Mr. Fernand Robichaud (Westmorland-Kent):
I wish to thank you for giving me this opportunity to take part in the debate on the Small Businesses Loans Act. Having owned two small businesses myself, I believe I am in a position to appreciate the concerns of this sector.
However, I fail to understand the position the present Government seems to be taking with respect to small- and medium-sized businesses. It seems to me there are many contradictions between what I have heard from our Conservative colleagues and what I have read in Bill C-23, and I shall, if I may, Mr. Speaker, touch on a few that are particularly revealing.
First of all, the Hon. Members opposite have been very expansive about their desire to consult with the groups in question so as to better respond to their needs. This is an entirely worthy attitude, but I do not think the Conservatives are particularly innovative in this respect. Otherwise, small-and medium-sized businesses would not, as they do today, represent nearly 30 per cent of the Gross National Product. But let us be generous. Let us give them the benefit of the doubt and believe they are sincere in their desire for consultation. If they are, then how do the Minister of State and his colleagues propose to explain the fact that the vice-president of the Canadian Federation of Small Business and the president of the Canadian Federation of Independent Business have both protested against the provisions of the Bill concerning the 1 per cent fee to be paid by lenders to the Government? If these organizations had been consulted, this fee would not have been included in the Bill, unless the present Government, with all its
consultations, has been ignoring the views of the groups concerned. Not necessarily on purpose-I would not want to believe that.
Mr. Speaker, I can only hope the Government will make good use of these consultations it has been making so much of. In fact, when I was looking at the recent consultation paper on small business presented by the Minister of State (Small Businesses) (Mr. Bissonnette) and the Minister of Regional Industrial Expansion (Mr. Stevens), I noticed some very major paradoxes in the Conservative approach.
The first page of this document refers to some of the goals the federal Government has set for itself. One of these I found particularly interesting, and I quote:
"-to adopt policies that will lead to increased investment, further and more intense innovation, improving our international competitive position and establishing a climate favourable to creating and developing new enterprises."
A little further it says that job creation is a fundamental priority for the present Government and that Canada must strengthen this growth model and promote the start-up of new businesses.
Mr. Speaker, I am afraid the Party opposite has yet to come up with something new. It is as plain as the nose on anyone's face that small- and medium-sized businesses are the motor of any economy. I do not see why it took them six months to realize this.
Even worse, in Bill C-23, the Conservatives have neglected to observe these primordial goals by proposing incoherent policies and amendments.
I say incoherent, Mr. Speaker, because clause 2 of the Bill provides that from now on, liability for losses sustained on loans will be shared by the Government with the lending institutions, the latter to be liable for 10 per cent.
While the Small Businesses Loans Act is aimed at encouraging lenders to make loans to small businesses, the amendments proposed by the present Government will have the opposite effect. It is not at all unlikely that lenders will be reluctant to make loans if they are liable for 10 per cent of the losses sustained on such loans. Lenders will tend to exercise extreme caution and draw up more restrictive regulations, and one could hardly blame them for doing so.
However, this attitude will also make lenders less inclined to make loans to small businesses, which will certainly have an adverse effect on the emergence of new small businesses. The contradiction here is very obvious. On the one hand, the Government wants to make things easier for small- and medi-
February 26, 1985
Small Businesses Loans Act
um-sized businesses and promote the establishment and growth of such businesses, but on the other hand, it is obliging lenders to endorse 10 per cent of losses sustained on loans, which will force lenders to be more selective or to make fewer loans or fewer large loans. What the party opposite is urging is that we cripple a piece of legislation which has been the mainstay of Canadian small business for 23 years.
Our colleagues across the aisle openly brag about stimulating private investment and the Canadian economy, but they fail to take the proper approach-in fact, they throw cold water on businessmen and lenders who are anxious to participate in our economic growth. I hope they realize the disastrous consequences of the fresh approach they want to take with respect to small business. It is essential that you grasp the full implications of such measures. Perhaps I might be of some help.
Still referring to this consultation paper, I read that entrepreneurship and risk-taking are not sufficiently promoted. I fail to see how the provisions of this piece of legislation will enable you to promote and spur risk-taking by small business and lenders. You know as well as I do that no businessman or businesswoman will invest unless the chances of failure are extremely remote. Canadians are not risk-takers, and they should not be unless the economic climate and conditions are altogether favourable. To be frank, I am convinced that your proposition will never create the conditions conducive to and required for risk-taking. The more your Government will force lending institutions to pay for a high percentage of losses incurred on outstanding loans, the fewer loans those institutions will make, the less small business will take advantage of those loans and the less new businesses will want to set up shop.
Furthermore, I can read in this famous consultation paper- and, of course, you had no idea how many inconsistencies this paper would contain-that "small business considers that Governments and most financial institutions have an approach which favours the requirements of big business".
Then again, section 2 on loss sharing by the Government and lenders will do precious little to encourage the latter to make loans to small business. One might even suggest that this measure will be a boon to big business since the market will not be crowded by small business, and lenders will be more inclined to offer better conditions to big business. Hypothetical though it may be, this suggestion is not all that far-fetched.
It is a fact that the Progressive Conservative Government spent the first six months worrying about big business, foreign multinationals and the need to attract them to Canada. This Government has been concerned about making room for big rather than small business. What will be the impact of uncontrolled foreign investments in this country?
The answer is simple: they will corner the Canadian market. That being so, is it still possible to talk about promoting small business in Canada? I hardly think so. I would suggest that the Government will indeed be well advised to reconsider-as they so aptly put it-the regulations and policies that might hinder small business financing, including venture capital.
This is a priority, Mr. Speaker. It is a priority because the legislation contains so many nefarious provisions that will only hinder SMB financing. Among other things, their Conservative Minister will require lenders to pay a fee of 1 per cent of the amount loaned under the Act. This means that on each and every loan, the lender will have to pay 1 per cent to the Government as a guarantee. Assuming that total loans remain at the current level of $900 million a year, lenders will be paying out $9 million to the government to account for that 1 per cent fee. Those $9 million that will go the public Treasury will reduce by $9 million the amount of loans available to small businesses. This is one way for the Government to fill its coffers at the expense of lenders and especially of small businesses. We cannot be consistent and support such a measure. The Minister of State himself is entertaining doubts as to the true efficiency of such a policy. As he stated in this House last week, and I quote:
The total impact on the yield to lenders over that period or over the term will be minimal. Therefore, the volume of loans should not decline significantly.
Despite the weak-kneed phrases used by the Minister, clearly when he said "minimal impact" and "should not decline significantly" he meant that in fact, there will be negative results and the volume of loans will go down. The Minister is admitting therefore that his proposal implies a negative impact. When he says "not significantly" and "minimal", it is only to reassure those who are concerned and distract the attention of the people involved.
In fact his statement was conditional and this is therefore extremely hypothetical. His comments are fraught with uncertainty. "The volume of loans should not...", meaning that it could decline significantly. If we are to rely on assumptions, mine is just as valid as the Minister's. But I for one know very well that the odds are in favour of lenders reacting unfavourably. Who will be happy to pay out $9 million rather than investing the money?
Finally, Mr. Speaker, what the Government wants to achieve with Bill C-23 is to significantly reduce access to the Small Business Loans Act by lenders, and in turn by small businesses. In other words, they are limiting access to financial sources that are absolutely vital and that have in the past enabled a number of small businesses, small Canadian firms to start in business and prosper in this country.
Anybody who claims to support small businesses and view them as our society's economic locomotive must reject the
February 26, 1985
Government's proposals because they are inconsistent and unacceptable. This is a serious issue and so is our duty.
As you know, Mr. Speaker, in New Brunswick in 1980 there were 17,000 small- and medium-sized businesses with a sales volume of less than $2 million a year. There were 17,000 in 1980, and now there are many more. In 1983, with the Small Business Loans Act, 745 new small businesses obtained loans for a total amount of $22 million. You know also, Mr. Speaker, that in my province of New Brunswick, small businesses are essential. They provide most of the jobs and they also are vital to our people. The citizens in my province are born workers whose ability to earn a living is aleatory, greatly dependent as it is on the climatic conditions under which they operate. I refer for instance to our people involved in the fishing, farming and tourist industries.
As they operate already under difficult and uncontrollable conditions, the last thing we should do is to create new obstacles for them. On the contrary, we should try and find ways and means to alleviate these natural impediments. These ways and means are already at our disposal, Mr. Speaker. The party opposite preaches that Canadians should be encouraged to invest. But "preaching" is just not good enough. It should take action. What is more, it should take appropriate action.
So far, the new government has covered the first two stages. As to the third, I suggest that its first appropriate action should be to withdraw the provisions about the 90-10 per cent sharing of losses and the 1 per cent loan fee which lenders would have to pay on each loan to the government.
If the party opposite really wants to help small businesses, it should fulfill its promise.
Subtopic: SMALL BUSINESSES LOANS ACT
Sub-subtopic: MEASURE TO AMEND