Mr. Langdon:

Mr. Speaker, 1 thank the Hon. Member for her questions. What our Party has said with respect to this whole area is, first, that there should be incentives for an agribond program. Therefore, I would start, Mr. Speaker, by saying that the interest received from agri-bonds, under our approach, would be exempt from taxation. So there would first be that incentive and that would be an incentive which would apply to farm income and farm receipts put into agri-bonds and to other capital put into agri-bonds. I expect that would be an incentive, dealing with the second concern of the Hon. Member, which is the degree to which we could get other kinds of capital flow besides that from the farming sector.

To give a little more detail with respect to farmers themselves, I would say that our approach has been that the first $100,000 of capital gains made on a farm would be completely exempt from capital gains tax. We could give that much freedom to farmers so that they could put that money into the purchase of a house in town or wherever they wanted. Beyond that our concern would be to see that there is an incentive given to see that capital which is in farming stays in farming. I believe that could be accomplished by saying that to be free of the remainder of capital gains tax, you must put your funds into agri-bonds. It is a matter of judgment, Mr. Speaker, what the impact of that would be. My own feeling from discussions with farm leaders in Essex County is that many of those people share my concern that capital in farming should stay in farming, and the system of getting tax advantages if money is kept in the farm sector is quite appealing to a significant number of farmers.

I might also say, Mr. Speaker, that what it does is meet two objectives at once. It succeeds in helping to refurbish the funding base of the FCC and it provides relief for farmers so that they are able to receive income, which in itself would be tax free because of the way we treat agri-bonds.

With respect to the third point raised by the Hon. Member, my own feeling is that this system could be adapted much more effectively to the rather complicated, informal methods of financial exchange which are involved when a farm moves from one generation to another. It would be possible without very much money actually changing hands for that change to take place with the next generation incurring a debt to the parents and the parents having that debt, in effect, covered by an agri-bond with which they would be able to avoid paying capital gains.

Mr. Fraleigh:

Mr. Speaker, I welcome the indication by the Hon. Member for the great riding of Essex-Windsor of his desire to work together to solve what we on this side of the House consider to be a major problem facing agriculture. I have some concerns, however, about some of the recommendations of the Hon. Member. Modern agriculture today depends

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on large amounts of operating capital. I have a great deal of concern about where those farmers who require this operating capital are going to get it if we bring about a freeze which will scare away investors in agriculture. That is one point.

Many of the problems which we face in agriculture today have their roots in a lot of advice which was given in the 1970s by people who are called "economists". 1 want you to be assured of that, Sir. When the farm sector was trying to move ahead at a moderate pace, economists in the banking sector, in government and in other advisory capacities urged farmers not to creep, but to jump and jump big. That is where all our problems started and most of that advice was given by economists. The other thing I was interested in was the allusion to the problems of the dairy industry in Essex County. I understand that there is not a dairy herd left in Essex County.

Mr. Langdon:

Mr. Speaker, there are a number of points raised by the Hon. Member that I would like to reply to. My predecessor from Essex-Windsor also had a problem with economists. I think I may have personally contributed to that problem. Just as there are Members of Parliament and then there are Members of Parliament, so there are economists and then there are economists. Some have some wise advice, if I may so, concerning agriculture. Others perhaps less so. In fact,

I think the push to expansion to which the Hon. Member refers came not so much from economists as it did from bankers. A good many banks were assuring their farm customers: "No problem, borrow more". All of this occurred in the late 1970s when banks had a great deal of money to lend and interest were not particularly high compared to what followed. However, once those debts were incurred, the banks became far less interested in helping their farm customers.

I do not think you would scare investment away by a moratorium which dealt with this emergency, especially if it was tied to the other two points noted in our resolution concerning the desire to set up an agency which would renegotiate and reschedule payments. After all, Mr. Speaker, we do it with foreign countries like Argentina and Chile and we should be prepared to do it with our own farmers.

Finally, I think the cash crisis is so severe that we must take this move even if there is some potential danger in the short run of scaring some of the banks. The banks in this country have done very well out of the farmers, thank you very much, over the last few years. I think they should now be asked to help carry farmers through this crisis period.

The Acting Speaker (Mr. Charest):

The question and comment period is now over.

The Hon. Member for Richelieu.

Mr. Louis Plamondon (Richelieu):

Mr. Speaker, during the last election campaign, the Progressive Conservative Party made a commitment to help Canadian farmers. Well, we have already taken steps to meet that commitment and we intend to

continue. Since this Government came to power, we have been consulting actively with members of the agricultural sector and we have had some frank discussions. One comment that often came up concerned the role of the Farm Credit Corporation. This Crown corporation plays a very important role in Canada's agricultural industry. The corporation was created by the Conservative government of the Right Hon. John Diefenbaker in 1958. It was set up in response to the definite desire of farmers to be able to obtain long-term loans. Farmers themselves gave their opinion on what the role of the Farm Credit Corporation should be. From the time of its inception, the FCC has shown great initiative and energy. It is time to give it the means to do what it is capable of doing. Mr. Speaker, there are many agricultural organizations that would like to see the FCC take its rightful place on the market.

Unfortunately, increasing restrictions on its activities and the lack of financial resources that have plagued it in recent years have been instrumental in diminishing its impact.

Mr. Speaker, our Government does not intend to follow the example of the previous Government and ignore the Farm Credit Corporation.

I might remind my hon. colleagues that the role of the FCC is an entirely indispensable one. It is very active in long-term financing. In fact, it occupies 39 per cent of the market and is considered to be the principal lender, followed by the chartered banks which rank only second, with 24.4 per cent. The FCC lends primarily to young farmers, "beginners" and those who cannot obtain favourable terms in the private sector. The majority of the loans offered by the FCC are made to farmers operating a family farm. The FCC makes it possible for such farmers to contract long-term loans at fixed rates for five, ten or fifteen years. It can even lend money over a period of twenty-nine years.

Considering the conditions peculiar to the agricultural sector, longer term loans make it possible for borrowers to balance their income and expenditures. Loans at variable rates or rates that are adjusted at frequent intervals like the ones offered by commercial lenders do not always allow for these conditions.

We now have a situation that is sometimes problematic. What is the situation? During the last decade, farm credit has risen spectacularly, from about $5 billion in 1972 to over $20 billion in 1982, the most significant incease being in the long-term market.

As far as short- or medium-term loans are concerned, the chartered banks and other institutional lenders have always played a significant role. Indeed, the private sector must continue to be very active in financing this industry, and my colleague, the Minister of Agriculture (Mr. Wise) made this commitment before the provincial Ministers of Agriculture.

During this decade, Mr. Speaker, the real inflation rate, that is, the current nominal interest rate less the inflation rate,

November 23, 1984

has always been lower than 7 per cent. In two or three years, however, the situation has changed dramatically. Interest rates are up, inflation rates are down, and on top of that, the value of farmland has dropped significantly.

Mr. Speaker, I would like to point out that many farmers have very few debts. At the other end of the spectrum, a number of farmers have net assets that are proportionally weak, and they will have trouble surviving.

Farmers with an average proportion of net assets are facing problems, to varying degrees. The problems depend on three factors: first of all, the farmer's management skills; second, the nature of the operation-regulated or unregulated, new or well-established-third, the farmer's debt structure. In addition, there are some farmers who although they are very good managers, are nevertheless in difficulty. They have piled up deficits and find themselves in a bind as a result of high interest rates and the carry-over of a series of losses. Although that problem was solved to a certain extent by programs such as the special agricultural financial assistance program administered by the Farm Credit Corporation and by the Small Business Bond, their restricted availability did create difficulties. Besides, the FCC program is not available and the first applicants cannot even benefit from it any more. The first issues of Small Business Bonds are maturing, but no provision has been made for their renewal. While the Liberal government was spending money right and left, Canadian farmers were working like slaves on their farms. We must do something, Mr. Speaker. What should we do?

Last November 5, the Minister of Agriculture (Mr. Wise) asked the Farm Credit Corporation to suspend most of its current recovery proceedings until next January 15. It would have been unfair and irresponsible to force about 300 farmers off their property at a time when we are considering the agricultural situation. In addition, some of those farmers will have their files reviewed by appeal commissions and the FCC which are themselves made up of farmers. In any event, farmers are expected to play a larger role within this Crown corporation. Since that time, we have met frequently with FCC representatives to decide what program might be set up and provide acceptable solutions.

Not all Canadian farmers are in a desperate situation. We must also help those who are in a situation which, although not critical, does require special attention. We are now trying to find mechanisms to enable farmers to refinance their debts at interest rates somewhat lower than prevailing rates in recent years. In our opinion, more than 3,200 farmers would stand to benefit from such a measure and thus bring their interest rates in line with the Farm Credit Corporation's current rates.

We are involved in a process that is calling into question all of the corporation's programs. We have asked the corporation to make sure that each one of them is relevant. As far as the

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Farm Credit Act is concerned, various avenues are being explored to make sure it better fills the needs of those who comply with its requirements. We have discussed a shared-risk mortgage program that could be implemented whenever interest rates reach highly volatile and very high levels. There are still a few problems involved in such a program, however.

We have also discussed the possibility of developing a mortgage rate increase insurance program. That kind of program could be managed in part by the Government, or better still in my view by the mortgagees. There are similar programs in existence elsewhere in the world. We will undertake a study of the cost and risks involved in such an endeavour. There are similar programs in private industry, and it is important that they be respected.

The Minister of Agriculture met with his provincial colleagues at a federal-provincial conference on farm financing and credit, in early November. Following their discussions, the ministers of Agriculture have recommended that the special farm assistance program be maintained for another two years.

We are now discussing this with the Farm Credit Corporation which administers this program. We are in the process of evaluating the costs of extending it. Need I remind the House, Mr. Speaker, that under this program, farmers facing severe financial difficulties would obtain special loans to consolidate their debts. They would also benefit from reduced interest rates. They would then have a much better chance to get back on their feet.

Agribonds were also discussed at this meeting, Mr. Speaker.

I should point out that the agribond project is being reviewed in the context of the Farm Credit Act. Agribonds can be described as a financial tool designed to allow farmers to borrow at interest rates lower than regular market rates. Since there is a tax rebate on interest income from investments, this instrument is quite similar to the small business bonds. The difference is that small business bonds provide tax rebates to lenders such as chartered banks and not to individual investors as would be the case with the agribonds.

This idea offers many possibilities. However, it should be carefully scrutinized. In theory, it has many advantages. It would provide farmers with lower interest rates. It can be directed to specific types of farmers, which would make it even more effective. Losses in tax revenue could be shared between the federal and provincial Governments. Investors would certainly welcome this kind of initiative. There are many other positive points which should be considered as opposed to the problems created by this program. Our tax system is already complex. It is difficult to assess the cost of such a program as the loss in revenue is hard to evaluate. Lower interest rates could be capitalized as agricultural shares. The initial costs of such a project could be high, especially with regard to advertising and monitoring.

I would like to get back to the costs of an agribond program. The cost of such a program, whether we are talking

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about losses in tax revenue or direct subsidies, depends on the volume of loans to which the program applies, on the repayment period for these loans and on the conditions chosen. If we were to grant direct subsidies, farmers would receive greater and more direct benefits from Government expenditures than they would in the case of tax rebates. For instance, let us suppose that bonds are issued for a period of ten years at the rate of $200 million a year, with a direct subsidy of 5 per cent, the cost would be about $10 million the first year, $20 million the second year, and so on up to $100 million the tenth year.

In his financial statement, the Hon. Minister of Finance (Mr. Wilson) asked that a committee of the House examine the issue of agribond management. This committee will have to report before the budget is brought down next spring. We strongly hope that the provincial departments of agriculture will make representations to the committee. Their co-operation is very important and even essential.

The committee of the House of Commons will also have the mandate to consider such issues as the capital gain tax on farm lands, as well as the administration of income tax in the case of part-time farmers.

Another avenue which we will explore together with the Farm Credit Corporation is a possible amendment to the Farm Syndicates Credit Act, to reduce from three to two the number of required participants. Such an action would encourage the co-operative purchasing of farm machinery. Moreover, we are considering the possibility of raising the ceiling for eligible loans from $50,000 to, say, $250,000.

There are also steps beyond the area of the Farm Credit Corporation which we could take. In this economic statement, the Minister of Finance (Mr. Wilson) indicated that Canadian farmers would benefit from now on from a sales tax rebate on farm fuel, a rebate which will amount to some 4.5 cents a litre. Surely, such a move will not be prejudicial to farmers' interests. Quite the contrary!

On the other hand, the Farms Improvement Loans Act will lapse on June 30 of next year. The government is now looking into the possibility of amending its regulations. The Ministers of Agriculture have suggested amending this act to allow for fixed rates of interest on intermediate term farm loans. This recommendation will not be disregarded. If we decide to go ahead with this plan, we will certainly consult our farm organizations.

The Minister of Agriculture (Mr. Wise) has indicated to the Minister of Finance (Mr. Wilson) that he intended to encourage private lenders to make greater use of the Small Business Bond Program.

We made a commitment to improve the well-being of the farming community, Mr. Speaker, and I am convinced that the direction we have taken is the right one. We have sought the advice of the provinces and, with their co-operation, we have decided to take certain steps. We have also asked the working

committee on agricultural financing to consider some innovative mechanisms in order to meet the financing and credit needs of farmers.

To correct present conditions, a government program will not be enough, Mr. Speaker. The needs vary according to crops and regions.

A program could be quite satisfactory for a group of farmers and almost ineffective for another. To improve the farmers' situation, we will need the co-operation of the provinces, chartered banks and other credit institutions.

In the agricultural industry as in many other sectors of our economy, this government intends to take all means available to restore confidence.

The agricultural policy is a priority of our government. We are convinced, Mr. Speaker, that it is unreasonable to ask farmers to take all the risks in their sector while all Canadians benefit from their labour.

The Acting Speaker (Mr. Charest):

Before I recognize the Hon. Member for Lethbridge-Foothills (Mr. Thacker), I must ask Members if there are any questions or comments.

Mr. Blaine A. Thacker (Lethbridge-Foothills):

Mr. Speaker, it is a pleasure for me to rise today on this allotted Opposition Day and speak to the NDP motion urging the Government to take immediate action to address the financial needs of Canada's farmers. The motion sets out a number of points which I will deal with more specifically later on.

Of course, 1 have some doubts about some of those points, but there are some which I feel deserve consideration. Indeed, the new Minister of Agriculture (Mr. Wise) has already acted on some of the issues raised in this motion. I am sure that Members opposite would agree that the Minister of Agriculture has done more for agriculture in two months than the last government did over a period of 10 to 12 years.

There is a real sense of optimism in the farming community that for the first time there is finally a government in Ottawa that is prepared to address their issues. I have spoken to a number of provincial ministers of agriculture. They were absolutely elated as a result of their joint meeting with the federal Minister of Agriculture. It was the first time they were genuinely consulted and their views were taken seriously. I have a list of joint actions that are being taken which are of great comfort to the farming community.

Let me make it clear that a very large portion of our agricultural community is in very deep trouble. Indeed, there is not enough money in this or most countries of the world to save every farmer in this nation who would like to be a farmer. It does not matter whether it is farmers in the free market end of agriculture, such as the beef farmers in my riding, whether it is farmers in the supply management form of agriculture,

November 23, 1984

the dairy industry or the poultry industry, there are farmers who are facing collapse and will not be saved. This is due to the policies that were imposed upon this nation for the last 10 to 15 years. Of course, I speak of inflation. It has been a curse that has destroyed many civilizations before us. Not only has inflation had a severe impact on much of our farming community, it has affected ordinary citizens who have worked their whole lives to save a modest amount of money only to see it halved and indeed quartered during the last ten years as a result of this pernicious disease of inflation that was imposed upon people by the Liberal government. Any time that there is a government that will practice deceit with the people who put them here-

Ms. Mitchell:

You are in government now, not Opposition.

Mr. Thacker:

That is exactly what I am saying. We are in government and it is not going to happen again. The Liberals and the NDP would offer the people all sorts of solutions to their problems by throwing money at them. They would offer programs-

Mr. Riis:

Talk like a government member for once. Tell us what you are going to do. Be positive.

Mr. Thacker:

I am always amazed at how the NDP members jump in even now to defend those past Liberal policies that have reduced the number of farmers in this country.

Mr. Riis:

Be positive for once. You are whining, snivelling and complaining. That is all we hear from you guys.

Mr. Thacker:

Mr. Speaker, $24 billion worth of Canadian taxpayers' sweat and toil will come off the top to service the debt.

Ms. Mitchell:

What are you going to do?

Mr. Riis:

Protect the banks. Say one negative thing about the banks.

Ms. Mitchell:

Tell Canadians how many reforms you will bring into the tax system.

Mr. Thacker:

The Hon. Members should sit patiently because then they will find out what this Government is doing.

Mr. Riis:

Tell us what the Government will do.

Mr. Thacker:

I just want Canadians to know that the NDP is once again defending the Liberal policies of the past.

Mr. Riis:

There you go again. You are going to make a whole speech without saying one thing positive.