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


Gregory Francis Thompson

Progressive Conservative

Mr. Greg Thompson (Carleton-Charlotte):

Mr. Speaker, out of generosity we are trying to squeeze in as many speakers as possible and allow some questions from the opposition.
Today's opposition motion as put forward by the member opposite, relates to the Government of Canada and its leadership in directing banks and other lending institutions. I simply want to pick up on what is happening in regard to the economy and our debt and deficit position because there is a connection.
I will be the last guy to stand up in this House and defend the banks because I think there is room for criticism in regard to their behaviour. However, there is also room for some praise so I do not think we can just stand up here and blindly criticize them.
There is a connection between our debt and deficit position in relation to the amount of capital that is available for the private sector in lending institutions. I just want to remind the listening audience that this year in Canada we are going to need about $113 billion. That is what new businesses will need to expand their operations. Out of that we have to remember we have financing and deficit commitments which will eat up about $84 billion.
We are going to have a shortfall of somewhere in the vicinity of $25 billion to $29 billion. That shortfall puts pressure on capital borrowing markets. In fact, we will have to go abroad this year to borrow $25 billion or $29 billion.
There is a cost to small business at the end of the day because of continued deficit financing in this country federally and provincially. I think that has to be made known from the outset. If there is one thing all governments, federal, provincial and municipal, can do to help businesses large or small, it is to get our debt situation under control.
The interesting thing is that small business is the engine of growth in the economy. There are 900,000 small businesses in Canada. Their annual payroll is not insignificant and amounts to $85 billion a year.
Our definition of small business by most standards is any company that employs fewer than 50. Between 1979
and 1989 that is where the growth in the economy was in the number of employees hired. Between 1979 and 1989 companies with fewer than five employees did 49.2 per cent of all hirings in the economy. For companies with six to 50 employees, it was around 36 per cent of all hirings. Those companies with over 50 employees accounted for about 14.3 per cent of all hirings between 1979 and 1989. The engine of growth in that period very clearly was small business and it continues to be small business.
Of the 28,000 jobs created in Canada by business in February, the last month with a precise number, 90 per cent of them were small business hirings. Therefore, not too much has changed. What have we done as a government to help promote that?
I want to step through some of the things we have done. There is the lifetime capital gains exemption of $500,000 for the sale of shares in a small business. We have done some things on the pension side with initiatives to help encourage investment in small business. We have done the same thing with RRSP contribution limits on the private side and for small businesses again. We have relaxed the rules for RRSPs and RRIFs, Registered Retirement Income Funds, for shares in small businesses.
We have also, much to the dismay of the opposition, reduced the federal corporate tax rate. We have increased tax credits for research and development. We have made it easier for businesses to claim research and development costs. We have reduced the paperwork making access better to federal contracts. In other words, to secure a federal contract there is less paperwork than there used to be.
We have set up the small business data base. That was done in 1986 to provide information and analysis to help business compete in global markets. If we are looking at Canada's export capacity, last year Canada sold $157 billion worth of goods to its international competitors. That program was very much part of that increase. It helped us streamline our access and information systems to those markets.
The Entrepreneurship Awareness Program was set up in 1987 to help non-profit organizations promote entrepreneurship. That is something which had never been done in this country or others and the government took steps in 1987 in that direction.

May 14, 1993
Another one we can take some pride in is that the Minister of Finance announced changes to the Small Businesses Loans Act. We were not given a lot of credit in relation to the Small Businesses Loans Act by the opposition. The banks have responded to that but not as much as I would like. Each of us in our constituencies can point to areas where the banks have to be a little more aggressive and work with us in relation to that act.
That was an important change. We increased it in the federal budget of 1992 from $100,000 to $200,000. It increased from $200,000 to today's $250,000 in the 1992 economic statement. We have responded in that area. The result has been that for the year ending March 31, 1992, the Small Businesses Loans Act program gave support to lenders for more than 10,000 loans worth a total of $400 million. That is not insignificant.
We are doing the best we can. We are going to require more co-operation from the banks. We will have to continue to hold their feet to the fire to make sure they respond.
I see one thing happening in relation to the banks and one can ask whose fault it is. Is it ours or somebody else's? Confusion exists when a client comes through the door and I think the member for Broadview-Greenwood spoke today about the relationship between banks and their clients. I think all levels of government have helped destroy that relationship because over the years governments have taken over some of the territory which should have belonged to the private sector to begin with.
I will point to a number of specific examples which affect all regions of the country. They have to do with institutions set up either by the federal government or the provincial governments and sometimes both.
Where does a small business person in my constituency who wants to start a small business go? The first stop might be the bank but in all probability it might be somewhere else. It often might be a federal or provincial agency that is in the same business as the bank and lends money. I want to give some examples that exist from one end of this country to the other. I think this is where the confusion lies.
Someone in New Brunswick wants to start a small business and has the resources, knowledge, skill and
everything necessary to start up a small business. The first thing that person will hear is that ACOA, the Atlantic Canada Opportunities Agency, helps small business gets started and big business as well at times. As soon as that door opens that person will go in and discuss the project.
Aside from that, business development centres have been set up by the federal government. The Department of Commerce and Technology is in most provinces. Sometimes it is under a different name but in New Brunswick we continue to call it the Department of Commerce and Technology. It may have had a name change. We have regional development corporations in the province of New Brunswick. We have the Federal Business Development Bank in all provinces as well. We do not want to forget about the chartered banks themselves.
There is mass confusion on the part of the small business owner when he makes application for a loan. The federal and provincial governments have taken over some of the turf which legitimately was the bank's to begin with. We might say they took it over simply because the banks were not responding to a need and that area had to be taken over. Borrowing and investing had to be encouraged as well as entrepreneurship because the banks were not doing this.
At the end of the day the banks have not had their feet held to the fire. For example they say they will lend money but at the same time the applicant should speak to ACOA or the same agency in Quebec or the Western Diversification Fund out west, to make sure the loan being granted is going to be secured. In fact a grant may be available to help offset the amount needed to be borrowed in the first place. A reduced rate of interest may be available if the applicant gets under the right program.
There is a lot of confusion out there and often the banks are not doing business with these small business people unless some of those loans and insurance agencies as provided by the federal government are there.
In relation to the Federal Business Development Bank we have an institution now that is on a cost-recovery basis. It is reluctant now to take up the space it was originally designed for as the lender of last resort.
May 14, 1993

There is a great deal of room for improvement in the whole process. I do not disagree that it has to start right here. I think a lot of it has but more can be done.
I want to look specifically at some of the recommendations coming from the other side of the House and comment on them. In today's The Globe and Mail they are talking about the MP for York West, the chairman of the National Liberal Caucus who laid out some of what he would like to see happen. I am not doing this just to criticize but these are some of the things he is suggesting:
"The government should call a national summit meeting with the banks and representatives from the small and medium-sized business sector to focus on long and short-term problems and challenges in small business financing".
The government does consult regularly with banks and lending institutions.
"The government should urge banks to stop withdrawing loans from small businesses that are meeting interest charges".
Again,-not to be overly generous-I think many of the banks, not all of them, have been quite cognizant of the difficulties small businesses have experienced in the last three or four years. Many of them have bent over backwards to help some of their clients. Many have not because we all have individual horror stories where they have pulled the plug on them.
"The government should encourage banks to expand their lending under the Small Businesses Loans Act".
We have done that and we are continuing to work in that direction.
"Canadian banks should set up a joint venture small business development corporation with each contributing about $200 million in start-up capital".
It is not specific. I guess it means $200 million, more or less. It is not a bad idea but where does the money come from? Does it mean more borrowing? Possibly.
"The Federal Business Development Bank should be strengthened to stem a decline in both the average size and number of loans the FDBD makes each year".
The difficulty of that is the FBDB is on a cost-recovery basis. In other words, if there is a loss out there who is it picked up by? The taxpayers' of Canada. The taxpayers' of Canada are saying they do not want any more debt. They do not want any more giveaways.
I guess it would mean a massive restructuring of that institute. Over the years it has not been one of my favourite institutions but I guess we would have to take a serious look at how much money we want to put in that direction because at the end of the day there is a cost to the taxpayers of Canada.

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