Speaking Notes for
Ernest McLean
Minister of Development and Rural Renewal
Venture Capital Tax Credit Programs
October 30, 2000

Today, Minister Matthews and I are launching two new programs that have been developed as a result of comments and recommendations Government received during our public consultations on jobs and growth.

As you may recall, the Interim Report on Jobs and Growth was released in March. At the same time, Minister Matthews announced in the Budget Speech several initiatives that became effective immediately to stimulate the growth of small businesses and new jobs in expanding areas of the economy throughout the province.

These initiatives included:

• The elimination of the payroll tax for small businesses with payrolls of $400,000 or less;

• The creation of two new programs in the Department of Development and Rural Renewal � a $2 million Small Business Seed Capital Equity Program, and a $500,000 Small Business Market Development Program;

• The expansion � in partnership with the Federation of Co-operatives � of the Collective Enterprise Development Program;

• A new federal-provincial $10 million small business investment program focused specifically on the needs of rural communities impacted by the collapse of the groundfish fishery; and

• Additional investments, with the federal government, to strengthen and expand the network of federal-provincial-community business service centres in each of our 20 economic zones.

The Budget Speech also made commitments to other initiatives that would be taken as a result of our public consultations. Among them was a commitment for another initiataive that would be taken to stimulate the growth of small business � namely, a new a venture capital tax credit program.

Today, we are honouring that commitment.

We are doing so after further consultations with the private sector since the Interim Report on Jobs and Growth was released.

Based upon these further consultations, we have concluded that a single venture capital tax credit program is not enough. We concluded that two programs are needed if we are to address the diverse needs of the business community in all regions of the province, as well as the capital requirements that businesses need at various stages in their development.

The two new complementary programs are:

• The Direct Equity Tax Credit program; and,

• The Labour Sponsored Venture Capital Tax Credit program.

As I have already indicated, these programs have been developed to respond to what the Cabinet Committee on Jobs and Growth heard during our public consultations. The committee was repeatedly told that one of the keys to continuing the economic momentum that has been building in our province is for government to create the right environment to attract new investment and keep business competitive.

Presenters in the jobs and growth process also emphasized the significant contribution the small business community makes to creating a stronger and better Newfoundland and Labrador. The facts speak for themselves:

• Small businesses have created more than 80 per cent of all new jobs in Newfoundland and Labrador since the 1980s.

• Small businesses account for one-third of all employment in the province today.

• Almost 95 per cent of all businesses in our province employ fewer than 50 people � the upper limit most often used in defining small business. And,

• About two-thirds of all our businesses fall into the smallest category � employing fewer than five people.

Clearly, there�s nothing small about the role of small business in our economy. From small beginnings, small businesses make a big difference. What is also important to keep in mind is that small business activity in both traditional and emerging new sectors is alive and well and is growing in all areas of the province.

The Cabinet Committee on Jobs and Growth heard this message loud and clear, over and over again from presenters throughout the province.

However, they also identified some impediments to the growth of the small business sector. One of these was lack of access to venture capital. Furthermore, the consultations highlighted the extraordinary challenge of raising venture capital in rural areas, and the need to target government programs accordingly.

Government has listened.

I now ask Minister Matthews to give you the specifics of the two new programs.

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