Governments all over the world have been talking for several decades now about reducing red tape, or what is called the "administrative burden" of regulation. In Canada, there has been one federal report on the issue every five or 10 years since the 1970s.
Yet, there is a distinct feeling among small business owners that nothing has really happened at the receiving end, except still more paperwork and a higher regulatory burden. The problem is not unique to Canada. The Organisation for Economic Cooperation and Development (OECD) notes that, even when governments have reported significant drops in the paper burden, "businesses expressed little enthusiasm."
I think the problem resides with governments, not with businesses. All these exercises may have succeeded in reducing red tape in the short term. But if it starts growing again, we find ourselves in the same predicament as Hercules fighting the hydra, whose seven heads grow again as soon as they are cut.
Unnecessary red tape is a serious problem for entrepreneurs and for Canada. Red tape stifles economic growth and job creation, reduces productivity, and can crush the entrepreneurial spirit of Canadians.
The Red Tape Reduction Commission, over which I have had the honour of presiding since last May, was launched a year ago by Prime Minister Stephen Harper as part of the Economic Action Plan to take another look at this problem.
As required by our mandate, the Commission's first task was to identify irritants to business that stem from federal regulatory requirements. Helped by our cross-country consultations 2,300 such irritants were identified. The Commission's report, which was unveiled this week, contains some 90 specific recommendations to eliminate or alleviate them.
However, these short-term solutions will only go so far. Efforts at treating the symptoms, which are the irritants, are not sufficient. A deeper, long-term approach is necessary. The second part of the Commission's mandate was to recommend options to control and reduce compliance burden on a long-term basis.
Some regulations are of course necessary. But too often, people are treated as children by governments. Governments seem to assume that people do not have private solutions to which they can resort. They sometimes try to eliminate all risk, which is an impossible goal and unnecessarily stifles innovation and growth in the process.
The presumption should rather be that the people who elect us politicians are responsible individuals and should be left free. It is unreasonable to expect any significant reduction in administrative burden if the flow of new regulations, which is the underlying cause, is not tightly controlled. We believe the government needs to "hardwire" a disciplined approach to controlling new administrative burden. That is why our Commission is proposing the adoption of a One-for-One Rule: Every time the government proposes a new regulation, it must eliminate an existing one.
The United Kingdom is the only country that applies a One-In, One-Out (OIOO) rule based on the net direct costs of regulations to business. The approach is supported by strong political leadership and appears robust. Each regulatory submission for a new initiative must be accompanied by the repeal of another regulation of equal cost to business. "Ins" and "outs" must be reconciled within six months.
The accountability for ensuring that this exchange happens is reinforced through transparent forward planning and public reporting on results. The task of measuring regulation is difficult as there is no single, obvious, measure of "regulation," which is made up of a large number of individual regulations relevant in many different fields. Yet, applying the One-for-One Rule, or any other goal for controlling regulation and its burden on business, requires an unambiguous standard.
This is why the Commission proposes to give the Office of the Auditor General of Canada the mandate of reviewing and reporting on the government's progress in reducing red tape.
Good intentions, of course, are not sufficient. Those who make the decisions need to have the proper incentives to control regulation.
Consequently, and again to deal with the long-term aspect of regulatory growth, we are recommending that a substantial part of the bonuses of senior public servants be directly related to their success in implementing the One-for-One Rule. If a department or an agency does not at least respect the One-for-one Rule, its senior public servants will lose part of their bonus.
If it does even better and succeeds in reducing the stock of its regulations, the higher the bonuses paid to its public servants should be. This will bring the public servants' incentives more in line with the long-term goal of controlling regulation and its burden on business.
These recommendations are the most important out of 15 systemic recommendations to cut red tape contained in the report. Combined with our recommended short-term solutions to irritants, we believe they would contribute much to the process of controlling federal regulation and its irritants, make our government a leader in this field, and help entrepreneurs do what they do best: create jobs and wealth to the benefit of our country.