May 14, 1993 (34th Parliament, 3rd Session)


Beryl Gaffney


Mrs. Beryl Gaffney (Nepean):

Mr. Speaker, I too am very pleased to speak on this opposition day motion:
That this House condemn the government for its miserable failure to offer leadership and direction to Canadian banks and other lending institutions in order to provide adequate financial resources for the growth and development of small and medium sized businesses-
A small business is one with an estimated gross revenue that does not exceed $5 million during the fiscal year. It is also a business with under 100 employees.
From 1979 to 1989 businesses with less than 100 employees created 80 per cent of the new jobs in Canada. Since 1989 this number has dramatically increased to 98 per cent. During this time bank loans to small business have decreased by 11 per cent while loans to big business have increased by 11 per cent.
In 1992 Canada's major banks lost an estimated $600 million in loans to 900,000 firms in the small business sector. However, banks lost a total of $2 billion in loans from the collapse of Olympia and York, and now are effectively forcing small and medium sized businesses to pay the price.
This government will say that it has changed the Small Businesses Loans Act and that is designed to help new and existing business enterprises obtain term loans from chartered banks, but the government is not going to say what I am hearing from small business in Nepean.
Let me give a couple of examples. Despite being long and loyal customers of banks, small businesses, with all the pressures of the economy, are having their lines of credit pulled, reduced or completely cut off. Our banks, as lending institutions, have failed small business in this country.
I want to mention a specific example but I will not give the firm's name. This is quoted directly from a letter to me from this business. The letter reads:
Banks are loaning and helping very large companies-
-and the letter mentions O&Y-
-but to the small and medium size companies trying to survive this recession, they are very hard on them. They will only finance accounts receivables of 30 and 60 days, and most companies are not paying until 90 and over. This is making it almost impossible to try to keep in business. If the banks were more lenient in a time of problems it would help everyone. They state: "We do not want to finance a company showing a loss", but what companies are making a profit? Not very many at the present time. They are demanding many more reports, which is taking also a lot of extra time, which most companies cannot afford now, as they also tell us to lower overhead. With less staff it makes it much harder to comply with their wishes.
The letter says that this hurts small and medium sized businesses and employees and causes large lay-offs and a loss of revenue for the government.
I do not usually quote from newspapers, especially a local newspaper which sometimes might not be too kind to me, but I am going to quote from an editorial in this morning's The Ottawa Citizen'.
- A new federal cabinet must moderate the absolutism that governs the Bank of Canada. For too long the central bank has been allowed to wage its relentless jihad against inflation as if nothing else matters- Crow can be instructed to quit or obey the law, which requires the Bank of Canada "to regulate credit and currency in the best interest of

May 14, 1993
the economic life of the nation-and generally to promote the economic and financial welfare of Canada".
Too-tight monetary policy has made Canada's recession harder.
The present economy was not created by some unpreventable force of nature. It is the chosen creation of Conservative policy.
An article in The Gazette of April 2 stated:
But bank critics also charge that, wounded by bad loans to big businesses, the banks are now gun-shy about lending to anyone.
A change in attitude toward small business by the banks, more than the change in legislation is needed, said one.
Their attitude has been "pathetic", said Susan Bellan, economist, owner of Frida Craft Stores in Toronto, and a spokesman for 1he Canadian Organization of Small Business.
"They go on about how the administration costs for small businesses are high", she said. "They want a big fat return with no work".
The $24 billion loaned to small businesses over the last four years is only a fraction of the $71 billion loaned to big corporations-
Is that not the truth as well?
I also would like to comment briefly on how the New Democratic government in Ontario is hurting business through the many cutbacks it is making. I want to bring right into the regional and local picture the moneys and grants that are being cut back.
My city of Nepean will have a shortfall probably of $2 million this year due to cutbacks on transfer payments. If the city is having a shortfall of $2 million it is going to mean that it has to cut back in certain areas. The cutback the city has to make in turn is going to hurt small businesses. Small businesses then have to cut back. It hurts their cash flow. Government is a major player when it comes to controlling the economy of the country or controlling the economy in a given area.
We also know another measure that is certainly hurting small business in the national capital region is the lack of direct air links to the United States. You cannot get on a plane here in Ottawa and fly direct to a city in the United States. This has been going on since 1974 when the Air Traffic Control Act was set in place.
Today Ottawa is a major cosmopolitan city. No longer is it just a Public Service town. It is high time that this federal government got with it and recognized that Ottawa needs a major air link to the U.S. The nation's capital is the fourth largest region in Canada after
Toronto, Montreal and Hamilton, yet it is the most ignored region. The economy here is suffering the same as everywhere else.
Let me give a few examples of the burdens placed on us by this federal government. Fifteen years ago the federal buildings were built in Hull with the proviso that as it would place an overburden on the sewer system, the federal government said it would contribute to the expansion of the sewage treatment facilities. This has never been done. We have a federal government that makes these commitments and never follows through.
My colleague for Ottawa Centre certainly knows what I am talking about. Like any other area the unemployment rate is up mainly due to downsizing of the Public Service by the federal government. Bankruptcies are up; construction is down.
This area has been pressuring the federal government for 10 years to allow that direct flight that I mentioned before. The nation's capital has only a single lane highway leading into it from the south. When coming from New York State or from the city of Toronto into the nation's capital you come in on a two-lane road. I think the federal government has the responsibility. Sure, it is a provincial responsibility, but it is also a federal responsibility to add to this the nation's capital.
The Ottawa-Carleton economy is still struggling. We know that our unemployment rate is probably lower here than in most cities in the country and we are very concerned about the high rate of unemployment throughout the nation. Welfare is at 13 per cent. We know that bankruptcies were 155 in 1993. We know that we have 25,000 people unemployed. I do not care what the rate of unemployment is, any unemployment is too high.
I am delighted to speak to this motion, although I do not have time to comment on the strategy my colleague from York West is putting forward for small business development where he talks about the national summit between the federal government and major banks and the federal government must urge the banks to stop withdrawing capital from small business and the federal
May 14, 1993

government should encourage banks further to expand the Small Business Loans Act-

Full View