Proceedings of the Standing Senate Committee on
National Finance
Issue 29 - Evidence - April 1, 2015
OTTAWA, Wednesday, April 1, 2015
The Standing Senate Committee on National Finance met this day at 6:45 p.m. to study Bill C-21, An Act to control the administrative burden that regulations impose on businesses.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Honourable senators, this evening, we are continuing our study of Bill C-21, An Act to control the administrative burden that regulations impose on businesses.
[English]
Honourable senators, I want to let you know that we did invite the Canadian Chamber of Commerce and the Conference Board of Canada, both of whom thanked us very much and indicated they may have an opportunity to send us something in writing but couldn't attend on the short notice that we have to satisfy our masters in the Senate Chamber as a whole. But thank you very much for suggesting those.
I have also been told that the budget is likely to come down on April 20. We can anticipate that shortly after that we will see a budget implementation bill, but we'll plan for that over the next couple of weeks.
This evening we're very pleased to welcome a number of witnesses and who were able to come on short notice. From the Canadian Consumer Specialty Products Association, we welcome Shannon Coombs, President. From the Public Service Alliance of Canada, we welcome Chris Aylward, National Executive Vice-President; and Howie West, Work Reorganization Officer. By video conference from Vancouver, we welcome Laura Jones, Executive Vice President, Canadian Federation of Independent Business.
I understand there are opening comments before we engage in our question and answer period. We will begin with Ms. Coombs.
Shannon Coombs, President, Canadian Consumer Specialty Products Association: Good evening, Mr. Chair and honourable members of the committee. It is pleasure to be here today to provide CCSPA's perspective to your review on the proposed legislation, Bill C-21. My name is Shannon Coombs and I am the President of Canadian Consumer Specialty Products Association. I have proudly represented this industry for 17 years and our many accomplishments as a proactive and responsible industry.
CCSPA is a national trade association that represents 35 member companies across Canada, collectively a $20 billion industry, directly employing 12,000 people in over 100 facilities. Our companies manufacture, process, package and distribute consumer, industrial and institutional specialty products such as soaps and detergents, domestic pest control products, aerosols, hard surface disinfectants, deodorizers and automotive chemicals, or as I call it, everything under the kitchen sink. I have provided the clerk with some copies of our one-pager, which has a picture of our products, and I am sure that many of you have used them.
Why are we here? CCSPA member companies are regulated. The ingredients, the bottle, at times the end use of products — so ant traps and disinfectants — and the labelling are all regulated under respective regulations and governing legislation. This is both for consumer use as well as the workplace.
We support Bill C-21because it adds the necessary checks and balances for regulation development, which can often add complexity and cost to doing business in Canada. The act tackles the issue of administrative burden, which is very important to industry. While it may be narrow in scope, only addressing regulatory burden brought by the paperwork, it is a positive step in the right direction. It causes regulators to reflect on the cost to industry prior to the development and implementation of regulation.
Could the scope, the net of the bill be bigger? Yes, we would argue that the net could include regulations that modernize labelling laws or ingredient regulations which are costly to industry. We are currently faced with the implementation of the Globally Harmonized System for classification and labelling of workplace chemicals, which is known as GHS. Industry will be changing all of the safety data sheets and labels to adopt the UN GHS system, which the U.S. recently implemented. It will be a significant cost to industry and the one-for-one rule does not apply. However, the spirit of the one-for-one rule was considered in the development of the regulation as Health Canada worked with officials from the U.S. Occupational Safety and Health Administration, OSHA, to reduce regulatory barriers so that industry could use one SDS and one label within North America.
As per the regulatory impact analysis statement for GHS, it "is proposing to revise the classification and hazard communication requirements related to workplace hazardous chemicals in order to align the current system with that of the United States" and "it is expected to reduce costs for industry while simultaneously enhancing the health and safety of Canadian workers."
We support the GHS initiative and the intent to streamline regulations for the classification and labelling of workplace chemicals. We see Bill C-21 as the catalyst for change within the government's regulatory development. It is the first in a step-wise approach to changing Canadian regulatory development processes and the culture that creates them. It provides rigorous a checks and balances function by Treasury Board.
Since the one-for-one rule has been introduced we have seen officials within government open to the ideas of harmonization to reduce regulatory burden, with the Treasury Board officials providing oversight and guidance to the departments to ensure adherence to the policy. Both have been refreshing and effective.
When I appeared before the House of Commons Government Operations Committee, we had suggested the government undertake a review and write an accountability function to assess the successes and possible improvements within the scope of the initiative. These are by reviewing the scorecard and the metrics to develop it; by reviewing the successes not captured in the report, which I'm sure you'll hear some of the stakeholders provide to you; by reviewing each department's forward regulatory plans, which are a most positive outcome of the process; and by ensuring departments publish and deliver on plans and that the small business lens is being utilized within the departments.
Mr. Chair, thank you for the opportunity to comment on the important piece of legislation and provide our perspective. We support this legislation and working with you and the committee to ensure the intent of legislation is fulfilled.
The Chair: Thank you very much, Ms. Coombs.
Chris Aylward, National Executive Vice-President, Public Service Alliance of Canada: Thank you for inviting the Public Service Alliance of Canada to appear before the committee.
The Public Service Alliance of Canada represents public service workers who protect Canadian consumers and work in the fields of health and safety, food safety, transportation safety and environmental protection, among others. They are proud of the work they do to protect Canadians.
Our major issue with Bill C-21 is that it is completely unnecessary. The stated purpose of the bill is to eliminate one regulation for every regulation created: the one-for-one rule. If regulations are no longer deemed in the public interest, after due consideration and consultation, the regulators have always had the ability to amend or delete them. In fact, they do so on a regular basis. There is absolutely no need for the one-for-one rule. Everything that it claims to do can already be done.
Bill C-21 is filled with loaded terms like "red tape" and "administrative burden." Laws and their accompanying regulations are important safeguards to balance rights in a democratic society. We should be proud that they exist and not paint them as red tape. Why should it be an administrative burden to make sure our citizens are protected? Regulations in Canada have helped make this country one of the safest and best places to live. Canadians depend on regulations to protect our water, food, health and consumer goods. Regulations ensure the safety of the roads we drive on and the environment we live in. They keep financial institutions, telecom companies and other businesses in check.
Canada's economy was sheltered from the worst of the 2008 global economic meltdown because our bank regulations were tougher than those in jurisdictions like the United States. Those regulations paid off and protected Canadians from the economic devastation that almost ruined some other countries.
Canadians also rely on their governments to enforce those regulations. Today that reliance is in jeopardy. Not only are the regulations on the chopping block, so are the people who enforce them. Federal inspectors in all sectors have seen their numbers and enforcement power reduced through successive budget cuts and freezes. We are relying more and more on corporate self-regulation to the detriment of Canadians' health and safety.
Not only is the Bill C-21 unnecessary, it will not adequately protect Canadians. Where the bill says that the one-for- one rule must not compromise public health, public safety or the Canadian economy, this is unsufficient. We know in testimony in hearings of the House of Commons Government Operations and Estimates Committee that departments are already looking at these regulatory areas.
The bill also compromises a broader category of issues that concern Canadians, such as consumer and environment protection. It could be mean, for example, that our current strong financial regulations won't be there to protect Canadians in the event of a future economic crisis. The immunity in clause 8, while absolutely essential, if this bill becomes law, it makes us wonder again why this bill is even necessary in the first place. This clause says that no action will be taken if this legislation isn't applied and that no regulation is invalid, only if it fails to comply with this act.
As we understand it, the proposed legislation foresees that there will be occasions when the government will decide that the act can't and won't apply. If that's the case and regulations can already be amended or deleted, what is the point of Bill C-21?
We believe that there must be transparency around which current regulations will be traded away for new regulations. This is suggested in clause 9. If this bill becomes law, it must provide for broader public consultation than currently exists.
Our members believe that it is more important to the Canadian people that regulators spend time to actually inspect and enforce non-compliance. We certainly don't believe it's in anyone's best interests to have public service regulators spending time looking for regulations to cut just to meet the terms of this unnecessary bill. That would really be an administrative burden.
Previous parliamentary testimony has shown that a responsible, ongoing review of outdated administrative processes would effectively accomplish the same purpose as the one-for-one rule in this bill.
Bill C-21 is just one aspect of how regulations to protect Canadians are being undermined. First, you eliminate the people who enforce the regulations, and when you can no longer enforce them, you eliminate the regulations.
In summary, we believe that Bill C-21 is unnecessary. At worst, it is a make-work project that will divert scarce resources from enforcement to one-for-one reviews. Reviewing outdated regulations can be valuable, but when budgets are being cut, we believe a priority must be given to enforcing the regulations that protect Canadians.
Thank you.
The Chair: Thank you, Mr. Aylward, for a very clear presentation. We understand what your position is, so I will now go to Ms. Laura Jones, Canadian Federation of Independent Business, in Vancouver.
Laura Jones, Executive Vice President, Canadian Federation of Independent Business: Thank you very much for the invitation to present on Bill C-21. My name is Laura Jones and I am the Executive Vice President of the Canadian Federation of Independent Business, better known as CFIB.
CFIB represents 109,000 small- and mid-sized companies across Canada that are independently owned and operated, so that means we're the non-stock market economy. We represent those members by surveying them frequently and then bringing their positions to the table.
Over our 44 year history, the burden of regulation has consistently been a very high priority for our membership. In fact, it's second only of concern to our members to the total tax burden.
In a recent study, we have estimated that the total cost of regulation to Canadian businesses of all sizes is $37 billion a year, which is obviously a significant cost.
In addition, our research shows that the smallest businesses in Canada pay over five times the per-employee cost of regulation as the larger businesses in Canada, which means that regulation is a significant handicap for small business.
Perhaps the most disturbing indicator that the amount of regulation is a serious problem for small business comes from the number of business owners who are indicating that they would not advise their children to start businesses in this country based on the amount of regulatory burden. In fact, 42 per cent of the members that we survey say they wouldn't advise their children to go into business because of the regulatory burden, with only 38 per cent saying that they actually would advise their children to go into business based on the current state of regulation.
I do want to be clear with the committee that small businesses believe that some regulation is necessary and beneficial. In fact, small businesses believe that about 30 per cent of the current burden of regulation could be cut without harming the legitimate public interest, health, safety and environmental reasons for having regulations in place.
With this context in mind, it's not surprising that business owners overwhelmingly support the one-for-one rule. In fact, 83 per cent of small businesses support it, with 54 per cent of that 83 per cent saying that they are very supportive of the bill.
Small businesses do believe that the one-for-one rule is important because it adds a constraint to regulators. Business owners themselves, of course, face constraints in their business every day in terms of the amount of time they have to run the business and to devote to regulatory compliance. They do like this bill and, in fact, believe also that it is good not just for business but for all Canadians because a significant portion of our membership, about 65 per cent, says excessive regulation is reducing productivity in their businesses. When productivity is lower than it otherwise might be, that means that prices end up being higher, wages end up being lower and there are fewer job opportunities.
I would add that I think this is one part of controlling the regulatory burden. We continue to convey to the government on behalf of small business that this is an important piece of keeping a lid and a check on the regulatory burden, but it needs to be complemented with other measures that address some of the things that affect small businesses that are outside the scope of what is addressed simply by controlling the burden of rules that comes from regulation. There are also rules that come from legislation. Government customer service, or lack thereof, that can be a big concern for small business, and there are rules that show up in policy that aren't related directly to regulation.
Thank you.
The Chair: Your last point, rules that come from policy, this in effect is moving from rules that come from policy to regulations that come from legislation. This is an evolution of that process. Are you with me?
Ms. Jones: Yes, I think so. We're very concerned that we address any rule that hits small business. This is definitely an important piece of that, but there are also rules that come directly from legislation that wouldn't be covered by the one-for-one rule — for example, some of the anti-spam rules.
The Chair: Honourable senators, I want to confirm that we have received from Senator Black, the sponsor of the bill, an explanation flowing from one of the questions from yesterday in relation to carve-out and the tax measures that were part of the policy carved out from this one-for-one rule and will presumably continue to be carved out for the time being in the regulations when we see them.
We will begin questioning with Senator Larry Smith, who is from Montreal.
Senator L. Smith: In listening to all of the witnesses, they have talked about regulations, legislative rules and administrative process. It's my understanding that Bill C-21 is meant to try to reduce impediments to businesses in our country so that we can become more effective and efficient.
Mr. Aylward, in your presentation, especially when you talked about the banks, you said that with more regulation we could have more financial trouble. The changes that Mr. Flaherty put in were simple; I think $57 billion was the amount that flowed to the banks so that they could overcome the major bump that they took, the shock. I'm just trying to understand. That to me is not anything that has anything to do with a regulation. I'm trying to understand, and maybe all the witnesses can help me, when we talk about administrative process regulations and legislative rules, what are we really trying to reduce? I look at Mr. Aylward's example that the banks could fail. If more changes, which are called regulations, were put in place, the banks could have trouble. The banks survived because of money put into them, which was a critical move by the Government of Canada at the time.
I'm not trying to be critical. I'm trying to understand how you look at regulation, how you look at legislation and how you look at administrative process. What are we trying to reduce here? Is there a clear distinction between the elements of administration, legislative rules, et cetera, in terms of the whole process?
Do you see what I'm getting at? Is there a clarity of understanding of what exactly we are trying to achieve? I understand the one-on-one rule; you take one to replace one.
The Chair: Mr. Aylward, we will start with you. If either of the other witnesses wish to comment after you finish, we'll go to them.
Mr. Aylward: I was saying that fewer regulations as far as the financial institutions are concerned could put Canadians at risk, not more. With fewer regulations, Canadians are actually put at risk. The banking institutions in Canada are regulated. Those in other countries are not. Once you start reducing or eliminating some of those regulations that our financial institutions must follow, you are putting Canadians at risk by doing that.
In respect to the linkage between the three, absolutely, I would agree with you. What I have heard from the other witnesses is that it's all about reducing cost, but reducing cost at what real cost to Canadians?
Senator L. Smith: I did read your letter, which you read tonight. When I saw some of the elements, I was a little confused because I was wondering whether you were talking about administrative burden or about changing rules?
If we go back to the banking situation, the banks worldwide run under rules that they have to agree with if they are going to be a member of the banking community. If you are a major bank and you hear the term Basel III, it refers basically to the amount of capitalization you have to have in your banking system to qualify as a member, but more important, to be determined to be whole and to be able to work within certain environments. Changing rules that have to deal with that type of element is not hurting the banking industry. I don't see it the same as changing an administrative process.
My question was: Is there a difference between an administrative process and operational rules that are critical to help businesses perform? I think there can be some confusion that if there is not a clear definition of what we're trying to improve or modify, it may not be as effective as possible.
The Chair: Mr. Aylward, before we go to you, could we clarify something? You've made reference on the record to a letter. That hasn't been circulated.
Senator L. Smith: No, I read the submission.
Mr. Aylward: I believe he's referring to my submission.
The Chair: Okay. Thank you. Would you like to comment?
Mr. Aylward: Again, in respect to the rules, you certainly have rules, and then you have regulations. What we're concerned about here are the actual regulations.
When you say that we're simply going to eliminate one once we create one, the legislation doesn't even speak to how that gets done. It speaks to a report at the end of the year. So we are very concerned about that.
Going back to your original question, if you start eliminating some of those financial regulations that we currently have in place in this country, that's where we're saying you're putting Canadians at risk.
Senator L. Smith: Ms. Coombs, you seem to support the legislation.
Ms. Coombs: I do, yes.
Senator L. Smith: As we discuss this, and I'm not trying to create arguments here, but your perspective to the type of comments that Mr. Aylward brought up, am I completely in the cold when I'm asking a question of the definition of regulations and administrative burden? My understanding in listening to you, based on the way the system works in the world with the GHS and other SDS rules that exist for regulations, is that you felt we were going in the right direction with this legislation because it would help small businesses.
Ms. Coombs: Absolutely, senator. The scope of the bill only focuses on administrative burden, but from our perspective, that's a critical first step. So when I was talking about my GHS example, I'm talking about hidden regulatory costs, so changing labels to meet new regulatory requirements and changing new safety data sheets. Those aren't included in this bill, but the advisory committee to the minister did recognize that the definition could be expanded in the latest scorecard report. We saw that as, again, another positive step forward.
I think one of the officials who appeared before the House of Commons committee really captured the essence of what we were trying to get at. This is Environment Canada. He says that it encourages us to go back to looking at the existing regulation bank, including how the regulations are structured, whether they could be better structured, as well as the exact administrative costs they impose on industry and Canadians in those regulations and whether there are other ways we can get at the same information in a more efficient way. So for us, that's critical. That is looking at making regulations better, more effective and having less cost on industry. We see this as a really good piece of legislation, senator.
The Chair: I will offer Ms. Jones an opportunity out in Vancouver to comment on the question as well. Do you have any comment you'd like to make?
Ms. Jones: We all agree that some level of regulation is necessary and important. However, there need to be some checks on that because it is continuing to grow.
I think the definitional issues that the senator references are challenging, in part because when you talk to the private sector about what regulatory burden is, they don't limit themselves to the administrative burden coming directly from administration. If they call the CRA and don't get a straight answer to a question, from the perspective of the private sector, that is regulatory burden; that is red tape. So that makes some of this difficult to discuss.
However, we very much support this bill because we think there is a piece of what the private sector would deem regulatory burden that is effectively addressed by this, and that is the administrative burden flowing directly from regulations. It is important that there be a check on that and that regulators have to ask themselves important questions, like the ones that Ms. Coombs just discussed.
The Chair: Thank you.
For the benefit of our witnesses and those who may be watching this on television, we have in the Senate a way of handling these bills. We have a sponsor and a critic who are the spokespersons on both sides. The sponsor is here to tell you why this is good legislation and the critic hopefully will tell you how it can be improved, if at all.
Senator Black from Calgary is the sponsor of this bill, and I'll call on him at this time.
Senator Black: Thank you very much, Mr. Chairman.
To the three of you, thank you very much for the presentations you've made.
I think something we should always celebrate in this country is we can sit in a civilized forum like this and agree that we are going to disagree, so it was nice to hear some disagreement. But as the sponsor of the bill, Mr. Aylward, you won't be surprised that I have a question for you.
My question is very simple. There is no agenda behind this question except I would like to understand. Have you assessed the impact on your members, on your membership, should Bill C-21 be passed? That's what I want to understand.
Mr. Aylward: Thank you for the question.
We have assessed the impacts of the cuts within Canada, the cuts to, like I said, our members who deliver a service, especially around food safety and the deregulation around that. When you look at some of the things that Minister Raitt has recently announced around regulations, she's announced several new regulations. Our concern is what gets deleted as a result of that?
Senator Black: Is it the deletion that you're worried about for your members? That's what I want to understand.
Mr. Aylward: Our concern is the safety of Canadians.
Senator Black: Of course I understand that. We all share that concern. But I would like to understand, if you could share it with me, what you think the impact on your members will be from this legislation.
Mr. Aylward: The lack of ability to enforce regulations, and we're seeing that currently. When you have a regulation that needs to be enforced and you take away the ability to enforce that, what value does that regulation have?
Senator Black: Except we're hearing from business that some of the regulations that need to be taken away have no value. That's what we're hearing.
Mr. Aylward: And that may be true, but where's the consultation taking place and which stakeholders are involved in that? We just heard of an example given by one of the witnesses about service delivery. How do you tie in service delivery with this bill? I'm not sure, and I certainly don't see it as an administrative burden.
When you call an agency, whether it be CRA or anybody else, and do not get a response or do not get an accurate response, that's more of a service delivery issue that has to be addressed, and we wouldn't disagree with that. But we would certainly disagree with trying to tie Bill C-21 with a service delivery problem. The whole issue around the administrative burden, maybe I missed it, but I did not see a definition of "administrative burden" within the bill.
Senator Black: There is an effort at it. We recognize it's complicated.
Do you think the effect of this bill will be for your members to lose jobs?
Mr. Aylward: That's not our concern, but if you take away the regulations that our members enforce currently, certainly that's a possibility. As I said, and I want to emphasize this, this is not about jobs or saving jobs; this is all about protecting Canadians. That's what our concern is.
Senator Black: Thank you very much, Mr. Aylward.
The Chair: Thank you, Senator Black.
I just want to clarify the record. Clause 2 of the bill gives a definition of "administrative burden." Were you aware of that, Mr. Aylward? Do you feel that is an inadequate definition? It is at the top of page 2 on my document and states:
"administrative burden" means anything that is necessary to demonstrate compliance with a regulation, including the collecting, processing, reporting and retaining of information and the completing of forms.
Mr. Aylward: Again, I would go back to more of a service delivery. That's what the administrative burden here really demonstrates, a service delivery issue.
The Chair: So you accept there is a definition of "administrative burden"?
Mr. Aylward: I agree with Senator Black. There is an attempt to define it.
The Chair: Thank you.
I'll now go to the critic of Bill C-21, Senator Massicotte, a senator from Montreal.
Senator Massicotte: Thank you for being with us, all four of you. To be very clear, I'm the critic, and the way I view my role is to be critical and review the legislation in a critical manner.
Having said that, from a conceptual sense, from an objective sense, I highly support the bill. I think it's a very necessary bill, but what I am worried about is: Will it work in real life? Will it be fair in real life? Will it cause a structure in which maybe some decisions or eliminations could be made to the detriment of the Canadian public? That's what I worry about.
Ms. Jones, I think you were personally quite involved in a process where you were a member of a previous committee that, over the last couple of years, came up with all kinds of recommendations as to how to assist and basically minimize the burden upon business, particularly small business. One of the recommendations was the creation of this bill, the one-for-one, which is where the government took its initiative. But, if you heard Mr. Aylward, his earlier comment was that this is not necessary. The bureaucrats and the minister already have full authority, full discretion, to make those efficiencies and those gains, so why is this necessary? It seems to be arbitrary, where you have to do one-for-one. It's really redundant. It could have been done already, and it has been done already. How do you respond to that comment?
Ms. Jones: I think the big difference with the one-for-one way of thinking is that it requires a challenge function before the new rule comes into place, not after the fact, saying that maybe that rule was not necessary or that now we can look at what we're going to remove, but before something comes into place. That is a different discipline.
In my experience, in British Columbia, where we have a one-for-one rule in place, albeit a bit of a different rule, which is actually broader than what's being proposed federally because it applies not just to things in regulation but also to legislation and policy, it really does facilitate a culture change where people are thinking about what the most important rules are. They're doing it before they are making changes, rather than after the fact. I think that that is a very important distinction and change.
I also, by the way, think that that's good for health, safety and environmental protection because I think we need businesses to be focusing on the most important rules. One of the things that we sometimes hear, particularly from our smallest business members, is that there are so many rules now that they worry constantly that they are out of compliance with some things. They are just trying to keep their heads above water in some cases, complying with the most important rules. I don't think that's constructive in terms of doing the best we can to protect Canadians.
Senator Massicotte: As you know, this act basically implements into law a practice that has been in place, at the federal government level, for the last two or two and a half years, and a score card was recently issued. You were part of the thought process, the creation of it. When you look at what has been achieved, are you satisfied? They apparently have saved $22 million of labour. I would probably have said that $22 million is not a big number. It doesn't seem like very much. Are we going with the right process relative to how your committee defined the objectives?
Ms. Jones: I think you're right in saying that 22 million is not a big number. I believe the 98,000 hours that have been saved is another number that is used.
However, the question is: What's the alternative? The alternative would be no checks on the process and to have the regulatory burden continue to grow without that check on at least maintaining it.
The one-for-one rule was never meant to reduce the regulatory burden; it was to keep the regulatory burden from growing. So a nice side effect is that it has forced enough discipline that we actually do have some reductions, but I think that's why we continue to say that the one-for-one rule by itself is not going to be sufficient to get the kind of difference on the ground that we need. However, it is a very important part of the equation because without it I believe the regulatory burden would continue to grow unchecked.
Senator Massicotte: If you look at the legislation, it has three outs. Basically, any impact upon the economy or the safety of people is excluded automatically. The legislation also allows the minister, at any point in time, to say, from the way he sets the rules, "That's to be excluded."
I look at all of these exceptions and note that since 1970, every government since then has basically talked about reduction of bureaucracy. It's very popular, and we're maybe months away from an election. Every four or five years, there has been a report about how smart we've been doing in reducing bureaucracy, but as you well know — and the Income Tax Act is a good example — it just keeps getting bigger and bigger.
Are we going to get real results, or are we going to have another report? Since 1970, over 45 years, we've been talking about the same subject. Are we going to get real results or just another exercise of academically looking good for an election?
Ms. Jones: I think that that's a really important question. I do think the ultimate test of a good regulatory reform is whether it's making a difference on the ground, while continuing to protect human health, safety, the environment, all of the things that Canadians think are important.
I do believe that this can make a difference. I do believe, though, that it will be critical for the government to stay committed to the other reforms that complement this one. We continue to discuss with the government the importance of having some really good measures that reflect how the private sector is feeling and the total burden that the private sector faces when it comes to regulation, in order to effectively answer the question that you are raising.
So I think this is part of the solution, but it would not be advisable to think that this is going to be the magic bullet. This is a big challenge we have in Canada, and it's going to take a number of different strategies to make sure that we are getting rid of red tape and keeping necessary regulation in place.
Senator Massicotte: Ms. Coombs, the policy is in place. It's happening. We're getting a scorecard report every year. Why the creation of a law? Why put it into a law as opposed to just going on with business?
Ms. Coombs: I think that the policy has been very effective for the last two and a half years, but from our perspective we'd like to see it in law because then it's written down. It's in stone and the government officials have to adhere to it. It's very important for us to see it actually written down, not just a policy that can be changed but legislative in nature.
The Chair: Thank you for that question and that answer. We were wondering about that yesterday.
Ms. Jones, you mentioned that British Columbia has a similar type of law, and you explained the difference in how it's broader and applies to legislation as well as regulation. Do you know of any other provinces that have similar legislation across Canada?
Ms. Jones: Just to clarify, in British Columbia, the one-for-one rule is not law; it's policy. However, they've had it in place for over a decade.
Other provinces have done this over time. Nova Scotia actually had a rule where they were looking to reduce their regulatory burden by 20 per cent, but they actually had a slightly different measure. They were looking at the number of hours, and they reduced the number of hours off of that baseline.
Ontario is starting to work on something similar to what British Columbia has in place.
So other provinces are starting to work on measuring and setting targets for either maintaining the regulatory burden or reducing it, but there are slightly different approaches and measures that have been used across Canada.
The Chair: Mr. Aylward or Ms. Coombs, do you have anything further to add on that? You're okay with that answer? If you're okay, we're okay.
[Translation]
Senator Bellemare: My question is for Ms. Jones, but the other witnesses may answer as well. You said that you have estimated the current cost of regulation to Canadian businesses at $37 billion a year. That's a lot. Where does that $37 billion come from?
Bill C-21 is meant to alleviate red tape. Are you able to provide a breakdown of the regulatory costs caused by red tape? Does that $37 billion include the cost of labelling? Does it include the cost of health and safety? Can you tell us exactly what the cost components are, and how you arrived at that number? Did you use the same method we have used for the past two years, the method that is being proposed to estimate the cost of regulation?
[English]
Ms. Jones: That's a very good question. On what we do in order to evaluate and estimate the costs of regulation in Canada, I want to be clear that any number looking at the cost of regulation is an estimate. It is quite difficult to quantify because most of the costs are compliance costs borne by businesses and some of that is passed on to consumers. It is an estimate. I believe our estimate is quite conservative.
We look at the hours that business owners and their staff spend trying to understand and fill out forms, and comply with any regulation. Again, from a private sector definition, we are not limiting to just technical regulations but any requirement that comes from governments of all levels on their business and how much time are they spending.
[Translation]
Senator Bellemare: Does it include taxation costs?
[English]
Ms. Jones: Yes, it also applies to tax calculations. In fact, that's a very big part of the total.
We also look at how much money they spend on accountants, lawyers and other outside professionals in order to help them with compliance.
Finally, we ask them about any expenditure on equipment or machinery that is specifically and only for the purposes of complying with regulations. So it's machines and equipment that they would not otherwise buy but they need to have in place to comply with the rules.
Those are the main components of our cost estimate. It does not include things like lost business opportunities or any money they might spend on lobbying for better regulation. Those are things we do not include because we feel they are too difficult to estimate.
[Translation]
Senator Bellemare: Do you have a sense of the costs this bill targets? Do you have a sense of how much of that $37 billion is the result of federal red tape? What's the percentage?
[English]
Ms. Jones: It's a very difficult question to answer because our estimate looks at all levels of government. So we are not looking at only the federal level of government. Because we're asking business owners, and sometimes they don't even know which rule is federal or provincial or municipal, it's a very challenging thing to estimate.
Your question illustrates a very important point: We need to do a better job of trying to come up with good estimates. When I say "we," I mean government as well as groups like ours.
[Translation]
Senator Bellemare: You also said that the per-employee cost of regulation is five times greater for small businesses than it is for bigger ones. That's a major difference. So regulatory costs can hurt small business, and I can see why, given that regulation often results in fixed costs, not variable ones. Is there anything you could suggest in terms of how to tackle that problem?
[English]
Ms. Jones: That is another good question. Part of tackling the problem is keeping the total cost of regulation more reasonable across the board. Of course, there are also policies that can be put in place where there are different levels of regulation depending on the size of business, and we already have some of that where the requirements escalate as you get bigger. But I think the single most important thing that we can do for small business is to keep the costs reasonable, including government customer service.
One of the things that really does frustrate businesses, which is not included in this bill, are those calls they make to CRA, Health Canada or whatever government agency. Getting clear, precise, plain language information is critical for small business. That's why we continue to say that this bill is important. It's just as important that the government stay focused on the entire problem and thinking about that problem from a private sector perspective, from the perspective of the majority of businesses in Canada that are small.
The Chair: Would either of you like to comment? Was it handled well enough?
I will go on to the next senator on my list who has asked to intervene.
[Translation]
Senator Chaput: My question is for Ms. Jones. Bill C-21 doesn't include a small business component. Do you wish it did, and would it have been beneficial to business to include that component in the bill?
[English]
Ms. Jones: Yes, I think it would be nice to have the small business lens in the bill.
[Translation]
Senator Chaput: What would that have added to the bill?
[English]
Ms. Jones: One of the challenges we find with regulators, and indeed with the general public sometimes, is that when they think business, they think big business. Of course, the reality is that the vast majority of businesses in this country have fewer than five employees. I think that reminding people of that reality is always a good idea.
[Translation]
Senator Chaput: Thank you.
My other question is for Ms. Coombs. In your remarks, you called Bill C-21 a step in the right direction, a first step. What would you like to see as the second step in terms of an approach that builds on the bill? What would be a positive second step that would build on the foundation laid by the bill?
[English]
Ms. Coombs: As I mentioned in my comments, we would like the scope to be increased with respect to regulatory red tape. It was recognized by the advisory committee to the minister that they look at the department, as well as with stakeholders, to see how we could expand the current definition. It is very narrow, "administrative burden," but it is a step in the right direction.
However, if we could include regulations that look at cost of business, which would be label changes or reformulation, for example, I think that would also be helpful.
Senator Wallace: Ms. Jones, I was interested in all of your comments, but one caught my attention. You said, and I'm sure this is an approximation, that in your opinion 30 per cent of the existing administrative burden could be removed without adverse social or economic impacts. Where does that 30 per cent come from? What it is based on?
Ms. Jones: Thirty per cent is based on the average of what small business are telling us they believe could be reduced. We asked them how much of the existing burden of regulation could be reduced without harming the public interest of regulation.
I think it's a number that makes a lot of sense. Over the past seven or eight years we surveyed businesses on this same question three different times and the results are quite stable.
The other thing to consider is in British Columbia they reduced the number of regulatory requirements by 42 per cent with nobody arguing that this had a detrimental effect to human health, safety or the environment, so I think it's a number that holds.
Senator Wallace: Mr. Aylward, you opened with a very strong statement that you feel this bill is unnecessary. When I think about that, I think why is this? Why is it proposed to us that this bill is necessary? My sense of it is that if there is going to be reduction in administrative burden and this regulatory burden, the only way it can happen is if there is a pressure point. If it's just left as a result that will happen in the normal course of events, the sense I get from business is it just does not happen.
Although the Income Tax Act is not something we are dealing with in this particular bill, that's something we can all relate to, where it seems over time it's just a series of Band-Aids. There's one regulation on top of another to the point that unless you have a tax expert, you couldn't begin to understand what the Income Tax Act even begins to say. I know many of us feel just start from ground zero and rebuild it again and build it properly.
Having said that, what has the experience been with our two business representatives? This may be stating the obvious, but if this bill is not implemented, then the reduction in administrative burden would not otherwise happen. Otherwise it would be left to bureaucrats to somehow figure it out in that bureaucratic world. There has to be a pressure point to make this type of reduction happen. I'm just wondering if that's the conclusion you have each come to.
Mr. Aylward: After spending 30 years with the Canada Revenue Agency, I fully a agree with your last comment about the Income Tax Act.
As to whether the bill is necessary, we fail to see what can be done as a result of this bill that cannot be done today. The pressure point today can come from stakeholders, such as the businesses that our two witnesses represent today. That's where those pressures points can come from. In respect to reducing those, there is nothing in the bill that indicates how that will be done. That is a major concern to us.
There have been several comments and several references made to the advisory committee. When you look at the composition of that advisory committee, which gave initiative to this bill, it is very peculiar to us. Who actually sat on that advisory committee? Members of Parliament sat on that committee; business groups sat on that committee. All of the members of Parliament that sat on that advisory committee were from one party. Not one opposition member of Parliament sat on that advisory committee; not one stakeholder that sat on that advisory committee could voice opposition to this bill.
So when that takes place, it gives rise, as Senator Massicotte referred to, to the initiative for this bill. That raises all kinds of flags for us.
The pressure points can come from businesses, business groups and the associations that represent the businesses, those who are advocating for stronger service delivery through government departments and agencies. It can take place and happen the same way.
Senator Wallace: Certainly I would agree that those individuals and groups can exert pressure, and they do it effectively. We are seeing that tonight in the presentations. It is one thing to advocate for something; it's another thing to actually make it occur.
My experience in dealing with bureaucracy, unless there is something that will force these types of changes to happen, it just won't. There are other things to be done. They will move on to other issues. We end up with a series of Band-Aids and you never cure the issue. You just keep layering on more and more temporary solutions.
I hear what you are saying, that individuals and groups can apply these pressures, but unless you have something built into the system, my concern is that those changes will never actually happen.
Mr. Aylward: And our concern goes along with that in respect to what gets eliminated and what safeguards are in this piece of legislation, which is a very small piece of legislation when you look at the bill. There are no safeguards built in there to say exactly what gets deleted. It's done through a report at the end of a year.
Senator Wallace: You're right. The details aren't in the bill, but as you pointed out in your comments, the bill is very specific that the one-for-one rule must not compromise public health, public safety and the Canadian economy. That's entrenched in the bill.
You might ask what that means and how you determine it. When we had witnesses appear at our last meeting, I asked them a question about the exemption provision in clause 7, that regulations could be made that would exempt from the application of the act and would the details be fleshed out through those exemptions. The response I got was yes. It seems that that is yet to come. You are quite right that those are valid points to make, but my sense is it has been considered in the bill. The proof will be in the pudding, and we'll have to see how those exemptions work out.
Ms. Coombs: Thank you, senator, for your comments. I think it would be helpful to illustrate because I come at it from a different perspective. We are in the process of developing a regulation. Tying into your comments about the small business lens, we are seeing where the rubber hits the road, where the departments are developing a regulation.
There is one being developed now in Environment Canada. It is for volatile organic compounds used in consumer products, and the department is looking at the costs to industry. They are strictly looking at the administrative burden, what it's going to cost our companies to fill out all the paperwork.
I have to say, in 17 years of being involved in regulations, this is the first time anyone has ever asked how much time it will cost in terms of resources within the company but also how many man-hours we will need to fill out the paperwork and how much paperwork there is.
We look at it from a very different perspective and see this as a very positive step forward.
The Chair: I think we had from Ms. Jones a comment that she has been involved in the policy. Over the last two years there's been a policy in regard to what is now being implemented in legislation.
Have you had direct involvement in the policy over past two years?
Ms. Coombs: We have seen the policy implemented across various departments. I think each department has taken a different approach to how they have embraced it. We see changes being made not just from a regulatory standpoint but also in guidance documents. My member companies who manufacture disinfectants, for example, know what type of data we have to provide for a submission. That is part of that guidance, and we've had it harmonized with the United States. We are seeing it translated in different ways, but it is very important to have it enshrined in the act so it translates down into that policy.
The Chair: I understood your answer to Senator Massicotte in regard to why take the step for legislation. You heard Ms. Jones say that in British Columbia they have had a similar policy for 10 years and have not seen fit at this stage, for whatever reason, to move it into legislation, but you would like to see it in legislation?
Ms. Coombs: I would, senator.
The Chair: Mr. Aylward?
Mr. Aylward: We were not involved in the policy at all or the implementation or anything, no.
The Chair: You weren't part of advisory committee or the commission?
Mr. Aylward: We were not, senator, as I'm sure you just read.
The Chair: I just wanted to clarify that.
Ms. Jones, did you have any further comment in relation to how this policy has worked over the last few years?
Ms. Jones: No, just to comment that I think it is a very important point that one of things this does is make the hidden costs of regulation, as Ms. Coombs talked about, more visible because you are required then to find out what the compliance costs are. In the past, those compliance costs just get passed on to business without a thought to making them more understandable or asking the kinds of questions that she is saying they are now being asked.
The Chair: Ms. Jones, that would have happened with the policy over the last two years as well, would it not?
Ms. Jones: With the policy, absolutely true, but we support the legislation and in fact would advocate in British Columbia that they legislate as well because it does, as Ms. Coombs said earlier, make it more permanent, harder to undo and harder for regulators to argue with. I think that's very important.
Senator Massicotte: The way you answered that you're presuming there will be a change in government, and you're probably right, so we'll see what happens.
Having said that, I have a question for Ms. Jones. You said B.C. has done something similar. Can you tell us more about that experience and what we can learn from it? Maybe it was Vancouver.
Ms. Jones: No, it's British Columbia. In 2001, the Liberal government had made a pre-election commitment that they would reduce the regulatory burden by one third in three years. When they came to power, I think they were scratching their heads wondering how they would do that because at that time no one in Canada was making any real attempt to measure the regulatory burden. They set out to do that and decided to count regulatory requirements, which is different from what this bill is doing. This bill looks at regulation and associated burden.
Regulations can have literally thousands of regulatory requirements associated with them, so the B.C. approach is a bit more granular. Initially, while they were working toward their one-third reduction, which is a lot more ambitious than what is being done federally because they were not just maintaining but reducing, they had a two-for-one rule in place. For every new regulatory requirement introduced, two had to be removed. At one point in time they were running at five for one. They had identified so much stuff that could be eliminated that five were being eliminated for every one.
In any case, they met their one-third target for reduction. After that, they put in a one-for-one rule. We pushed quite hard for that because we felt that the gains would be undone if we didn't have something to maintain the gains.
That one-for-one rule has been in place now for over a decade. The government just recently, in January, extended the commitment to keep the one-for-one rule in place until 2019. So every few years they keep extending their one-for- one commitment.
British Columbia also has legislation that requires the government to report once a year on what's happening with respect to regulation. Again, it has been very powerful in terms of changing the culture. We had one regulator who said they went from being a regulation maker, seeing their job as coming up with more and more regulation, to being a regulation manager and really focusing on which regulations are necessary and important.
Senator Massicotte: To respond to Mr. Aylward, he was worried and we should all worry about the fact that some regulations may be eliminated. I presume they were put there for good use to start off with. I can appreciate some may become redundant. Is there not a risk that we could make a mistake and expose the public to mistakes or errors? Has there been such an instance in B.C.?
Ms. Jones: There have been none that I am aware of. If there was anything big, the media would have covered it.
Of course there are always times when people feel we need more regulation or we didn't know that this might be a problem and now we do have new information so we need new regulation with which to address that. But I think the point is that there is a recognition here that we need to keep the total burden of regulation manageable, so let's focus on those rules and regulations that are most important. We have not yet felt like there has been an over-reduction. There is still a bit of padding there in terms of getting rid of things that might be unnecessary as new rules are needed.
It recognizes, too, that we don't live in a static world and that things evolve. Some of the rules we needed 50 years ago we don't need today. We need new and different rules. It's keeping things moving and keeping things reasonable for business.
Senator Massicotte: Thank you.
The Chair: On behalf of the Standing Senate Committee on National Finance, I'd like to thank Laura Jones from British Columbia and the Canadian Federation of Independent Business; as well as Mr. Chris Aylward and Howie West. We didn't call on you too much, Mr. West, but he who stands by also serves. We appreciate you having been here from the Public Service Alliance of Canada and, from the Canadian Consumer Specialty Products Association, Shannon Coombs. Thanks to all of you for being here and helping us understand the impact of this legislation on you.
Colleagues, this concludes the work that we had planned on this particular bill. We will meet tomorrow morning in this room for clause-by-clause consideration of the bill.
I'm reminded that we have filed the report for the Main Estimates for the fiscal year that ended yesterday. That report is almost 100 pages long. If anybody would like to speak on that report, this is an opportune time to do so, to talk about some of the work we've done over the past year as we begin a new fiscal year.
(The committee adjourned.)