becomes much more contemporary and much more aggressive in dealing with small businessmen and women.
I will end my remarks by saying that the Prime Minister and the Minister of Industry have led the way for all of us in the House in making sure that small business becomes a front burner sector in terms of policy making. They have also made sure that this issue is put on the front burner in terms of implementing change in legislation quickly.
I hope that the tone of today's debate can continue. The more constructive we are in making the recommended amendments that are needed to the Bank Act, the quicker we can get on with making sure we create that environment the member for Okanagan Centre described which will cause the entrepreneurial spirit to flourish once again in this country.
