moved that Bill C-212, an act respecting user fees, be read the second time and referred to a committee.
Mr. Speaker, I am very pleased to speak to the House about my private member's bill, Bill C-212, an act respecting user fees.
The intent of this legislation is to bring greater transparency and accountability and parliamentary oversight to federal government departments and agencies when they attempt to recover costs through user fees.
User fees take many different forms. They are meant to defray some or all of the costs of a service provided by government, presumably in the public interest, but which also provides a specific service to a client, for example, licence fees, registrations, et cetera.
I would like to say at the outset that I support the government objective of recovering the costs it incurs by charging fees for users of property and specialized services. The bill that I introduced deals with the following issues:
The bill addresses the need for more parliamentary oversight when user fees are introduced or changed; the need for greater stakeholder participation in the fee setting process; and improved linkages between user fees and federal department and agency performance specifications and standards. There is a requirement for more comprehensive stakeholder impact and competitive analysis when new user fees or fee increases are contemplated. The goal is increased transparency with respect to why fees are applicable, what fees are charged, what costs are identified as recoverable and whether performance standards are being met.
There also needs to be a dispute settlement mechanism to resolve complaints or grievances from user fee payers, and an annual report that lists all of the user fees that are in effect. This report would be tabled in the House and referred to the relevant committee of the House, which might be the finance committee.
Our government has embarked on a very ambitious innovation agenda. We need to ensure that our regulatory environment supports and encourages this very important objective. The government recognized this connection when it launched the smart regulation initiative in the recent throne speech. The government announced that it will “move forward with a smart regulation strategy to accelerate reforms in key areas, to promote health and sustainability, to contribute to innovation and economic growth and to reduce the administrative burden on business”.
I would suggest to colleagues in the House that the government's cost recovery user fee policy runs counter to the innovation agenda and should be a major part of the smart regulation initiative. Bill C-212 does just that, in my view.
It is time for parliamentarians to take greater ownership of user fees. What began as a legitimate attempt to more fully recover costs for proprietary services and goods has developed into something that is beyond that which was contemplated.
User fees currently bring in $4 billion annually in revenues for the federal government. There is a systemic bias for federal government departments and agencies to increase user fees. Departments and agencies of the federal government have in many cases expanded the concept and introduced user fees, and increased user fees, beyond what is reasonable and more often than not without any reference to service or performance.
It is not that federal civil servants are bad managers. We have some of the best in the world. But we do know that individuals will respond to incentives that are built into the reward and recognition system. It is only natural. If they are rewarded for increasing user fees, if this assists them in their budget building process, they will respond accordingly.
Let us keep in mind that these are monopolies increasing their prices. If a company wishes to have a drug approved, for example, it cannot shop around if the price charged by Health Canada is excessive.
The fact that certain of these user fee revenues accrue to what are referred to as net votes may be a motivating factor as well. A net vote is one where user fee revenues are credited directly to the budget of the government entity. They do not accrue to the consolidated revenue account of the government as general revenues.
The result of user fee revenue that is credited to net votes is that the budgetary requirements of the department or agency are reduced because the fees are deducted from expenditure budget requests. Even where user fee revenues find their way to consolidated revenue and not to a net vote, this additional revenue implemented by departments and agencies is seen as a positive measure by Treasury Board, and the Treasury Board Secretariat, the body that recommends annual budgetary appropriations for these organizations for inclusion in the annual budget and budgetary estimates.
This practice strongly encourages departments and organizations to charge user fees and increase them above the amount originally planned. There is now incentive to systematically multiply these fees. The time has come to make this practice more transparent.
Companies in my riding of Etobicoke North, companies like BASF Canada and Bayer Canada which are exposed to such fees for drug approvals or approvals of chemical products, do not argue about the appropriateness of user fees for proprietary services. They understand that this is required. What they believe is seriously eroding their competitiveness however are increasing fees with no corresponding increase in service or performance. Since fees have been on the rise in most cases, there has been no corresponding improved service or response times.
In Canada for example, it takes an average of 750 days for a drug to be approved. In the United States the corresponding time is 500 to 550 days. In Europe the timeframe is less. User fee charges however are as high or higher in Canada when compared with these jurisdictions.
With drugs and chemical and agricultural products, competitive advantage often depends on being the first mover to the marketplace. It is easy to understand why our Canadian companies are seeing their competitive position eroded.
In the United States, the United Kingdom and Australia, user fees are tied in some way to the service provided and the quality of that service. The Government of Canada has not yet implemented this type of measure. In Australia, drug reviews must be carried out within the time period set out in legislation, and if not, the authorities lose up to 25% of their user fees.
In the U.S.A. written performance goals tied to the fee collecting authority were negotiated with the industry. The Medicines Control Agency in the United Kingdom sets targets for clearance times.
Bill C-212 would potentially affect Canadians from coast to coast to coast because it would apply to federal government departments, agencies, boards, crown corporations, commissions or any other body that has the power to fix a user fee or a cost recovery charge under the authority of an act of Parliament. Thus, individuals paying fees to visit a federal park, passengers paying the air traveller security charge, individuals paying a fee to the passport office for a passport, or provincial or territorial authorities paying fees to the Canadian Coast Guard for ice breaking services, would be affected by the bill.
I have introduced the bill because of a certain level of frustration with the lack of progress on this issue. The House of Commons Standing Committee on Finance some two years recommended significant changes to the cost recovery user fee policy, but progress to date has been minimal. In fact there are concerns by stakeholder groups that the policy may be moving in the opposite direction.
Bill C-212 would require that before a federal regulating authority introduces increases or expands the application of, or increases the duration of, a user fee, it must consult meaningfully with affected stakeholder and client groups.
It must take reasonable measures to notify clients and other regulating authorities with a similar clientele of the proposed user fee changes. That is because some of these user fees become incremental in nature. Different departments and agencies are adding these fees and, in totality, they become quite burdensome.
The regulating authority would be required to give all clients or service users a reasonable opportunity to provide ideas or proposals for ways to improve the services to which the user fee relates.
The regulating authority would be required to conduct an impact assessment to identify relevant factors and take into account its findings in a decision to fix or change the user fee.
The regulating authority would need to explain to clients clearly how the user fee is determined and identify the cost and revenue elements of the user fee.
Finally, the regulating authority would be required to establish an independent dispute resolution process to address a complaint or grievance submitted by a client regarding the user fee or charge.
To some, these provisions may appear completely reasonable; to others, they may appear to be quite onerous.
I will acknowledge that these measures would not simplify life for these regulating authorities. I make no apology for that. I believe that all these steps are necessary because these fees could have an enormous impact on companies and individuals in Canada. These groups may have some constructive ideas about how the service could be improved, especially if they are paying more for the service.
It is important to understand what costs are proposed to be recovered with the proposed user fee or fee increase. How expansive or limited is this definition? To what extent are direct and indirect costs, like departmental or agency overheads, included in the cost recovery formula? How costs are defined can make a major difference in the level of the user fee. We need more transparency and accountability in this area as well and Bill C-212 would provide that transparency and accountability.
Parliamentarians need to understand how departments and agencies define what is a public good and what is a private good. These definitions are usually not easy, to be sure. These definitions are typically not black and white, and some are easier than others to define. However, these are important considerations because user fees could only be charged for proprietary goods and services, and parliamentarians need to be involved in these debates. Bill C-212 would allow for that to happen.
Every user fee proposal under Bill C-212 must be tabled in the House of Commons and referred to a committee of the House by the relevant minister. That proposal would, first, explain in respect of what service, facility, authorization, permit or licence the user fee is being proposed. Second, it would state the reason for any proposed change in the user fee rate. Third, it would outline what performance standard is being proposed, as well as the actual performance level that has been reached. Fourth, it would provide an estimate of the total amount that the regulating authority would collect in the first three years after the introduction of the user fee, and identify the costs that the user fee would recover.
Should the amount of the user fee being proposed be higher than that existing in another OECD country the minister would be required by Bill C-212 to give reasons for the difference.
These questions are very important for the competitiveness of Canadian business. A case in point is the new substance notification program. Chemical companies in Canada, when they introduce a new product into the domestic market must appropriately obtain approval from the federal government prior to launching the product. The federal government reviews the application and makes a determination as to whether or not the product is safe and effective. To cover the cost of this approval process companies must pay a user fee. Companies have no difficulty with this.
They do question, however, why our government will not recognize assessments and approvals from our major trading partners, particularly the U.S.A. Questions such as this would attract more scrutiny from the House of Commons and the relevant committee.
Bill C-212 spells out what the requirements are when adjustments in the application of user fees are proposed. This provision is necessary because broadening the application of a fee can have as large an impact as a fee price increase.
If a regulating authority wishes to amend the definition of persons subject to the application of a particular user fee for the purposes of maintaining fairness or covering additional cost, the regulating authority may implement the amendments, but the minister must, within 40 days of their implementation, seek the committee's approval for the new measures. Failure to do so would invalidate the adjustments and any change must be consistent with the principles laid out in the act.
Despite this provision a regulating authority may not fix, increase, expand the application of, or increase the duration of, a user fee unless the result gives an additional benefit to clients.
The committee of the House would review every user fee proposal and make recommendations to the House of Commons as to the appropriate fee. Although this step would result in a large volume of work, at least initially, the committee of the House would design the appropriate mechanism to handle the volume of proposals. The formation of a user fee subcommittee or some type of exception reporting system are two such possibilities.
We currently have a number of examples where committees handle a regular volume of like matters and they institutionalize certain mechanisms to deal with that. There would clearly be a learning curve and a bulge of work at the launch of this initiative because many user fees have had limited or no scrutiny by Parliament. This work would become more regularized over time.
Early indications are that Bill C-212 has broad support across a wide spectrum. Support letters are continuing to come into my office and many more are expected. If members would like to see those letter they are more than welcome to come to my office.
The bill is supported so far by the Business Coalition on Cost Recovery. The coalition is made up of representatives of leading Canadian business organizations representing large, medium and small businesses in a diverse range of sectors of the Canadian economy, from agriculture and cosmetics to marine transportation.
The combined membership employs over 2.2 million Canadians and is directly responsible for over $330 billion in economic activity annually. The business coalition members include: Animal Nutrition Association of Canada; Canadian Animal Health Institute; Canadian Association of Chemical Distributors; Canadian Chemical Producers' Association; Canadian Consumer Specialty Products Association; Canadian Drug Manufacturers Association; Canadian Federation of Independent Business; Canadian Association of Importers and Exporters Inc.; Canadian Manufacturers & Exporters; Forest Products Association of Canada, which by the way represents 3% of Canada's GDP; Medical Devices Canada; Nonprescription Drug Manufacturers Association of Canada; and Rx & D, Canada's Research Based Pharmaceutical Companies.
The Canadian Federation of Independent Business, which is a member of the Business Coalition on Cost Recovery, represents over 103,000 small and medium sized businesses and it has told me that supporting Bill C-212 is at the top of its public policy agenda and priority list.
Other supporters of the bill include: CropLife Canada, Canadian Medical Device Technology Companies, the Industry Coordinating Group for the Canadian Environmental Protection Act which includes, in addition to some of the members I have previously mentioned, the following: Adhesives & Sealants Manufacturing Association of Canada, Canadian Paint & Coatings Association, Canadian Petroleum Products Institute, Canadian Plastics Industry Association, Canadian Steel Producers Association, Canadian Textiles Institute, Ecological & Toxicological Association of the Dyes & Organic Pigment Manufacturers, Industrial Biology Association, and the Soap & Detergent Association.
Other organizations include: Canadian Consumer Specialty Products Association, a $14 billion industry which employs over 11,000 Canadians. Many companies also support Bill C-212, like Bayer CropScience; BASF Canada; Provel Animal Health , a division of Eli Lilly Canada Inc.; Engage Argo Corporation; and Crompton Company.
These are serious organizations employing thousands of Canadians across Canada. These organizations support the bill because it is the right thing to do. It would encourage companies to make investments and create jobs.
I ask colleagues to support the bill. It would enhance Canada's competitiveness and advance our country's innovation agenda.