Thank you, Mr. Chair, and good morning, members. Thank you very much for inviting the Treasury Board of Canada Secretariat to contribute to your review of the Red Tape Reduction Act. As the chair indicated, my name is James Van Raalte and I'm the executive director of the regulatory policy and co-operation directorate at the regulatory affairs sector with the Treasury Board of Canada Secretariat.
My remarks and testimony this morning are intended to explain what the act sets out to do and how it works, share some initial observations on its results reported to date, and describe the efforts that have been made so far to support its upcoming statutory review.
The one-for-one rule, instituted in Treasury Board policy in 2012-13 and then legislated in the Red Tape Reduction Act in 2015, aims to control the administrative burden that regulations impose on businesses. Administrative burden refers to the costs that relate to activities like submitting reports and preparing for inspections, whereas compliance burden refers to the costs related to complying with the actual requirements that protect health, safety, the environment and the economy—for example, things like batch testing.
There are two components to the one-for-one rule. When a new or amended regulation increases the administrative burden on business, the cost of this burden must be offset via other regulatory changes. Specifically, for every dollar of new administrative costs imposed, a dollar must be removed; and for every new regulation that introduces administrative burden, an existing regulation must be removed. In both instances, when new administrative costs are introduced, departments have two years to offset the costs with other changes and remove a regulation from across a minister's portfolio.
There are three categories of regulations exempted from the requirements to offset: first, regulations related to tax or tax administration; second, regulations where there is no discretion regarding what is to be included in the regulation, for example, treaty obligations or the implementation of a court decision; and third, regulations made in response to emergency, unique or exceptional circumstances, including where compliance with the rule would compromise the Canadian economy, public health or safety.
Only Governor in Council and ministerial regulations that impose administrative burden on businesses are subject to this one-for-one rule. It does not apply to regulations developed under independent regulation-making authorities such as those typically granted to organizations at arm's length from government, such as the Canadian Radio-television and Telecommunications Commission.
I would like to share with the committee some of the results of the one-for-one rule observed since its introduction as policy in 2012 and up to March 31, 2019. I will clarify for the committee that the policy was in place before the act was in place and we have performance results all the way through, so I will be speaking to those performance results all the way back to 2012.
For context, Canada currently has about 3,000 federal regulatory titles in its stock. Annually, approximately 150 to 250 regulatory changes are approved. This includes the additions of new regulations, amendments to regulations and repeals.
Since the policy was put in place in 2012, there have been approximately 2,070 regulatory changes, again, new amendments or repeals. Roughly 86% of these, or 1,772, were subject to ministerial or Governor in Council approval and were therefore within the scope of the rule. The remainder, as I indicated, were made through independent agencies, arm's length from the government.
Of the regulatory changes within the scope of the rule, about 15%, or 266, had implications under the rule, meaning that the changes that were made increased or decreased administrative costs for business, added new regulations with new administrative costs for business, repealed regulations or contained some combination of these elements.
Under the first element of the rule, regulators removed an estimated $44.9 million in annualized administrative costs while adding $20.6 million in annualized administrative costs, producing a $24.33-million net reduction in annualized administrative costs. Put another way, for every dollar of administrative costs that has increased, approximately $2.2 were decreased.
Under the second element of the rule, departments and agencies added a total of 41 new regulations that introduced new administrative burden on business. They also repealed a total of 185 regulations from their stock. This has resulted in a total of 144 net regulations removed under the rule.
With regard to the application of exemptions, a total of 88 regulations met the criteria that were approved for exemption by the Treasury Board. The breakdown is as follows.
Fifteen of the 88, or approximately 17%, were exempted because they were related to tax or tax administration, for example the United States Surtax Remission Order, which reimbursed importers for Canadian surtaxes on imported steel that responded to U.S. tariffs on Canadian steel, or the elements of the Softwood Lumber Products Export Charge Act, 2006 regulations, which eliminated export charges on softwood lumber products exported from Canada to the United States.
Forty-nine out of 88, or approximately 56%, were exempted on the basis that there was no discretion regarding what is to be included in the regulation. This included the access to cannabis for medical purposes regulations, which responded to Federal Court and Supreme Court decisions concerning the access to cannabis for medical purposes, or the regulations implementing the United Nations resolutions on Mali, which implemented a UN Security Council resolution to freeze the assets of designated individuals and entities whose assets were derailing the peace process in Mali.
Finally, 28 of the 88 exemptions were there because they were made in response to emergency or unique circumstances, including where compliance with the rule would compromise the Canadian economy, public health or safety—for example, a 2017 amendment to the regulations amending the wild animal and plant trade regulations that temporarily prohibited the importation of salamanders to prevent the introduction of a specific fungal disease into Canadian ecosystems.
The Government of Canada, as a whole, has maintained positive balances—that is, it has complied with the act—for both elements of the rule: administrative burden and regulatory titles.
Allowing portfolios to bank reductions in administrative burden and numbers of regulations provides added incentive for regulators to remove burden as soon as possible. This results in immediate benefit to Canadian businesses.
One significant gain from the implementation of the rule is the system-wide heightened awareness of the cost impacts of administrative requirements on business. As a direct result of the rule's application, we now have the ability to measure, record, and report on changes in regulatory administrative burden on business and to inform meaningful conversations with stakeholders about its reduction.
The one-for-one rule is one part of a larger scheme of policies and measures that make up Canada's regulatory framework. Cost benefit analysis, the application of the small business lens, regulatory co-operation and regulatory stock review all aim, among other objectives, to minimize burden on business and maximize efficiencies.
Following the implementation of the Cabinet Directive on Regulation in September 2018, the government committed to a regulatory reform agenda and announced the review of this act alongside a number of modernization initiatives that aim to strengthen transparency, co-operation across jurisdictions, innovation, and competitiveness within the regulatory system.
These initiatives include targeted regulatory reviews, the development of an online consultation platform, the establishment of a Centre for Regulatory Innovation, an annual regulatory modernization bill, and an external advisory committee on regulatory competitiveness and ongoing support for international and interprovincial regulatory co-operation.
As you know, the Red Tape Reduction Act includes a provision for the President of the Treasury Board to cause its review five years after coming into force. In preparation for this review, the Treasury Board of Canada Secretariat launched a consultation via Canada Gazette from June 28 until September 5, 2019.