April 11, 1974

PC

Peter Reilly

Progressive Conservative

Mr. Reilly:

Mr. Chairman, at the outset I should like to congratulate the minister for proposing amendments to this act. One thing that appeals to me is that for the first time this will allow businessmen to enter the money market with the expectation of a certain amount of government assistance. One thing loans under this act are to be used for is the acquisition of land necessary to carry on. At first blush it looks as though this measure might enable the Toronto Northmen, for example, to acquire a football playing field and thus frustrate the desires of the minister's colleague in the Department of National Health and Welfare.

There are a couple of anomalies that have struck me. Several days ago Bill C-20 was introduced to set up the Federal Business Development Bank under the aegis of the Minister of Industry, Trade and Commerce. According to Clause 4(1) of that bill the objects are as follows:

The objects of the Corporation are to promote and assist in the establishment and development of business enterprises in Canada by providing, in the manner and to the extent authorized by this Act, financial assistance, management counselling, management training, information and advice and such other services as are ancillary or incidental to any of the foregoing.

Then Subclause (2) states:

The Corporation in carrying out its objects shall give particular consideration to the needs of small business enterprises.

I must say I began to be curious because there is no discernible link between this bank which is set up to give assistance to business-as the bill says to give particular consideration to the needs of small business-and the bill which we are now being asked to consider which changes in some respects the Small Businesses Loans Act. I would be pleased if, at the conclusion of my remarks, the minister would clear up what would appear to be an anomaly in the government's approach to small business.

There are other programs which apply to small business. There is a multiplicity of such programs. I shall list some of them. The Federal Business Development Bank, which I have just spoken about, is to take over at least two existing programs.

One is the counselling assistance for small enterprise, the acronym for which is CASE. Another is the business management training program now under the manpower department. It will be taken over by the Business Development Bank. In addition to those two programs there are a few others which are not perhaps widely known to the community. One is called GAAP, the general adjustment assistant program. It was set up to help companies to take advantage of tariff cuts during the Kennedy round of

negotiations. It has now been expanded to include all companies which wish to improve their competitive international situation, or which are faced in the domestic Canadian market with stiff foreign competition.

Under the government's program to broaden aspects of GAAP it has undertaken in some cases to become a partner in the GAAP assistance projects and to take a considerable amount of risk in the process.

There is another program called the program for export market development. Under that program the Department of Industry, Trade and Commerce will provide up to half the cost of forming a consortium of small businesses to trade in foreign markets, as well as some of the initial operating costs. It hopes to get the money back through a share of future sales.

I have outlined just a few programs which apply to small business. One of my colleagues said earlier there were something like 18 in all. I suggest through you, Mr. Chairman, to the Minister of Finance and to his colleagues that despite the fact that he was kind enough to send to my colleague, the hon. member for Hamilton-Wentworth, an attractive and concisely articulated pamphlet, this is a pamphlet which never sees the light of the day in any branches of the chartered banks which I have visited, and that the small businessman .in this country is confused by the multiplicity of programs administered by a variety of departments, ministers, deputy ministers and departmental assistants. What is really needed is a rationalized approach by the establishment of a department of small business under a minister who would administer all the variety of programs which are directed toward the assistance of small business.

When I say "small business" I am talking about medium or smaller enterprises, and it must be remembered that three-fifths of the people of this country, 60 per cent of the working force, work for medium and small business. In the aggregate this is a large sector of the economy. I think the time has long passed when the people who trade in the market and pass as small business should have their relations with the government recognized through the establishment of a separate department. Lord knows how many different departments and ministers they have had to deal with for a long time. I think they deserve a special minister, ministry or department. Our party has pledged that it will set up such a department when we form the government.

I hope, Mr. Chairman, that the exuberant members across the way, who dined well earlier this evening, are having a chance to get it all out.

Mr. Chairman, the breakdown of loans granted in the various provinces during the period January, 1973, to December, 1973, shows that there is no coherent approach to the manner in which the federal government gives assistance to small business. For example, in the provinces of Nova Scotia, Prince Edward Island and Newfoundland there were during that period 163 loans for a total of $1,605,000. That is for three provinces. That compares with $12,587,290 in the province of Quebec, $6,324,986 in the province of Ontario, and $5,268,859 in the province of British Columbia, the three richest provinces in this country. I suggest that there is no per capita justification for this discrepancy.

April 11, 1974

I am not suggesting that there are as many small businesses in the Atlantic provinces as in the other three provinces, but I do suggest it appears, as several of my colleagues have pointed out, that perhaps the government has not done as efficient a job as it might in making small businessmen aware of the facilities and services available to them.

It may very well be that the proper approach, as I have suggested, is a department of small business. I urge this as a consideration for the minister. These are all my remarks except that I would like an explanation from the minister concerning the apparent anomaly I mentioned at the beginning, that is, the connection or lack of it between this bill and the business development bank measure which was introduced a couple of days ago.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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LIB

John Napier Turner (Minister of Finance)

Liberal

Mr. Turner (Ottawa-Carleton):

Mr. Chairman, I should like to respond. The difference in the scope of this bill will become more apparent when the new Federal Development Business Loans Corporation gets underway. It is meant to split off the Industrial Development Bank, as the hon. gentleman knows, from the Bank of Canada. It will be a more active concern than the Small Businesses Loans Act, which has merely a guarantee function for the chartered banks and other financial institutions. The Federal Business Development Corporation will be making larger loans, and loans of longer term. It will be making loans involved with perhaps an equity participation in the interests of the small businessman.

I recognize, as does my colleague, the Minister of Industry, Trade and Commerce, that there must be co-ordination between these loan programs and the information programs for small businessmen. The decentralization under the Federal Business Development Corporation, and the field staff of Industry, Trade and Commerce throughout the country will be co-ordinating these programs under the management counselling service of the department. I think the hon. gentleman's points have a lot of merit, and the Federal Development Corporation will try to meet them.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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PC

Peter Reilly

Progressive Conservative

Mr. Reilly:

Mr. Chairman, would the minister agree that what he has just said goes at least part way toward meeting what I contend, which is that there is a demonstrable need perhaps to put these under one separate department, and perhaps a separate minister?

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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LIB

John Napier Turner (Minister of Finance)

Liberal

Mr. Turner (Ottawa-Carleton):

One could have a separate department for youth, one for sports, one for small businesses. But I will say this to the hon. member: I agree that the small businessman has a legitimate grievance in this country. He has seen that big government deals with big labour and big business, and he really does not have a segment of the government looking after him. The hon. member mentioned that 60 per cent of employment in this country is supplied by small business, that is, by firms employing around 100 employees. He is quite correct in this-they are the ones that make up 60 per cent of employment in this country.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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PC

Frank Fletcher Hamilton

Progressive Conservative

Mr. Hamilton (Swift Current-Maple Creek):

Mr. Chairman, I would just like to draw the minister's attention to the fact that in the area of the country I represent

Loans Acts Amendments

government loans, no matter how generous, work against that part of the country. The effect of these loans has tended, over the years, to depopulate that region. You still have to pass the banker's test to be able to qualify under this legislation; and the more generous the loans are, the more generous the government programs are, the easier it is for established persons to take advantage of them to the detriment of the younger fellows trying to get into business. I would like to see the government consider some scheme to induce younger people to take part in those programs.

I think that more stress should be put on character, and a little less stress on collateral. I am thinking of a situation where a young chap could get four or five of his neighbours to sign a statement saying that he is of good character, and this would be all that was required when he approached a bank manager for a loan.

This $50,000 limit is very welcome. I would just like to point out that now farmers are dealing with very large sums of money. One hopper car of flax returns about $35,000 to the producer. There has been some talk about box cars in the House. I wonder whether the Minister of Agriculture could tell me whether the Chief Commissioner of the Canadian Wheat Board was expressing government policy when he suggested that farmers buy 4,000 hopper cars out of their proceeds in the Wheat Board.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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LIB

John Napier Turner (Minister of Finance)

Liberal

Mr. Turner (Ottawa-Carleton):

I want to respond briefly to the hon. gentleman. I agree with him. A generation ago bankers, both in towns and in the rural parts on the country, used to lend money on the strength of good character rather than on the amount of collateral. I think they are getting a little cozy on the collateral and rely more on how big his barn is, and such things that add up to quantity. When my colleague and friend, the Minister of Agriculture, brings in amendments to the Farm Credit Corporation Act, the hon. member will find that this is part of the tone of that bill.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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PC

Fred Alward McCain

Progressive Conservative

Mr. McCain:

Mr. Chairman, while this bill is intended to take into consideration the inflationary tendencies which have been evident for a little while, it seems to me that it is virtually out of date before it can be implemented. I know this is not new-it has been said before.

There are a couple of other weaknesses in the bill, as I see it, and one of them as has been pointed out by the last speaker from the opposition is the lack of inclination on the part of banks to consider properly the type of individuals who apply. There is the fact that banks are not obligated to accept all applications for farm improvements, fisheries improvement or home improvement loans, and to forward them to the government. The government therefore has no idea how many loans the banks may have declined to make. Therefore the principal behind the loans is not being properly exercised by the banks, and the government does not necessarily know what is going on under the provisions of this act.

In the community in which I live it happens that there was a bank manager who said that under no circumstances would he make home improvement, farm improvement, or any other comparable type of loan because of the difference that existed between interest rates on the free market and interest rates under government guarantee on

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April 11, 1974

Loans Acts Amendments

this type of loan. What policy does the government have in mind so that it will know how many loans are refused, what type of loans are refused, and what banks are refusing to make loans, because perhaps their earning opportunity may be restricted by the ceiling on interest imposed under the act?

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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LIB

John Napier Turner (Minister of Finance)

Liberal

Mr. Turner (Ottawa-Carleton):

One of the advantages of this program is that it does not have a great deal of bureaucracy tying it up. If we are going to get a list of every refused application, the implementation of the provisions under the act would be much slower, and the whole process more cumbersome. I suppose that the best way to know what is going on in terms of refused applications is for members, when they are approached by their constituents regarding refused loans, to inform me of these complaints, and I will make inquiries directly from the bank concerned to find out what the reasons were for the refusal. I am prepared to do that on a continuing basis.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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PC

Fred Alward McCain

Progressive Conservative

Mr. McCain:

This is a statement which needs a great deal of publicity, because I want to emphasize again to the minister that a bank manager in New Brunswick utterly and totally refused to make home improvement or farm improvement loans because he said that the interest discrepancy was such that his little branch could not afford it, and that even the parent bank could not absorb it. He made great excuses, but no loans. Without some reasonable obligation imposed upon the bank, this is not going to work.

Another thing that I would like to point out is that if one were in the feed business for instance, in 1970, one might have been in real business, but a man who is in the feed business today who is not selling $1 million worth of feed is not selling very much. If a man is in the automobile business today and does not have a $1 million turnover, he is probably not doing very much. It seems to me that this particular aspect of small business loans is not realistic in the light of today's normal sales and that $1 million will not make many sales for small businesses.

This bill is pretty restrictive. Unless the next bill which will divorce IDB from its present parent is very effective and includes the business structure from $1 million up, on a much better basis than in the past, there will be a gap here. I implore the minister to try to create some kind of communication between the applicant, the bank, and the department so that there cannot be discrimination by individual bank managers against those who make applications for any of these loans.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
Permalink
LIB

John Napier Turner (Minister of Finance)

Liberal

Mr. Turner (Ottawa-Carleton):

I think a better way is not to build up bureaucracy but to have the individual member of parliament, when he recieves a complaint from his constituent, bring it to my attention and I will get in touch with the bank concerned. That is what I do, and it is the general policy of all chartered banks to promote these guaranteed loan programs. There may be a manager of a bank who is not implementing that policy and, if so, I would like to know about it. That is our business as members of parliament. I would be glad to hear the specifics in the case mentioned by the hon. member.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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PC

Thomas Gordon Towers

Progressive Conservative

Mr. Towers:

Mr. Chairman - I have a question about the appeal. Is this going to be the only type of appeal that the applicant will have?

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
Permalink
LIB

John Napier Turner (Minister of Finance)

Liberal

Mr. Turner (Ottawa-Carleton):

It is not really an appeal, Mr. Chairman. A bank has jurisdiction to make, or not make a loan, but I would like it drawn to my attention if an individual bank manager, in the opinion of a constituent of the hon. member, has not treated him fairly. I would be prepared to look into that for him.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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PC

Thomas Gordon Towers

Progressive Conservative

Mr. Towers:

I have a further question, Mr. Chairman, with regard to the small business loans. Is this going to allow for the operation of the business, or is it strictly for the purchase of property and machinery?

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
Permalink
LIB

John Napier Turner (Minister of Finance)

Liberal

Mr. Turner (Ottawa-Carleton):

It is not for working capital, Mr. Chairman.

Clause 1 agreed to.

Clauses 2 to 7 inclusive agreed to.

Clauses 8 to 10 inclusive agreed to.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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Title agreed to.


LIB

Gérald Laniel (Deputy Chair of Committees of the Whole)

Liberal

The Assistant Deputy Chairman:

Shall the bill carry? [English]

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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NDP

Thomas Speakman Barnett

New Democratic Party

Mr. Barnett:

I am sorry, Mr. Chairman, but the interpretation was not keeping pace with you and I was waiting to hear you call clause 9. Before I could get to my feet I heard you call clause 10. Under the circumstances I should like consent to deal with clause 9, which has to do with fisheries.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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LIB

Gérald Laniel (Deputy Chair of Committees of the Whole)

Liberal

The Assistant Deputy Chairman:

Do hon. members agree to revert to clause 9?

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
Permalink
?

Some hon. Members:

Agreed.

On clause 9.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
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NDP

Thomas Speakman Barnett

New Democratic Party

Mr. Barnett:

Mr. Chairman, I realize there was some reference to the proposed amendment to the Fisheries Improvement Loans Act in the general discussion under the Farm Loans Act, but I thought the point I should like to raise could be more appropriately dealt with whilst dealing with the specific proposal to amend the Fisheries Improvement Loans Act.

I have one or two questions which I should like to address to the Minister of Fisheries, but as he is not here I will put them to the Minister of Finance. The question of the applicability of the assured lending program under the act for use by fishermen in re-financing loans that they already have, has been raised before.

Generally speaking, as I understand the operation of this act, the lender, in effect, requires a chattel mortgage on a fishing vessel even though there is an assured loan. I have never been able to understand why a fisherman, who may have had an unfortunate financial transaction, should not be able to take advantage of the assured lending

April 11, 1974

program which this act provides, in order to refinance his boat under more favourable terms which he may be able to secure through a bank or credit union.

If the minister would turn his mind to some earlier discussions on this subject he would recall the concern expressed by the hon. member for Skeena and myself. Long before this act was passed, the fishermen of British Columbia in many cases were almost perpetually in debt to the fish processing and manufacturing companies because of the type of lending agreement which tied them to those companies.

Since we are now opening up this act I should like to ask the minister whether this matter has been under consideration, and if the regulations will be changed to give more flexibility to this program, so that fishermen who wish to get out of an unfavourable agreement through refinancing, can do so under this program.

Topic:   GOVERNMENT ORDERS
Subtopic:   FARM IMPROVEMENT, SMALL BUSINESSES AND FISHERIES IMPROVEMENT LOANS ACTS AMENDMENTS RESPECTING LOANS AND GOVERNMENT LIABILITY
Permalink

April 11, 1974