February 28, 1985

GOVERNMENT ORDERS

SMALL BUSINESSES LOANS ACT


The House resumed from Tuesday, February 26, consideration of the motion of Mr. Bissonnette that Bill C-23, an Act to amend the Small Businesses Loans Act, be read the second time and referred to the Standing Committee on Regional Development.


PC

Norman Melvin Warner

Progressive Conservative

Mr. Norman Warner (Stormont-Dundas):

Mr. Speaker, it is a pleasure for me to speak on Bill C-23, an Act to amend the Small Businesses Loans Act. It is also a pleasure for me to speak for the first time in this House on any Bill.

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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?

Some Hon. Members:

Hear, hear!

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Norman Melvin Warner

Progressive Conservative

Mr. Warner:

It's very nice to get the applause before the speech. I would also like to thank my electorate who sent me here last September to be part of this new and dynamic Government.

The riding of Stormont-Dundas comprises the entire counties of Stormont and Dundas and almost the entire township of Charlottenburgh in the County of Glengarry. It stretches along the St. Lawrence River some 80 kilometres from Lancaster in the east to Iroquois in the west. It extends north of the St. Lawrence River approximately 40 kilometres to include Winchester, Chesterville, Morewood, Crysler and Moose Creek.

The City of Cornwall is the only city and the largest community in my riding, with a population of approximately 46,000 people. The rural area has some 1,900 farms, of which 42 per cent are dairy operations. Cornwall and other communities in the constituency are among the oldest settlements in Ontario and Canada, having been established over 200 years. Last year Cornwall, along with other communities in my riding, celebrated its bicentennial.

The mother tongue of the residents of the constituency is approximately 72 per cent English and 25 per cent French. Unemployment in our area is quite high. Of course, we are most concerned with positive and progressive developments in our area. We are expecting a few new companies to locate in

Cornwall in the immediate future. We are doing all we can to encourage other manufacturers and businesses to locate in Stormont, Dundas and Charlottenburgh as well.

We are quite fortunate to have access to excellent transportation facilities with highways, railways and the St. Lawrence Seaway all running through our area. We are also very fortunate to have the least expensive hydro-electric power rates in Canada, some 28 per cent less than the surrounding areas. I invite all Members to visit the people of my area. We are located within a one-hour or one-and-a-half-hour drive from Ottawa. Hon. Members would be very warmly welcomed by all of the people there.

The majority of the discussions on Bill C-23 have been very positive and supportive. The Bill is recognized as basically housekeeping and modernizing the Act which has been so popular in the past. In the last five years the activity in this area has more than tripled. In 1978 the amount of loans written was approximately $176 million, while in 1983 the amount increased to $691 million. At the same time the number of loans increased from 7,300 to over 25,000.

This activity certainly indicates the popularity of the Act and the very useful purpose that it has for small business across Canada. There were only two areas that seemed to have created very much controversy and those were the areas of the administration fee and the concept of participation in losses. The 1 per cent administration fee on loans made after April 1 will be imposed on the banks and will certainly help to defray some of the costs of the program. It is also a provision of the Act that this charge will not be passed on to the borrowers.

[DOT] (DIO)

Also effective April 1 the federal Government will absorb 90 per cent of the losses as compared to the full 100 per cent of the losses which had been absorbed in the past. In 1984 losses or claims on this program amounted to some $43 million and it seems to be only good business practice that the underwriters of these loans participate to a certain extent in the absorption of losses and also pay a reasonable fee for the insurance protection that they are receiving.

I feel quite strongly that our financial institutions in Canada are the most appropriate vehicles for the Government to be using to distribute its programs. They are the most simple of vehicles and have the greatest lack of bureaucracy. Those small-business people who have dealt with such companies or concerns as the Federal Business Development Bank know what bureaucracy can be, particularly when they are trying to get a loan through quickly to solve an immediate problem. I would hope that in the future, if the Federal Business Development Bank is not going to be active in this area, we will see fit

February 28, 1985

Small Businesses Loans Act

to further expand this Act so that the amounts of loans will be greater. As well, we would certainly hope to encourage more participants.

It was quite encouraging to see that in 1983 the number of lenders had increased to 1,860 in addition to the chartered banks. Of course, with the great number of financial institutions that are eligible as lenders, I believe they only need be encouraged in order to see the great benefit that this Act has for the small businesses in their communities. I would hope that in the future some of the caisses populaires and credit unions that have not been active in the past will see fit to provide this very essential service for small businesses.

This Act will certainly provide some of the assistance that is required for small businesses. I am certainly not going to say that this is the be all and end all for small business, but it will certainly be an integral part of the Government's program to assist small business in the great future that we see for it in the next few years.

MS)

[ Translation]

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

Jacques Guilbault (Deputy House Leader of the Official Opposition; Liberal Party Deputy House Leader)

Liberal

Mr. Jacques Guilbault (Saint-Jacques):

Mr. Speaker, I welcome this opportunity to make a relatively brief contribution to the debate on Bill C-23, which concerns small business loans. A number of Members in my Party have spoken to this subject, and I would now like to offer a summary of the Liberal Party of Canada's position before the Bill is referred to committee, which we expect will be done today.

First of all, we think the Small Businesses Loans Act is an excellent piece of legislation. The loans program is a very good one and has been extremely popular. Applications under the program have continued to increase over the years, which proves that Canadian small business is very appreciative of this legislation, especially since most jobs in Canada are created by small- and medium-sized businesses, in other words, by those businesses that are eligible for loans under the Small Businesses Loans Act.

As a general rule, the Liberal Party of Canada supports Bill C-23, especially since the legislation which Bill C-23 is intended to amend was passed by the previous Liberal Government and received with great enthusiasm.

I would like to start by reviewing two of the measures proposed in Bill C-23 which I think are excellent, and which are in fact why we intend to give our consent that Bill C-23 be read a second time and referred to a standing committee of the House.

First, the ceiling or aggregate amount of funds that may be lent to small businesses under the program has been raised from $1.5 million to $1.8 billion. We think this is a very wise step because demand has already outstripped the funding available under this program.

Bill C-23 will also amend the definition of a small business by raising the maximum gross revenue for small businesses to

be eligible for loans under the Small Businesses Loans Act from $1.5 to $2 million annually. This will open the program to a larger number of small businesses, and we believe this is a very sensible decision.

However, while Bill C-23 seems to be making the loans program available to a larger number of businesses as a result of the two measures I mentioned earlier, namely, the increase in the aggregate amount of loans that may be offered and the change in how small businesses are defined, we wonder why the Bill also proposes restrictions that will make it much harder for small businesses to obtain loans. First of all, why did the Government decide to reduce the guarantee provided to financial institutions under the program so they will not have to shoulder the entire risk burden, from 100 per cent to 90 per cent? Bill C-23 as it is now stands provides that the program will not guarantee more than 90 per cent of the loan, and financial institutions will be asked, in fact obliged, to take 10 per cent of the risk. This will certainly reduce the amount of money being lent by financial institutions, especially since the institutions are also asked to pay, as of April 1, 1985, a fee of 1 per cent of the amount of the loan.

So the Government is now telling the financial institutions that they are going to take on a greater share of the risk than before, and on top of that, they will have to pay a 1 per cent fee, thus reducing the profits an institution can make on a loan, because although interest rates may fluctuate, according to the legislation they are set at prime plus one.

If we ask financial institutions to pay a 1 per cent fee every time they agree to make a loan under the Small Businesses Loans Act, we are reducing their cash flow.

Those are the two aspects of the legislation we are most concerned about. We believe the Government would be ill-advised, while ostensibly broadening the availability of such loans, to introduce other measures that would actually reduce that availability.

That is why, when the Bill is referred to a standing committee of the House of Commons, we expect our Members on the committee to make a contribution towards improving the proposed legislation, especially by removing the two measures I have just mentioned, that is the 1 per cent fee and the obligation on the financial institutions to share part of the loan liability.

Furthermore, we must not forget that under the provisions of this Bill, the Minister has the power to change the rules of the game in various ways. For instance, the maximum rate which is now set by legislation could be changed by the Governor in Council, in other words, by the Minister with the approval of Cabinet.

[DOT] (M20)

As I mentioned earlier, it has now been proposed that the guarantees be shared by the Government and the lending

February 28, 1985

institution-90 per cent and 10 per cent respectively. Here again, the sharing formula can be changed by order in council, so that the Minister will not have to come before Parliament to ask for amendments.

Similarly, the ceiling on the over-all amount of the loan under the program can be changed.

In my opinion, that is enough to create uncertainty among people who might benefit from this program. How can anyone seeking a loan repayable over a term which might run to ten years not be concerned over the possibility that the loan conditions may be changed while it is still outstanding?

I suggest that the Government, by creating such uncertainty, is going against its own policy, which is to favour the private sector.

Yet it would seem that the Government has given up about job creation, relying instead on the private sector to pick up the ball. It is rather strange that the Government has chosen to limit the benefits available to small business-the major source of new jobs in Canada-under the small businesses loans program.

To sum up my remarks, Mr. Speaker, I can say that we agree to have Bill C-23 referred to the committee because we feel that it does have a few good points. However, we will try to improve this measure and delete those provisions which we think will not serve the interests of small business in Canada.

Mr. Speaker, those are the few remarks I wanted to make on behalf of my Party.

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Marcel Danis (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Progressive Conservative

Mr. Deputy Speaker:

Is the House ready for the question?

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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?

Some Hon. Members:

Question.

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

Marcel Danis (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Progressive Conservative

Mr. Deputy Speaker:

Mr. Stevens, seconded by Mr. Hnaty-shyn, moves that Bill C-23, an Act to amend the Small Businesses Loans Act, be read the second time and referred to the Standing Committee on Regional Development. Is it the pleasure of the House to adopt the motion?

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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?

Some Hon. Members:

Agreed.

Topic:   GOVERNMENT ORDERS
Subtopic:   SMALL BUSINESSES LOANS ACT
Sub-subtopic:   MEASURE TO AMEND
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Motion agreed to, Bill read the second time and referred to the Standing Committee on Regional Development.


OIL SUBSTITUTION AND CONSERVATION ACT CANADIAN HOME INSULATION PROGRAM ACT MEASURE TO AMEND

PC

John Wise (Minister of Agriculture)

Progressive Conservative

Hon. John Wise (for the Minister of Energy, Mines and Resources) moved

that Bill C-24, an Act to amend the Oil Substitution and Conservation Act and the Canadian Home Insulation Program Act, be read the second time and referred to the Standing Committee on National Resources and Public Works.

Oil Substitution Act

Topic:   GOVERNMENT ORDERS
Subtopic:   OIL SUBSTITUTION AND CONSERVATION ACT CANADIAN HOME INSULATION PROGRAM ACT MEASURE TO AMEND
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PC

John Horton McDermid (Parliamentary Secretary to the Minister of Energy, Mines and Resources)

Progressive Conservative

Mr. John McDermid (Parliamentary Secretary to Minister of Energy, Mines and Resources):

Mr. Speaker, Bill C-24 provides for the termination of the Canada Oil Substitution Program or, in the jargon of this place, "COSP", on March 31, 1985, and for the phasing out of the Canadian Home Insulation Program, or "CHIP", by March 31, 1986.

It is essential, Mr. Speaker, that Parliament should weigh the issues involved when such programs are created and it is also essential that Parliament should weigh the issues involved when the time comes for such programs to be withdrawn. I do not believe that anyone has worked harder to establish this principle than the Minister of Supply and Services (Mr. Andre). You may not remember, Mr. Speaker, though many in this House will, that four years ago the Hon. Member for Calgary Centre, now Minister of Supply and Services, challenged an attempt by the Liberal Government to escape Parliament's scrutiny of these very programs. At that time he obtained a landmark ruling from Madam Speaker that these two Acts, and eight other spending items, had been brought improperly to the House as part of non-debatable appropriations. As a result of the ruling, the Government of the day was forced to introduce separate Bills to create COSP and to extend the life of CHIP. I am pleased to be acting in the spirit of that decision by introducing legislation so that the amendment of these Acts can be properly debated in this House of Commons.

The Government's intention to make these changes was announced by my colleagues, the Minister of Finance (Mr. Wilson) and the President of the Treasury Board (Mr. de Cotret), last November 8. Since then we have all had the chance to assess the reaction to these plans. I think it is quite clear that the people of Canada, as well as those involved in providing materials, equipment and services for residential oil substitution and energy conservation, acknowledge that outright consumer grants for these purposes are something this Government of Canada can no longer afford. A large potential exists for further oil substitution and energy conservation in the residential sector, and the pursuit of that potential remains an important priority for Canada. But at a time of restraint the Government must find less costly ways to support these objectives. I will return to this subject later in my remarks.

Under the off-oil program introduced in 1980, taxable contributions of up to $800 were provided towards the cost of converting oil heating systems to natural gas, electricity and propane, as well as to wood and other renewable energy resources. The existing legislation provided for a termination date of December 31, 1990 for the program. The amending Bill changes this date to March 31, 1985. The Minister has provided a limited exception which will allow applicants a further three months, until June 30, 1985, to complete their conversions if they had signed contracts prior to the November 8 announcement and if they faced difficulties in getting the work done by March 31. She has also waived the need for inspections to be completed by March 31, in recognition that backlogs of inspection requests may incur in some areas.

February 28, 1985

Oil Substitution Act

We in the Ministry of Energy, Mines and Resources have received a number of representations proposing that three or four or five extra months be allowed to complete conversions in respect of commitments signed by applicants before March 31 of this year. It has been argued that it is impossible to convert to natural gas between November and April, or in any event more costly to do so than during warm-weather months. Both gas and electrical utilities have expressed concern that the pressure to get the work done by March 31 may adversely affect work quality. In some cases, because of limited inventories of equipment, less than optimal systems may be installed.

We were sympathetic to these concerns and gave serious consideration to an extension of the period for eligible conversions into the summer. The Minister concluded, however, that a general extension could not be permitted in view of the additional program costs involved. For example, a minimum useful extension of three months only, to June 30, would increase cost outlays in the 1985-86 year by up to $35 million. I think that is a relatively conservative estimate. This would reduce by more than one-third the program savings that the Minister has pledged in respect of COSP toward the deficit reductions announced by the Minister of Finance and President of the Treasury Board.

I would now like to comment on the CHIP program. That program provided taxable contributions of up to $500 towards insulating and draft-proofing measures in existing homes. It was announced in 1977 and the Act provided for its termination date at the end of 1987. The amending Bill provides for a two-stage phase-out under which the Government's share of eligible costs is reduced to 33!6 per cent from 60 per cent effective January 1, 1985, and the program comes to an end on March 31, 1986. I emphasize that in these final 15 months of CHIP, the maximum contribution is unchanged at $500. The Minister has provided an extra year for CHIP beyond the termination date for COSP, in recognition of the fact that suppliers and installers of residential conservation materials across Canada need the time to prepare for the withdrawal of CHIP.

The end of the program has been anticipated for some time by industry and government. For example, the reduction of the contribution rate to 33!6 per cent is a natural and important step which follows an earlier reduction of the rate for materials to 60 per cent from 100 per cent.

Moreover, homes have been admitted to the program sequentially on the basis of their date of construction. The process is now in its final stage. The last group to become eligible, the 1.3 million homes built between 1971 and 1977, will have had two years to use the program by the time it concludes next year. That further period will also be helpful to the many small contractors across Canada who are working in trade that is still relatively young. They have rarely had notice of changes in CHIP and this phase-out period gives them some time to expand scope of the conservation work they can do and

improve their ability to explain the advantages of conservation to householders.

In this respect we are indebted to the National Insulation and Energy Conservation Contractors Association, which represents insulation installers across Canada, for its advice and support. The Association recognized early last fall that CHIP might have to be discontinued and volunteered options for an orderly conclusion of the program. Its suggestions were very helpful to the Minister in preparing recommendations to her Cabinet colleagues. The Association was later able to identify the likelihood that backlogs of orders for work and material would arise in advance of the change in the contribution rate on December 31. The Minister was pleased to accept the modification which permits applicants to sign for the work by December 31 but have it performed in the first three months of 1985 at the 60 per cent rate. More than 80,000 applicants have taken advantage of this provision.

Let us look at the budgetary savings because this is important. We estimate that CHIP and COSP expenditures in the current fiscal year will total almost $350 million. The termination of COSP and phasing out of CHIP will provide continued savings from the appropriation levels for the two programs of $180 million in 1985-86 and $315 million in 1986-87. These are major and necessary contributions towards reduction of the federal deficit. Our decisions have been made not just because we must address the deficit. Our decisions recognize that the market-place has changed and that the Government's role with respect to oil substitution and energy conservation must change with it.

COSP was introduced in October, 1980. We all remember that at that time OPEC dominated the world's view of the future for oil. It was expected to control world supply and push world prices much higher. Almost 40 per cent of Canadian homes were heated with oil. Most of those home owners had little knowledge of oil substitution. Residential oil substitution was identified as a priority and a large consumer grant was introduced as the instrument to make it happen.

It is difficult to establish how much of the activity which has taken place since 1980 can be credited to COSP. Almost one million units have been converted under the program representing oil displacement of some 32,000 barrels a day, which is a very significant amount. Over this period the financial benefits of oil substitution have become more familiar to home owners. A trend has been established toward installation of medium and high-efficiency natural gas furnaces which are being made available at steadily declining and more competitive prices. Dual energy systems such as plenum heaters and heat pumps are offering savings and comfort to home owners and advantages in load management to the utilities.

A broad range of controlled combustion wood-burning systems are now available. Hundreds of thousands of homes across rural Canada use wood as their only source of space heating and obtain their supplies at a very low cost. To preserve a share of the residential market, oil dealers and manufacturers of oil heating equipment are marketing new high-efficiency oil furnaces and retrofit packages for existing

February 28, 1985

oil furnaces. Everyone is getting in on the conservation game and we applaud that. In this mature and competitive environment I anticipate a continuing rapid decline in the residential use of oil after COSP is withdrawn.

CHIP has provided assistance toward conservation measures in more than 2,500,000 homes. Significant energy savings averaging some 17 per cent have been achieved in the homes that use CHIP. An evaluation of the program has established that CHIP played an important part in achieving those savings. It is estimated that the equivalent of 28,500 barrels of oil a day are being saved as a result of work done under CHIP. Between CHIP and COSP we are talking about some 60,000 barrels of oil. As with oil substitution, the benefit of energy conservation and reduced heating bills and increased home comfort are much more fully understood by Canadians now than seven or eight years ago. Installation specialists now certify their work to accepted national standards.

However, there remains a significant gap between understanding and action on the part of both consumers and industry. Consumers still lack confidence in the quality of work and the advice that they are offered. They see conservation and heating system technologies as being complex and doubt their own ability to sort it all out. Major technical issues remain to be solved and the work standards now in place need to be refined, expanded in scope, and backed up by the installer training program. These are very real problems, but they are not resolved by a Government grant, as I think everyone understands.

Reducing the use of oil and energy in Canada remains a very important national objective of the Government. Very large potentials for savings exist, not only in the housing stock but in other sectors as well, including commercial and industrial buildings and processes, buildings operated by various institutions, and the federal Government's own buildings and operations. We know that in many cases it can be less costly to invest in conserving energy than to bring on the same amount of new supply. In the existing housing stock the average potential for savings from cost-effective conservation measures has been estimated at 30 per cent. For millions of Canadian households it will be a very attractive investment, with a rapid return of dollars spent, to insulate, to draught-proof, and improve or convert their heating systems.

We cannot and should not continue to expect the public treasury to use borrowed dollars for the payment of consumer grants to try to ensure that this energy investment takes place. A more limited and balanced role for Government is clearly preferable, sensitive to the information needs of energy users and suppliers, to the technical problems still unresolved, and to opportunities for further development of energy use today.

The legislation before the House today is therefore a necessary step, but only a first step in reorienting government programs in these sectors. The Minister has also directed that all other programs of the Department of Energy, Mines and Resources in the areas of conservation and renewable energy are to be thoroughly and critically reviewed. She has directed her officials to conduct a parallel review of these program

Oil Substitution Act

areas with provincial Governments in order to identify instances of waste and duplication of effort. Meetings have already been held with all provinces and territories.

Officials, the Minister and I have also been actively soliciting industry views on energy use in all sectors and on the respective roles that should be played by government in the private sector. We look forward to further discussions with provincial Ministers. The Minister will be bringing recommendations to her Cabinet colleagues for future program directions. We intend to review federal-provincial teamwork in energy programs and activities. We will work in co-operation with the private sector and achieve a more selective, disciplined and effective deployment of resources to effect energy use in Canada.

I want to go into some detail about the very substantial public expenditures involved in these programs to date. Over the past five years, CHIP has paid out over $530 million in grants to consumers. The gross cost of CHIP to the federal Government over the past seven and one-half years has been over $855 million. The total budget expenditure to the end of the calendar year 1984 is some $1.4 billion, of which perhaps $300 million has flowed back to the federal and provincial Governments in the form of tax on those grants. At present, rates of program activity grants under the two programs represent a gross annual cost to the federal treasury of some $300 million.

COSP has mainly been an oil substitution program contributing half of the eligible material and labour cost of converting space heating and water heating systems from oil to non-oil energy sources. The maximum grants for single family units and non-residential buildings is $800. The sliding scale of grants results in smaller amounts per unit for conversions of apartment blocks and other multi-family dwellings.

In Prince Edward Island, Newfoundland, the Yukon and Northwest Territories, COSP grants can be used for off-oil measures as well as insulation, draught-proofing, and furnace improvement measures in recognition of the fact that there are few reasonably priced alternatives to oil.

COSP has paid grants toward conversion or conversion measures in about 900,000 units, including 880,000 housing units. The oil savings which have resulted from that activity are estimated at approximately 30,000 barrels per day, which is equivalent to the output of a Syncrude plant. When it is put into those terms, it is quite significant.

Electricity accounts for 41 per cent of the units which have received COSP grants and gas accounts for 35 per cent. Some may have thought it would have been the opposite. Surprisingly, wood accounts for 20 per cent and the remaining 4 per cent represents propane, a very small number of conversions to other sources and conservation measures.

Provinces have been invited to limit the alternatives to oil eligible under COSP so as to conform with provincial energy-use policies. In most cases provinces have been prepared to let the program operate on a neutral basis.

February 28, 1985

Oil Substitution Act

In Saskatchewan, Alberta and British Columbia, the provincial Governments have tilted the application of the program toward natural gas, which appears to conform with public preferences. In these provinces conversions to gas have represented 62 per cent of all conversions. It should be noted that past policies of federal and provincial Governments, together with the low price of natural gas and its public acceptance, led to significant conversion to gas in the west even before the introduction of COSP. In Alberta, urban and even rural gasification was almost complete by the end of the 1970s, as my colleague sitting to my right knows.

Manitoba may have made the greatest progress in the course of the 1980s to adopt gas and electricity for home heating. It is estimated that 24,000 of the 54,000 Manitoba homes on oil in 1980 have converted since then.

But COSP was aimed mostly at Ontario and Quebec, which in 1980 accounted for 73 per cent of residential oil use and for 73 per cent of the estimated realistic potential for conversion from oil. In fact, 75 per cent of the units converted under COSP have been in these two provinces. While these provinces represent by far the greatest potential for oil substitution in this decade, there are marked differences in the energy preferences of these populations. Gas has been preferred to electricity in Ontario by a margin of three to one. In Quebec, electricity is preferred four to one over gas. Moreover, total conversion activity has been significantly higher in Quebec where both electric and gas utilities have offered non-taxable cash grants for conversions in addition to COSP grants.

Only 11 per cent of COSP grants over the past four years has gone to the Atlantic Provinces, although they represent 15 per cent of the eligible housing stock. The region lacks access to natural gas, and for home owners in most areas electricity is at least as expensive for home heating as oil. The conservation assistance offered by COSP in Newfoundland and Prince Edward Island has had rather limited take-up, and while conversions to wood have been popular, demand now is approaching saturation.

With respect to the experience under CHIP, the program has provided grants up to S500 per unit toward insulation and draught-proofing measures in about 2.5 million units. That represents about one-third of the eligible housing stock built before 1977. The program has been dominated by attic insulation activity and an installer force has grown up specializing in blowing insulation into attics by mechanical means. As demand for this measure has approached saturation, the industry has begun to diversify its service by including a comprehensive caulking and weather stripping, insulation of basements and to some extent insulation of walls. Energy savings attributable to work done under CHIP are estimated at the equivalent of 28,500 barrels of oil a day.

The take-up of CHIP by region reflects the length of time homes in various provinces have been eligible and the pattern of energy costs. On both counts, this has resulted in the most extensive use of CHIP in Atlantic Canada. The homes covered by CHIP represents 61 per cent of the eligible housing stock in Newfoundland, 89 per cent in P.E.I. and 91 per cent in Nova

Scotia. The figure drops to 35 per cent in Ontario, 29 per cent in Quebec and 31 per cent on average for the western provinces.

Activity under COSP and CHIP has been significant. The critical issue is how much of the activity can be attributed to the existence of the incentives and how much would have taken place anyway. These are important considerations but extremely difficult measurements to take. A formal evaluation has been taken of CHIP, establishing that the incrementality of the program, the extra activity for which it can take credit, was 29 per cent of total activity.

This is an impressive figure and puts the Government's investment in a favourable light compared with costs of tax concessions or grants devoted to the development of new oil or gas sources. However, the measurement was made when the grant consisted of 100 per cent of the costs of materials to a maximum of $350 and one-third of labour costs to a maximum of $150. This grant structure was fraught with a variety of problems and was changed in 1982 to 60 per cent of both material and labour costs. The incrementality of CHIP has probably declined since that time.

These programs were introduced at times when the progress to reduce energy and oil use was unacceptably low and the savings to home owners poorly understood. In Canada and other industrial countries, conservation is now a much more popular concept and the public is much better informed. Substantial progress has been made in the technology and installers have begun to expand their services to cover a more comprehensive range of conservation measures.

Similarly, public understanding and acceptance of the advantages of oil substitution are now much higher than they were in the 1970s. Competition for conversions between gas utilities and suppliers of electrical systems has been spirited. We need only look at the advertisements by electrical and gas utilities today to see that free entreprise is working well.

Canada must continue to make progress in both conservation and oil substitution: let me make that very clear to the House and the people of Canada. In the residential sector, this past decade has seen the average consumption of energy per household decline by 16 per cent. It is estimated that there is another 30 per cent to go-a 30 per cent reduction in energy use for the average home from such readily available measures as comprehensive draught-proofing, basement insulation and efficiency improvements in heating systems. These future savings would provide good pay-backs for the householder in reduced heating costs and, for the country, total energy savings equivalent to a further 60,000 barrels of oil per day.

[DOT] (M50)

A further substantial amount of residential oil substitution will also make sense for the country and individual households. It will help preserve domestic supplies of oil; that is very important. The major alternative sources-natural gas and electricity-are in abundant domestic supply. Their increased use is supported not only by the federal Government but by the Governments of the provinces where the resources have been

February 28, 1985

developed and whose industries and taxpayers benefit from their consumption. Wood has become another important alternative which will endure as a primary source of space heating in rural areas where supplies can still be obtained at low cost. Exciting new advances have been made in the efficiency of heating equipment, and this new technology is largely Canadian.

Conversion from oil will be practical and attractive for perhaps a further million homes in Canada. Even without a government grant it will offer savings in operating costs which justify the costs of converting. I think that is an important factor.

The over-all impact of COSP has been beneficial and it has obviously helped bring Canada closer to oil self-sufficiency. However, any massive intervention of this kind brings with it problems and distortions. We have heard that from all sectors. From the start there were areas of Canada where alternatives to oil did not provide cheaper home heating. It was no favour to home owners in these areas to encourage them to go off oil. By offering assistance only toward conversion, COSP discouraged the option of oil furnace retrofit in circumstances where it might make more sense than conversion. COSP has set up oil substitution in a kind of competition with conservation for attention and for the home owners' investment dollar, when home owners should be considering both actions as part of a planned approach to home energy management.

Much more can be done to foster such a total perspective to the household energy bill. It is up to suppliers and governments to provide better information on the full scope of conservation and off-oil measures, the sequence and timing for undertaking them, and the cost and savings involved. Conservation and conversion can be among the best household investments available, yielding savings in heating costs which can pay the investment back rapidly and go on providing savings year after year. They can be significant investments, amounting to several thousands of dollars for some home owners. In present circumstances there is no prospect that governments can afford grants or other incentives large enough to cover investments of this size or to pay for a share large enough to guarantee action by home owners.

Grants are not the answer in future, nor should they be necessary. Better alternatives are at hand. We can help ensure that householders, wherever they live in Canada, enjoy access to objective and comprehensive information on what to do about saving energy and how to do it. The more specific information can be made to individual household needs the better. We can continue to pursue solutions to technical problems, refine and expand work standards, and assist industry to improve insulation techniques and marketing. All these things can be done at far less expense than CHIP and COSP, and all of them can be done in co-operation with industry and provincial governments. This is being done now.

Surely this is the direction we should be taking-away from massive interventions and government hand-outs which can so easily prompt arbitrary decisions and invite abuse, toward better quality of work and better decisions by householders to

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reduce the use of energy. This is to what we are committed. I ask the House for its support of Bill C-24.

Topic:   GOVERNMENT ORDERS
Subtopic:   OIL SUBSTITUTION AND CONSERVATION ACT CANADIAN HOME INSULATION PROGRAM ACT MEASURE TO AMEND
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?

Some Hon. Members:

Hear, hear!

Topic:   GOVERNMENT ORDERS
Subtopic:   OIL SUBSTITUTION AND CONSERVATION ACT CANADIAN HOME INSULATION PROGRAM ACT MEASURE TO AMEND
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LIB

Russell Gregoire MacLellan

Liberal

Mr. Russell MacLellan (Cape Breton-The Sydneys):

Mr. Speaker, I thank the Hon. Parliamentary Secretary for his applause. I hope he will listen intently to what I have to say and hang on to every word, so to speak.

I do not think there have been many programs offered by the federal Government which have been of more general help to low-income, unemployed and fixed-income Canadians than CHIP and COSP. They have been of tremendous benefit. These are two of what the Department of Energy, Mines and Resources refers to as direct action programs, and they are in four categories. The first is energy conservation, that is, CHIP. The second is development of renewable resources. The third is the development of alternative fuels; and the fourth is the off-oil substitution program or COSP.

I will say a little more later about the second and third ones, the development of renewable resources and the development of alternative fuels. However, I want to deal first with the two direct action programs and how they are affected by Bill C-24. These programs are aimed directly at the final consumer. In that regard it makes them very special programs. They are aimed at Canadian families and Canadian home owners. When we talk about cancelling programs such as these, we are talking about taking away direct money from the federal Government to the ordinary Canadian family in the ordinary Canadian home.

We have to look at the ramifications of that. What would be the ramifications? First I will refer to CHIP, grants to home owners who invest in residential energy conservation. It provides up to $500 for home owners who wish to invest in home energy conservation. That is extremely important. As of the summer of 1984 it assisted 1.5 million Canadian householders in making their homes more energy-efficient. In 1983 alone it resulted in a reduction in home heating costs of close to $500 million. It has been a tremendously successful program.

The other program, COSP, has been encouraging home owners to convert off oil. It is very important as well. Oil was once an extremely expensive fuel. It is still expensive but not as it once was. It has the potential to be every bit as expensive as it was during the dark days of the energy scare or to be much more expensive than it was then. More than 425,000 Canadian families have benefited from grants up to $800 since the program was introduced in 1980. It has resulted in a redirection of oil consumption of 10 million barrels per year. The number of households heated by oil declined from 42 per cent to 31 per cent in the three years before the summer of 1984.

These two programs along with the Residential Rehabilitation Assistance Program, which was cut by 25 per cent on November 8 in the economic and fiscal statement, have formed the backbone of assistance to Canadian families through funding to households. I think the Government is missing the tremendous importance of these programs. This is

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extremely unfortunate both for Canadians and for the Government.

Let us look at the S500 which went to each family under COSP. We realize they were tremendous. Each home owner received those amounts under those two programs. It cannot be left there. The benefits of these two programs went well beyond the grants, mainly because the federal Government sponsored the programs. In this case, the Canadian Home Insulation Program and the Canadian Oil Substitution Program do not deal with members of boards of directors of the multinational oil companies. You are not dealing with people who work in the energy industry day in and day out; you are dealing with average Canadians who are concerned with what energy will cost them for their homes and automobiles in particular. This is tremendously important to keep in mind. They want to know how they can reduce their energy costs.

With a growing number of unemployed and a growing percentage of our people over the age of 65 on fixed incomes and the wage settlements in this country falling behind, it is becoming more important how people can redirect these energy costs to other tremendously important costs, such as rent, food and clothing for themselves and their children. That is tremendously important.

Look at this program other than just from the funding aspect. How was this program delivered? It was delivered by the federal Government with a tremendous amount of information. It provided information not only on the expense of oil, but on the cost of competing fuel sources. Most important, it supplied confidence to the Canadian consumer because the federal Government was involved in it. The federal Government provided brochures. It provided information and other sources. Very important, it provided a toll-free telephone inquiry service so that the average Canadian could call the federal Department of Energy, Mines and Resources and get information.

1 do not think there are too many Members of this House who have not come in contact with Canadians who have taken advantage of this program. As Members of Parliament and before they became Members, there were a lot of problems that came into play. Most important were people trying to take advantage of this program. The Government required, for example, that furnaces be CSA approved. An awful lot of people came to me who said: "I bought this furnace from so-and-so because he assured me that it was a great furnace, and now I find that I cannot collect the $800". That is a tragic situation. The person literally could not afford to pay that $800.

That person went into the program on the strength of what he or she had read and the fact that the Government provided information. Their attention was drawn to it because they were going to get $800. What kind of attention is the ordinary Canadian going to give to literature that does not have that very important carrot of the $800? This is a devastating opportunity for the average Canadian to be taken advantage of

with regard to oil and energy conservation now that the Government has backed out of these two very important programs.

What will happen? The Government says everything will be all right, that people will still be able to convert without these programs. Anybody can convert, if that is all there is to it. They are free to convert, but what will be their financial position? What will be their knowledge of the possibilities about which we have been giving information over the past seven and a half years with regard to the Canadian Home Insulation Program and the Canadian Oil Substitution Program? What will be the situation?

The Government says that the people of Canada are sophisticated and they know the options with regard to conservation. A lot of people do. The reason they know is because they took advantage of both these programs. Those who have not taken advantage of the programs do not have the same information. The people who have taken advantage of the programs have the information, but not those who have yet to take advantage of them. That is a tremendously important factor of which we must be cognizant.

The Minister said that both CHIP and COSP, the Canadian Home Insulation Program and the Canadian Oil Substitution Program, have served their purpose and are no longer needed to encourage people to become energy conscious. I do not agree with that. The facts do not indicate that. If any Ontario Members are interested, they can call Consumers Gas in Ontario and get the facts.

Between October 1, 1983 and February 28, 1984, 4,814 people took advantage of the Canadian Oil Substitution Program. Between October 1, 1984, and February 26, 1985, 17,912 applications have been received by Consumers Gas in Ontario. They have to try to put in these gas systems before March 31, 1985. Within one month they have to put in these systems. Of those 17,912 applications, 8,889 came in January alone. That is the highest number of applications that has ever come to Consumers Gas in Ontario in any one month period.

The Government says that people knew the program would end and that is why there is this rush. That is true to a certain extent. Word got around and that increased the number of applications. But these people are left hanging because of the way the Government is doing things. The Government has not taken into consideration very important factors. It has reduced the amount of the Canadian Home Insulation Program from 60 per cent to one-third as of January 1. That alone is damaging enough to low-income Canadians who cannot afford that difference. Now it is going to take away the whole program if a person did not make his application before November 8, 1984; or, if he made the application after November 8, if the system is in place before the end of March, 1985.

What have we done? Consumers Gas now has 50 to 55 crews working seven days a week trying to service these requests. They are trying to put gas lines in frozen ground covered by snow. If a deadline is going to be set, it should be

February 28, 1985

set in the summer or fall when gas lines can be installed in unfrozen ground that is not covered by snow.

Not only that, during these months the suppliers of furnaces are not making furnaces. They are making air conditioners for the summer season. How are you going to get the gas furnaces that you need to service these applications? You cannot. A lot of the suppliers of furnaces have tried to retool and manufacture furnaces, but there is complete and utter confusion. They still have to make the air conditioners for the summer season. By putting this deadline at the end of March, it completely frustrates the gas suppliers and Canadian home owners who want to take advantage of these programs. Those who could get systems in the summer cannot get them now because of the difficulty in installing these systems at this time.

I would very seriously and strongly request that the Government extend the deadline for the Canadian Oil Substitution Program by six months. This will give people who now want it a chance to have the system put in. It will give the installers and suppliers of gas and equipment the chance to instal this equipment properly at a time of year when it can best be done. If the Government does not do this, it is just twigging the noses of Canadians. Obviously this matter has not been thought over by the Government. I think this is a tremendously tragic situation. There is going to be a very cruel April Fool's Day joke played on Canadians when they find out that they are not able to benefit from this program.

Letters are already being drafted by Consumers Gas. Com-sumers Gas has to be able to notify some of these people beforehand that it cannot possibly service these applications. What will the cry be from Canadians who wish to take advantage of this program when they receive a letter telling them they cannot possibly get this system because it cannot be installed by the end of March of this year? That will be a most unfortunate situation. I think the Government will be hearing a lot more about that from Canadian home owners.

The Government does not seem to be giving any consideration to the average Canadian or to the direction in which the country is going regarding energy policy. The Government has completely laid waste the alternate energy program and the concept of renewable fuels. The Government has laid off 540 people at Atomic Energy of Canada in Mississauga and Montreal and this will effectively mean the end of the Candu reactor program other than sales of reactors to possible clients of which the AECL already has knowledge. There will be no meaningful drive to recruit new markets for these Candu reactors because AECL has only 50 per cent of its staff. It lost 600 people in 1982 and now it is losing another 540.

Topic:   GOVERNMENT ORDERS
Subtopic:   OIL SUBSTITUTION AND CONSERVATION ACT CANADIAN HOME INSULATION PROGRAM ACT MEASURE TO AMEND
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PC

John Horton McDermid (Parliamentary Secretary to the Minister of Energy, Mines and Resources)

Progressive Conservative

Mr. McDermid:

Your Government laid people off too.

Topic:   GOVERNMENT ORDERS
Subtopic:   OIL SUBSTITUTION AND CONSERVATION ACT CANADIAN HOME INSULATION PROGRAM ACT MEASURE TO AMEND
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LIB

Russell Gregoire MacLellan

Liberal

Mr. MacLellan:

Sure, we know who laid them off. I have a calendar. However, we must think of the industry.

This is an example of where the attention of the Government is directed. Before the layoffs in 1982 there were 177 managers for 2,500 employees at AECL. In 1985 there are

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223 managers for 1,800 people. The workforce has declined by 600 people and the number of managers has risen by about 50. The consideration of the Government is not for the ordinary working Canadian at all but for the big brass in the Crown corporations.

I do not think that any aspect of energy funding suffered more than alternative energy. The entire Energy Division of the National Research Council is to be phased out as rapidly as contracts within industry will allow. Within the National Research Council's Energy Division, 61 person-years, of which two-thirds are professional and one-third are support staff, are involved. In about two years' time there will probably be only five people working in that division. Many of these people being laid off are professional people who have been with the National Research Council for 20 or 25 years.

Much of the alternate energy program is in jeopardy because the Government is saying that the private sector can take it on. The private sector cannot take it on because the private sector is comprised of about 500 small to medium-sized companies which do not have the capital to take on this program. What will happen to the program? It will disappear.

Where is the thinking for the future? I am not saying that we are experiencing an energy scare right now but for heaven's sake, we should take advantage of this time to look at the possibilities for the future. We should take the time to study and make sure that Canadians are well served by this Government. We should take the time to look at the other possibilities.

I can mention a few statistics. I think these are important not for the figures themselves but for the trend that they show. With regard to crude oil, Canada supplies about 1.2 per cent of the world's crude oil but it produces 2.6 per cent of the world's crude oil. The ratio of production to supply in terms of years is about 14 years. I admit that that does not take into consideration frontier oil which does not have a supply and delivery system, nor does it take into consideration the oil sands and heavy oils. As well, it does not take into consideration that other oil supplies will be found. At the same time, this should not give the Government the confidence that it can do away with the possibility of finding competing fuels for the future. We need about 50 years to implement an alternate fuel structure. We need about 50 years to do the work, the studying, the research and the testing. That is a long period of time. That is a tremendously important factor which the Government has disregarded.

The 1985-86 cuts at the National Research Council will mean a reduction of $20 million in contracts to the industry. Not only will this affect industry cash flow but it is estimated that it could result in a direct loss of about 1,000 jobs in the country. Small firms only have so much available capital. If they are faced with the need to do R and D at this time when interest rates are rising and if they are faced with choosing between doing R and D and dealing with the long-term financial feasibility of their businesses, what option will they take? They must look after the financial strength of their

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businesses. They cannot afford to take on an additional financial burden.

In addition, what about the possibilities of alternate energy systems for underdeveloped nations? Some countries in the world have to start thinking about the problems of underdeveloped nations. With the hunger that is being experienced in these countries, how can they continue to pay the price of oil indefinitely? We should be thinking about them. There are certain alternate energy systems that are adaptable to these countries and those that are not now adaptable will be adaptable within a few years if attention is paid to this program. However, we are completely ignoring this option.

As well, we in this country are going to lose very valuable technology. Without R and D, the experimentation will not be done in Canada but in other countries. We will fall drastically behind in our knowledge of these alternate fuels and the renewable resource aspect of energy.

The economic returns in the solar sector exist in the flat plate solar collection systems. This is an industry in which, prior to 1980, the majority of the small Canadian solar thermal market was served by imported equipment. As a result of the determined effort of the former Liberal Government, not only has a solar industry been created in Canada which supplies close to 100 per cent of its own growing domestic market, but this industry had export sales in 1984 of $6.8 million. That will be completely thrown away.

Topic:   GOVERNMENT ORDERS
Subtopic:   OIL SUBSTITUTION AND CONSERVATION ACT CANADIAN HOME INSULATION PROGRAM ACT MEASURE TO AMEND
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PC

John Horton McDermid (Parliamentary Secretary to the Minister of Energy, Mines and Resources)

Progressive Conservative

Mr. McDermid:

Why?

Topic:   GOVERNMENT ORDERS
Subtopic:   OIL SUBSTITUTION AND CONSERVATION ACT CANADIAN HOME INSULATION PROGRAM ACT MEASURE TO AMEND
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February 28, 1985