SAINT JOHN – Banks are not meeting the needs of small businesses, and government agencies have been forced to fill the gap left by the private sector, said Andrea Bourgeois, director of provincial affairs for New Brunswick at the Canadian Federation of Independent Businesses. But Bourgeois said small businesses prefer to work with banks and private funding agencies rather than government.
“From the small business perspective, they don’t like subsidies and grants because basically it’s government picking winners and losers, and they don’t have a good track record when it comes to picking winners,” Bourgeois said.
“If (the government) have that money lying around, they should just reduce the taxes accordingly rather than government picking who the money should go to.”
Bourgeois made the comments in reaction to statements by Scotiabank (TSX: BNS) president and CEO Rick Waugh on Tuesday. In an interview following his speech to the New Brunswick Chamber of Commerce, Waugh said New Brunswick businesses must be more aggressive on the international market and not depend on government subsidies.
Bourgeois called on banks to step up to the task and build relationships with small businesses, assessing them based on their own unique needs.
“The small business owner goes in there and sometimes he doesn’t know what forms he should bring in there. Part of it is just explaining to them what is happening,” she said
Ian Munro, research director at the Atlantic Institute for Market Studies, agreed with Waugh’s position, saying that subsidies, favourable loans, and protection aren’t going to secure the province’s long-term future.
“I’m not sure we’re contributing to our long-term success by trying to make companies successful with taxpayer dollars,” he said.
Also, government subsidies are likely to prompt retaliation from trading partners, who will subsidize, protect, or prevent goods from getting into their markets, Munro said.
But Munro acknowledged businesses without state assistance face an uphill battle when pitted against foreign companies who receive help from their own government.
“It’s a tricky spot to be in when you have a business who is competing with another firm that’s receiving state funding from somewhere else,” Munro said.
Still, he believes that protection won’t help New Brunswick businesses in the long term.
“You can still look at other examples of countries that unilaterally reduced or removed subsidies to specific businesses,” said Munro, citing Ireland as an example of country that improved its economy after it lowered taxes, opened the market, and slashed subsidies to domestic firms.
David Murrell, an economics professor at the University of New Brunswick, said the province should cut taxes and improve infrastructure rather than hand out subsidies or loans with favorable rates.
“My view is bureaucrats don’t have a feel for business, they’re not close up front with business and they can’t micromanage business decisions about what kind of investments should be done and what not,” Murrell said.
“I’d rather see it done by tax reductions. There are other New Brunswick companies that could benefit from the tax reduction, rather than one company that receives a subsidy or favorable company.”
Cutting corporate taxes would not only increase performance of existing businesses, but also attract new companies to the province, Murrell said.