Carney’s red tape moment

As published in The Hub

Red tape and regulations are a perennial Ottawa issue, like interprovincial trade barriers or softwood lumber. Stakeholders raise it. Governments nod. Everyone agrees it’s a big problem. But no one seems to land a lasting fix.

Still, every new government takes its turn. Prime Minister Mark Carney’s team is up next. We wish them luck.

On July 9, the government told ministers and federal regulators to identify outdated, duplicative or needlessly burdensome rules and to report back within 60 days. That deadline is today. A new Red Tape Reduction Office at Treasury Board will track the proposed pruning.

The exercise will meet cautious optimism at best, and extreme cynicism at worst. The question is simple. Does this effort shrink the stock of legacy rules, or does it become another review added to the pile of toothless reform? If it’s the latter, it will be another tribute to incrementalism that has changed very little.

We’ve had plenty of kicks at the can.

Over the past 15 years under two previous prime ministers, there was a Red Tape Reduction Commission that led to the Red Tape Reduction Act. A Centre for Regulatory Innovation. Rounds of sector reviews. An external advisory committee on regulatory competitiveness. Cross-border regulatory harmonization forums with the United States and the European Union. A federal-provincial-territorial table on regulations. Cabinet directives. And yet we have barely made a dent.

The current pillar of today’s strategy, the one-for-one policy that requires government to eliminate one rule if they add a new burden, has removed about $82 million in administrative burden by the government’s own count over the past decade. But that’s a drop in a big bucket. The Canadian Federation of Independent Business puts total regulatory costs at roughly $52 billion in 2024.

In a study released earlier this year, and despite all these government initiatives, Statistics Canada estimated that regulatory requirements rose about 37 percent from 2006 to 2021, to more than 300,000 rules.

In our own work at the Business Council of Canada, executives keep putting the regulatory burden at the top of the list when asked what drives or deters investment. They describe the problem as “pancaking.” One rule stacked on another. As we wrote in a report released this week: “A single regulation that is poorly designed is annoying. Thousands of regulations that miss the mark are a macro-economic event.” Areas where rules are particularly cumbersome, according to chief executives of Canada’s largest companies, are permitting for infrastructure projects, financial services, package labels, impact studies, and overlapping ESG regimes.

To be sure, this is not a call for wholesale deregulation. Rules are necessary in many cases. But overregulation carries real costs, and by international comparisons, Canada’s burden ranks among the heaviest.

There are good reasons to be hopeful about the current review.

The 60-day clock forces ministers and regulators to deliver a public list of cuts. That should create accountability and put pressure on departments and agencies. The review also sits inside Carney’s broader “Build Canada” agenda that includes Bill C-5, the fast-track law, an ambition to double new home construction and work on internal trade, among other things. At the heart of the Carney agenda is the promise to drive investment in the economy as an offset to U.S. President Donald Trump’s trade disruptions. The prime minister can’t deliver on that promise if permitting and compliance stay broken, no matter how successful the fast tracking of major projects becomes.

Another recent innovation has been the Red Tape Reduction Office to track and facilitate progress. The aim is to turn what is typically a one-off exercise into a standing program.

But no one should underestimate the difficulties ahead. Every rule and regulation has a political constituency. And politicians know all too well that no one builds statues for red tape cutters.

It’s no coincidence that Carney’s focus since winning the federal election has been not to fix the problem, but to bypass it. The government’s touted C-5 legislation routes around a system that slows too many projects in the first place. That’s indicative of the challenge he faces on regulation.

If C-5 is an emergency fast lane for a few select projects, the rest of the economy will still sit in gridlock until this problem is solved. I don’t claim to have a master plan. But history is clear that anything short of full, sustained government commitment won’t be good enough. The real test is what happens on day 61 of Carney’s 60-day review. That starts now.