Overregulation is holding Canada back

Regulations get passed in Ottawa, but they seldom get reviewed. Departments and agencies identify a problem they believe must be solved, suggest a few dozen paragraphs of legalese to address it, and then spend immense amounts of resources to enforce it.

But rarely, if ever, will bureaucrats and politicians ask themselves if the regulations on the books are having the intended effect or if there might be more cost-effective ways to achieve similar or better results. As a result, Canada’s regulatory burden just keeps growing. Between 2006 and 2021, the number of different federal regulatory requirements grew from 234,200 to 320,900. That’s a 37 per cent increase in only a decade and a half.

Such intense micromanagement comes at a cost.

To begin with, there is the cost of enforcing all these rules, which is paid out of our tax dollars and involves legions of bureaucrats working for dozens of different government bodies bearing ever more inspiring names.

But there is also the cost of compliance for businesses, which have to make sure they meet all of those requirements, big and small, and file the mountains of paperwork needed to prove it.

It’s estimated that, each and every year, compliance with regulations from all levels of government costs businesses $51.5 billion and 768 million man-hours. It’s as if Canadian entrepreneurs had to employ 394,000 people full-time, not to grow their businesses, but just to make sure they abide by the growing number of rules our governments have put in place.

It costs money and man hours for governments to enforce rules and for businesses to comply with them yet often there’s no clear benefit.

Although large companies spend larger overall sums on compliance, small businesses face a much larger cost per employee. Canadian companies with over 100 employees spend an estimated $1,400 per employee per year on regulatory compliance. On the other hand, businesses with fewer than five employees spend $10,200 per employee — about eight times more.

It’s no wonder that year after year, business owners identify cutting red tape and regulations as one of the key ways governments could help them grow. Although the individual cost of each regulation may be relatively low, the cumulative effect of the 320,900 federal requirements, along with all provincial and municipal ones, adds up to very large costs for businesses every year.

But where do we start slashing? After all, some regulations meet their objectives and do a good job of keeping Canadians safe and healthy. And all too often, exercises that pledge to reduce regulations end up focusing on rules that haven’t been applied for a long time.

One source of inspiration for would-be reviewers of regulation is the Chrétien government’s thorough spending review in the mid-1990s. It helped reduce wasteful expenditures in Ottawa, ending a string of nearly 30 consecutive years of deficits and delivering a decade of budget surpluses.

Key to this approach were six standard questions that were asked of all government spending to separate the necessary from the useless, the efficient from the wasteful and the appropriate from government overreach.

With small adaptations, here are the six questions that should be asked about every single regulation, whether on the books or proposed:

• What is the purpose of this regulation?
• Does it serve the public interest?
• Is it the federal government’s role to regulate in this area?
• What is the expected economic cost?
• Is there a less costly or intrusive way to solve the problem targeted?
• Is there a net benefit?

These questions might seem very basic, but they rarely get asked when regulations are being considered and are rarer still in assessing existing regulations.

As we work to make Canada’s economy stronger and better able to withstand American tariff threats, such a review could help free up substantial time and money for our businesses to invest in growth. Isn’t that what “Canada Strong” should mean?

Renaud Brossard est vice-président, Communications à l’IEDM et un collaborateur sur « Comment réduire le fardeau réglementaire au Canada ». Il signe ce texte à titre personnel.