Ottawa’s red-tape cutting law gets Royal Assent
By Laura Jones, Special to Financial Post
Published April 24, 2015
With this being budget week, the federal government’s taxing and spending decisions are under the microscope — as they should be in a healthy democracy. But what about government’s hidden tax: regulation? With no equivalent of a federal budget day, regulatory decisions and their implications get precious little scrutiny and we are all worse for it.
Thankfully, regulatory transparency got a considerable boost Thursday when the Red Tape Reduction Act (C-21) received Royal Assent and became law. Minister Tony Clement, who has championed the bill, can be proud that Canada is now the first country in the world to require that for every new regulation introduced one of equivalent burden must be removed.
C-21 has been operating as policy for several years already, which means that the costs of new rules must be quantified and equal or greater costs removed. It essentially caps the cost of rules coming directly from regulations. Government rules can also come from legislation and policy so the one-for-one rule is not a cap on the cost of all government rules. Still, it is a very good start.
Why is this so important? Regulation, both necessary and unnecessary (red tape), are a huge hidden tax on all Canadians. The latest estimate from the Canadian Federation of Independent Business suggests that regulation costs $37 billion a year. To be clear, not all of these costs could or should be eliminated. But Canada’s small business owners suggest that about 30 per cent of these costs, $11 billion, could be eliminated with no negative impact on human health, safety or the environment. This number seems reasonable given that British Columbia has reduced its regulatory requirements over the past decade by over 40 per cent with no one arguing the cuts had any serious negative impacts.Prime Minister Harper calls red tape a “silent killer of jobs.” He’s right. One of the disturbing findings from CFIB’s recent report is that one in four of today’s business owners would not advise their kids to go into business given the current burden of complying with government rules. But discouraging businesses from starting is just the beginning of red tape’s negative impacts. Red tape wastes valuable time that could be spent doing any number of other things like serving customers, learning new skills, or enjoying family. For consumers, it increases prices and reduces choices.
Red tape’s most destructive impact is that it undermines the relationship between government and its citizens. Struggling with confusing language, getting put on hold for excessive periods of time, getting bad compliance advice from government agents or running up against a dumb, costly rule shakes one’s faith that the taxes we pay are working for us not against us. Small businesses often comment on CFIB’s surveys that they “feel like the enemy” when dealing with government.
In this context, it’s reassuring that C-21 received near unanimous support, with some opposition critics arguing that it doesn’t go far enough. While the one-for-one rule does not explicitly reduce the burden of red tape, it has gone beyond just capping new regulatory costs. In 2012-13, it saved small businesses 98,000 hours and $20 million.Two other reforms announced in 2012 as part of the federal Red Tape Action Plan are important to make government’s hidden tax more visible. The government recently published a 36-department inventory of 129,860 regulatory requirements that will be tracked annually. This inventory will allow for an overall assessment of whether regulatory activity is increasing or decreasing in the same way we can currently track whether government spending and taxes are increasing or decreasing.
The other important reform is that each department is now required to publish and track performance against service standards. For example, a department could publish a standard of a 15 day turn-around time for a permit, the goal of meeting that standard 90 per cent of the time and results against that goal. Government departments don’t have the same strong incentive to keep service high that businesses have because they are not subject to the discipline of competition. Publishing service expectations and results is therefore critical to ensure some accountability.
Taken together these reforms have the potential to give Canadians a much clearer picture of the impact of government’s regulatory activity. Making the hidden tax of regulation more visible deserves our applause and attention. Maybe soon we will have a regulatory accounting day that gets as much profile as budget day does.
Laura Jones is Executive Vice President of the Canadian Federation of Independent Business. She can be reached at email@example.com.