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Red tape report card: Study shows modest but encouraging progress in reducing regulations across Canada

Opinion: We still have lots of work to do, but things are improving

By Laura Jones and Patrick McLaughlin

Published in the Financial Post on January 21, 2020.

Rules matter in society. They provide guardrails to protect property rights, market exchanges and the environment. They can be useful to promote better health and protect us from harm. What gets regulated and what doesn’t can say a lot about who we are. Gun regulations are much stricter in Canada than the United States. To use a more extreme example, in Saudi Arabia women were only recently legally allowed to drive.

How many rules we have says a lot, too. Are we a society that believes in lots of regulation or very little? Do we believe more regulation is always better? And what outcomes are we hoping for when we regulate more or less? These important questions deserve our attention. But a paucity of data has made many of them difficult to consider with any measure of objectivity.

To see how limited data in this area are, consider that an often quoted statistic about Canada’s international regulatory competitiveness from the World Bank’s Doing Business Report — that it takes 200 days to get a construction permit — is based on one case study of the time it took to acquire a construction permit for a single warehouse in Toronto.

Ten years ago, to encourage more measurement in this important area, the Canadian Federation of Independent Business created an annual Red Tape Report Card on regulatory measurement and accountability. To get a decent grade, governments only have to do three simple things: show political leadership, measure the regulatory burden, and create some kind of regulatory cap or budget (e.g., a reduction target or a policy that for every new regulatory requirement introduced, one is eliminated). A decade ago, most governments in Canada resisted the idea that regulatory measurement had any value and no government was getting an “A.”

This has changed for the better. British Columbia, the first province to get an “A,” has been publishing counts of its regulatory requirements since 2001 and has exceeded its own reduction targets, cutting requirements virtually in half relative to its initial baseline. Other provinces have started regulatory measurement and the “A” club has expanded.

Manitoba recently built on British Columbia’s model and now has the most comprehensive measure anywhere in North America, going from “F” to “A.” Saskatchewan, Quebec and Nova Scotia are also at the top of the class for regulatory measurement. Until recently Alberta was getting failing grades but that is changing. Ontario is making good progress, too.

The provinces, however, are using slightly different measures. That means they can’t be compared to each other. But the Mercatus Center at George Mason University in Washington, D.C., has developed a way to analyze regulatory text in order to generate counts of regulatory restrictions found in legislation and regulation. Mercatus recently applied this same measurement methodology across Canada.

The data show that Quebec and Ontario — two provinces that get good grades for measuring — are still heavyweights in terms of the number of rules. Meanwhile, British Columbia, the province with the longest track record of good grades for measurement on CFIB’s report card — has one of the lowest regulatory burdens in the country.

These data add a new dimension to what is happening at the provincial level and allow us to ask some interesting questions. For example, no one is arguing that British Columbia’s health, environment, and safety outcomes are worse than Quebec’s or Ontario’s. So is it possible to get these good societal outcomes with a fraction of the regulatory restrictions? Alberta, a province with a reputation for having a much lighter regulatory touch, actually has far more restrictions than British Columbia. Maybe reputation and reality don’t always match.

The data are not comprehensive: regulatory restrictions found in guidance documents, policies and forms, for example, are not included. When Manitoba did its baseline count a few years ago it found that many of the over 900,000 requirements — 900,000! — it counted were in these types of documents.

Still, the study starts to fill in a picture of what is happening across Canada. The need for more of this kind of work is one of the key recommendations from the External Advisory Committee on Regulatory Competitiveness, a committee created last year by the federal government as part of its regulatory modernization initiatives: “Better measurement,” the committee reported last summer, “will help us estimate the size of the challenge and ensure accountability as we work to increase competitiveness while maintaining, and ideally improving, outcomes in areas related to health, safety, security, and the environment.” We still have lots of work to do.

Laura Jones is Chief Strategic Officer at the Canadian Federation of Independent Business. She created Red Tape Awareness Week (Jan. 20-24) and chairs the federal External Advisory Committee on Regulatory Competitiveness. Patrick A. McLaughlin is Director of Policy Analytics and Senior Research Fellow at the Mercatus Center at George Mason University.

January 21, 2020

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