May 14, 1993

LIB

Mark Joseph Assad

Liberal

Mr. Mark Assad (Gatineau-La Lievre):

Mr. Speaker, first of all, I would like to congratulate my colleague from Kenora-Rainy River for his explanation of how to help small and medium-sized businesses in this country. This is a major concern in our party because we see that the small-business sector is the driving force of this new economy we have to put in place in Canada.

I come from a family of entrepreneurs, not big ones but rather small ones, so to speak, and we have had this kind of problem in the past with getting financing from the bank to start up a business. We know the frustration. We know about the paperwork and the banks' lack of understanding of small and medium-sized businesses in our society.

The figures speak for themselves, as we say, and that is very obvious when we see that 80 per cent of jobs in this country are generated by small and medium-sized businesses. These past few years, they have even created 90 per cent of new jobs in Canada. So, knowing that one sector of our economy, namely small and medium-sized business, accounts for 90 per cent of the new jobs created, one would think that the government would pay more attention to it. But that is not what has happened.

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There is another statistic that seems almost appalling to me: 70 per cent of the business loans made by banks are to big businesses like multinational and transnational corporations; barely 30 per cent of loans go to small and medium-sized businesses, while they create over 90 per cent of the jobs. If these figures are not telling enough for a national government, I wonder what it is going to take. Sure, banks are there to make a profit. No one is disputing the fact that they are interested in making profits. But when you look at the role of a national government, we have the power to tax and to legislate. All Canadians would benefit from the government ensuring a fair balance nation-wide, but this is not what happens. We hear things such as: "The market will decide", or "we will let the market conditions decide-", but it does not work that way. We have ample proof of that.

We not only need a new policy but also a new determination and the political will to say to the banks: Now, you must think about the well-being of all Canadians. It goes without saying that small and medium sized businesses represent, for Canadians in general, the best avenue to improve our economy and to provide jobs for those who are qualified and who are looking for work. This is what our role should be.

Like my colleague from Kenora-Rainy River indicated, if necessary, we will legislate on banks and we will tell them that their most important role is to have funds available for small and medium sized businesses. It cannot be left up to the manager of each bank or to committees to decide whether a small or medium sized business will get help. They look at their balance sheet and then the paperwork follows. Things can no longer be done in this fashion. We need a very coherent and easily understood policy for everybody, and one which these people can benefit from.

Too many small and medium sized businesses have difficulty getting a line of credit from a bank, as well as a loan. Too often, when these businesses experience the least bit of problem, the bank will immediately insist that it gets paid, instead of proposing a plan which could be based over a year or two, in order to give the business a chance to increase its sales or to restructure its activity to survive. Let us not forget that jobs are at stake. But this is not what we see. We see too many small and medium

sized businesses which are literally at the mercy of banks and which are forced to dismiss people or lay them off. This is not the way to solve our problems.

Small and medium sized businesses also play a vital role in the field of high technology, inventions and innovations. There is ample proof that this sector of our economy is very much at the forefront. Of course, if we want to be part of a global market-this is the buzzword around here, we talk about globalization-we must get going. I submit that the time has come to take drastic action to cure our big problems, even if this means that we must do things which may be considered radical today.

In the past, there were changes that seemed very radical at the time, particularly during the depression, but which would be considered quite ordinary today. The big thing we have to do today is look at that part of our economy which is most beneficial for our country. Obviously, as the figures show, small and medium-sized business will certainly be the sector of our economy that will get us out of this depression. Some people would have us believe that we are in a recession and that we are getting out of it. I am sorry, but there is no evidence of that. The facts show that we are in a depression.

Small and medium-sized business can get us out of this depression. How will we do it? By giving them what they need most, making funds available to them. It does not necessarily mean asking any comer, "Do you need money? Well, here is some." That is not what we are asking. We are asking the government to set rules and insist that the banks implement this new policy. We will insist, we can do it and do not forget, that we have the power to tax, the prerogative to tax and to legislate. The government should not be at the mercy of the banks. Really, it should be the opposite, because we represent the whole country.

The figures from last year showed that small and medium-sized businesses failed more than in the past. The chartered banks lost nearly $600 million in bad loans. However, they lost $2 billion on one single customer. The chartered banks, with some customers, lost $2 billion on Olympia & York or the Campeau Corporation, over three times as much as on all small and medium-sized businesses, which have far more employees than those companies.

May 14, 1993

So you see, Mr. Speaker, there is no balance, but it is our role here to ensure balance in our economy. Until this balance is established, we will have to believe in miracles, that overnight, by some chance, the economy will suddenly recover. That is not true; that is not what is lacking. It will take policies, but especially, as I often repeat, political will so that our financial institutions, especially our banks, think of our whole country and all our fellow citizens, to make the economy recover.

We have great abilities. We must invest in people so that they can acquire technical knowledge or trades, and that is our next step. One thing the next government will do, and we will be in power, is to inaugurate a new era in our country's economy, because the banks will have to co-operate with the government to ensure that small and medium-sized business is recognized for once as the engine of our economy.

If this change is not made in the next few years, if radical policies are not put forward, we will be at the mercy of our financial institutions. We will be at the mercy of our southern neighbour who tends to monopolize everything. It is essential that we have the determination and conviction to represent all our fellow citizens, not the big interests, but the interest of every Canadian, to give them the opportunity to get a job and to progress in our country.

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Subtopic:   ALLOTTED DAY, S. O. 81-THE ECONOMY
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LIB

Robert Daniel Nault

Liberal

Mr. Robert D. Nault (Kenora-Rainy River):

Mr. Speaker, I would like to ask my colleague a very important question. It is one that I have been thinking about over the last number of years.

When members of Parliament go back to their ridings people do not let them off the hook very easily regarding government policy. Members on the government side know that when they go back to their ridings they are accountable.

When members get there they have to explain to the people why the government implemented particular legislation and why it went in a particular direction with regard to the economy or the country in general.

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One of the concerns I have had, being from northern Ontario, is that all the policies and all the regulations of the banks with regard to northern Ontario are made in Toronto, Montreal and the major centres.

There are 7,000 credit managers who basically are not calling the shots at all. I am asking a very legitimate question. What are they doing there then? Are they just pushing paper? What are they doing if they do not have the ability to go down the street to talk to a businessman or woman and say to them: I know you, I have seen your record, and you do not fit the criteria from Toronto but I know you are capable of doing it because I have seen you in action?

I want to mention a quote by a friend of mine who wrote to me about a particular statement a bank manager made. The bank manager said that there are a lot of decisions made regionally. This is what my friend said: "You state that things are handled on a local level. Last year our line of credit was reduced. When we questioned this we were told that the local branch's hands were tied and that Burlington had the final say. We phoned the Burlington office and were told that it does not deal with customers. A number was given for our area and then we made arrangements with the person there to talk to him".

Would my colleague not think that it would be more appropriate for these people to have a little more authority and the ability to make decisions in regions like northern Ontario, which are much different than the region of Toronto?

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LIB

Mark Joseph Assad

Liberal

Mr. Assad:

Mr. Speaker, the hon. member's question is very relevant. I remember when I was in the National Assembly that on several occasions, when we were talking about regional development, it was said that when businesses in remote areas needed capital, they were at the mercy of analysts from Montreal or somewhere else. Businesses in remote areas face some very specific problems. Of course, the people who analyse the files in Montreal are not familiar with these problems or with local attitudes, so they cannot really say whether a business will be successful. They look at the figures and the profit margin, and that is it. There is a lot more to be considered however.

May 14, 1993

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The hon. member for Kenora-Rainy River is right. Our new policy will have to acknowledge the fact that remote areas have specific needs, and we must find a way to ensure that funds are available for these regions. That is all they want. They do not want main offices to locate in remote areas, but they do want funding to help develop their economy. If capital is not available, they cannot expand, which applies to businesses in urban centres as well.

To answer the hon. member's question, an analyst 500 miles away is certainly in no position to predict or determine whether a business will be successful.

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NDP

James Capsey (Jim) Karpoff

New Democratic Party

Mr. Jim Karpoff (Surrey North):

Mr. Speaker, I am pleased to speak this afternoon on a motion concerning how we can support and encourage the growth and development of small and medium sized business in Canada.

There are a number of aspects to this. I want to review where we are in terms of our economy and job creation as they relate to small and medium sized businesses compared to the job creation that has taken place in large corporations.

At the moment we have a situation in Canada where unemployment is in excess of 11.5 per cent. In some provinces it is close to 20 per cent. Even the official unemployment rate is underestimated by at least 25 per cent to 30 per cent because people have withdrawn from the active labour force, have become discouraged and are no longer considered within the labour force.

As of March of this year, there were 2.6 million Canadians receiving social assistance. This is a phenomenal number of people now depending on public assistance. Of course the reason is as a result of two things. One is the growing unemployment and the second is the diminishing availability of unemployment insurance.

When the government dealt with the economy in a manner that was going to create unemployment in order to protect unemployment insurance, it of course tightened the rules and cut down the benefits in order to dump people off unemployment insurance on to income assistance. That simply drove up our income assistance cost in the country which the government was also

responsible for on a 50 per cent basis. Then it brought in legislation which limited its responsibility to Alberta, British Columbia and Ontario.

Poverty in this country has now reached 4.2 million people who are living below the poverty line. It is appalling that in this country there are 1.2 million children are living in poverty.

Bankruptcies are dramatically up over the last number of years. The rate of bankruptcies continues at a pace of over 7,000. Bankruptcy is not just a statistic. It is a real tragedy for individuals and for companies.

The economic growth forecast is down. The Canadian dollar has fluctuated. The debt and the deficit continue to climb. Last year at this time we were being told by the Minister of Finance that the deficit would be $28 billion. It turned out to be $35 billion. He was out $7 billion, 25 per cent. Any other Minister of Finance who was 25 per cent out in his estimates would have been asked to resign.

Our deficit has climbed to $460 billion, including a $10 billion oversight that the finance department forgot to count previously.

There are many things happening in terms of economics as it impinges upon medium and small businesses. With regard to job creation, it is clear that over the last number of years it is really the small and medium sized business that have been the generator of jobs. Over a 10-year period, companies employing less than five people have been the biggest generator of jobs; 1,200,000 jobs. Those employing less than 20 people, between 5 and 20, created another 650,000 jobs. Actually corporations that employed over 50 people over the last 10 years have created less than 375 jobs.

We know that most foreign takeovers have not resulted in investment in new jobs in this country. They have simply been taking over existing companies, often closing those companies and decreasing the pool of employment rather than increasing it.

Medium and small businesses have generated the kind of economic activity that is necessary to create jobs. There are many things happening to medium and small businesses that are as devastating as some of the inadequacies of our lending institutions in providing them with a line of credit.

May 14, 1993

I look at my riding of Surrey North and at what has happened to a number of businesses in that community over the last three or four years. Free trade in particular has been devastating to them. We lost a big winery. Our last food processors in the lower Fraser Valley have closed. That threatens all of our small agricultural businesses and farms that specialized in growing cannery vegetables and fruits.

It has had a tremendous impact on employment. It had a ripple-down effect where industries such as canners and processors closed because they can move across the line cheaper and ship back in. It removes not only those jobs but transportation jobs as well as all of the stability of market that has been built into the small food producing farms.

We then have big companies like Hawker Siddeley which owns a subsidiary in my riding called Kockums, a manufacturing operation. It is a sawmill equipment operator. I have an article here that came out a week ago in which the company is congratulating itself for its bold move which has increased its profits. What was its bold move? It bought out a competitive company in Hot Springs, Arkansas, bought out another on in Portland, Oregon, closed its Surrey operation and shipped its business down across the line. That is what is happening to small and medium-sized businesses, particularly when they become subsidiaries of multinational corporations.

Hawker Siddeley is very proud that it is now in a much better financial position because it closed its B.C. equipment manufacturing plant and moved it down across the line. There are some interesting things about it. If it had spent the same amount of money on capitalization in the Surrey plant that it spent acquiring the plant in Arkansas, some $30 million, the Surrey plant would have been competitive and we could have had an export business instead of an import business. Of course it says in bold print that it is keeping its sales offices and parts departments operating in Canada.

Small and medium businesses are under threat from a number of things. One thing that makes Canadian small and medium-sized businesses competitive is our social programs. I will come to that in a minute. I also want to take a look at what is happening in Canada in terms of the threat to social programs.

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If you ask any small businessmen what advantages they have in Canada compared to their counterparts in the United States, they will immediately say that we have a national health care program. A business in the United States often has to provide health insurance for its employees that runs into hundreds of dollars a month.

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An hon. member:

That is why they are not competitive.

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NDP

James Capsey (Jim) Karpoff

New Democratic Party

Mr. Karpoff:

That is right. That is why they are not competitive.

We now have an attack on our health care system. If our health care system goes and we end up with a two-tiered health care system our companies are going to have to provide their employees with the same type of health care coverage as the Americans.

There have been two threats to our health care system over the last period of time. The first was the cutbacks in transfer payments. Transfer payments have been reduced steadily over an extended period of time. It is important for Canadians to understand that it is not the Tories who started the cutback of transfer payments for health care. It was the Liberals who started the cutbacks to Canada's health care system.

In 1977 they forced the provinces into the EPF system. In 1982 they eliminated the tax points which cost governments money. Then of course there was their six and five policy. Taking a look at transfer payments under the EPF, British Columbia by 1994-95 will have lost a total of $6.8 billion, $2.6 billion because of Liberal cuts.

What happened in the threat to our health care system is that the Liberals set the path and then we had the situation where the Tories came in and said: "We understand how the Liberals have learned to do it. We will do it. We can even do it better" and they did. The Tories were good at learning from the Liberals how to attack health care.

We now have a second controversy in Canada that is a threat to our health care system and that is user fees. Nobody seems to be talking about this. The Liberals are talking about introducing user fees.

Yesterday, Mr. Cote, the Quebec minister of health, a Liberal, stood up and said: " I want to introduce health care user fees". In Newfoundland and in New Brunswick we have a funny thing going on. It is the Liberals who are continually proposing user fees. At least we have one

May 14, 1993

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minister in the Conservative government, the hon. minister of health and welfare, who is saying no.

My fear is that he is going to be gone in six weeks and in six weeks we are not going to have anybody on that side of the House who will stop the Liberals from introducing user fees in this country.

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Subtopic:   ALLOTTED DAY, S. O. 81-THE ECONOMY
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An hon. member:

Stop lying.

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NDP

James Capsey (Jim) Karpoff

New Democratic Party

Mr. Karpoff:

You say stop lying. Why do you not talk to your counterpart in Quebec? What was he proposing? The Liberals are the only people in Canada who have concretely proposed user fees.

Yes, we have the minister of defence who is sending up balloons but of course she is in a very awkward position. She is trying to capture that right wing Tory vote in order to get the leadership. She floats balloons about it. So does the Minister of the Environment.

The only concrete proposals to introduce user fees in this country have come from Liberal governments. That of course is a big threat to our medium and small businesses.

Another major threat to our medium and small businesses is the tax breaks that have been developed for the powerful corporations and the wealthy. Most of these tax breaks have come from the Liberals. It is the Liberals who developed the tax breaks. The Tories have plugged a few of them but not very many.

It is interesting that when Stats Canada did a review of the national debt it concluded that it was made up of three factors: high interest rate policy, tax concessions to the multinational corporations and social programs. We found out that 50 per cent of that debt is due to the failure of Liberal and Tory governments to collect taxes from the multinational companies. Forty-four per cent is due to the high interest rate policy of the Tory government and 6 per cent is due to expenditures on social programs.

I have a list of seven pages of very profitable large corporations that paid no tax in 1990 due to Liberal and Tory tax policy. Let us take a look at some of them. Canadian Pacific Hotels made $48 million and paid zero tax. The Coca Cola Company made $24.5 million and

paid no tax. That means the small businessman is having to pick up the tab for them.

Every time a big multinational pays no tax it is the wage earners and small businesses that have to pick it up. These tax loopholes were developed by the Liberals. They perfected them for years. Fletcher Challenge is another company that made $24 million and paid no tax. I could go on. I have pages of them here.

Let us look at another tax break developed by the Liberals on family trusts. One family, the Bronfmans were able to put $69 million into a family trust courtesy of the Liberals 21 years ago. It has now grown to $700 million and thanks to the Liberals no tax has been paid on the increased value. The Tories have now decided to just extend it forever.

The Liberals talk about the interests of small business. I think they should look at their record.

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LIB

Beryl Gaffney

Liberal

Mrs. Gaffney:

Tell us what you've done.

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NDP

James Capsey (Jim) Karpoff

New Democratic Party

Mr. Karpoff:

Another thing that has been crippling small and medium-sized businesses in this country is the GST. It has been a tremendous problem.

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LIB

Sergio Marchi

Liberal

Mr. Marchi:

And we introduced the GST too?

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NDP

James Capsey (Jim) Karpoff

New Democratic Party

Mr. Karpoff:

No, the Liberals did not introduce it but they are fooling Canadians when they say they will get rid of it. They have said they are going to get rid of it one day. Then they are going to bring in an SGT, a service and goods tax. Then they are going to bring in a value added tax but they will not tell us what it is. They say maybe they will tell us after they are elected but that is never going to happen because the Liberals are not going to form the next government in this country.

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LIB

Sergio Marchi

Liberal

Mr. Marchi:

And we're going to get rid of you too.

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NDP

James Capsey (Jim) Karpoff

New Democratic Party

Mr. Karpoff:

I want to make sure Canadians understand that the Liberals do a nice bit of talking when they are in opposition. However when they are in power they follow the same lines as the Tories, particularly in British Columbia.

We know the Liberals in British Columbia. We know them very well. We have watched them over the last few years when they pretended they were different from the Tories. Of course the Socreds were simply an amalgamation of the Liberals and Tories. The Liberals in B.C. are doing it again now. They are going to bring out Gordon

May 14, 1993

Campbell, that great Socred and try to trot him out as a Liberal to see if they can get the Tories and Liberals back together and call themselves the Socreds again.

We have been through this. The antics of the Liberals in B.C. have gone on for years. At least they have been honest enough there to say they are the same as the Tories and they call themselves Socreds. It goes on.

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PC

Steve Eugene Paproski (Deputy Chair of Committees of the Whole)

Progressive Conservative

The Acting Speaker (Mr. Paproski):

The time for debate has expired. Questions or comments.

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NDP

James Capsey (Jim) Karpoff

New Democratic Party

Mr. Karpoff:

Mr. Speaker, I am sure there would be unanimous consent in the House for me to finish my speech.

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PC

Steve Eugene Paproski (Deputy Chair of Committees of the Whole)

Progressive Conservative

The Acting Speaker (Mr. Paproski):

Is there unanimous consent for the hon. member to finish off his speech?

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?

Some hon. members:

No.

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PC

Steve Eugene Paproski (Deputy Chair of Committees of the Whole)

Progressive Conservative

The Acting Speaker (Mr. Paproski):

I regret there is no unanimous consent. Questions and comments, the hon. member for York West, the hon. member for St. Catharines and the hon. member for Carleton-Charlotte.

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LIB

Sergio Marchi

Liberal

Mr. Sergio Marchi (York West):

Obviously, Mr. Speaker, there is a lot of interest in pursuing some questions of the member for Surrey North because it was probably the most fearful type of speech I have witnessed in quite some time.

He did not speak to the motion or the subject-matter at hand because of his well-founded insecurities. I understand those insecurities because I visited his riding.

Instead of trying to be constructive and offering a few ideas on where the NDP stands in regard to the six proposals I have advanced with respect to the small business dossier, which the NDP member led off earlier this morning and completely avoided, he continues to discuss off-subject the question of user fees of the government.

He suggests that the Liberal Party is the big bad wolf and it is going to introduce user fees. I think our leader has certainly been eloquent and very clear on what he and our party think and what we will do with user fees. If the Tories want to have that debate in the campaign and

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have drawn that line in the sand then we would be more than happy to take them up on that.

The member's speech was devoid of any constructive ideas. It was a diatribe of insecurities because he is afraid of the Liberal Party of Canada, if not the Tory Party on the west coast. He obviously knows that a certain Prem Vinning is close behind him watching his every move. All of a sudden this MP for Surrey North who did not have any coffee parties for his constituents for five years is now scurrying about trying to organize all these little individual coffee parties to show he is in touch with his riding.

The member knows that the NDP premier of his province is an absentee premier who is good for cutting ribbons. He knows that Sihota and Clark are really trying to hold up a pathetic government. He knows what Stephen Langdon thinks about the Ontario NDP and he has the unmitigated gall and courage to try to scare Canadians. They are not going to fall for his politics of scare tactics. They are going to realize that the only member who is scared for his seat is this particular member for Surrey North.

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May 14, 1993