Measuring the Regulatory Burden is the First Step Towards Accountability

Many governments talk about reducing regulation but what makes the Liberal’s promise so remarkable is the reference to such a concrete target. This implies a commitment to actually measuring the regulatory burden—no easy task. But this week they made good on that commitment by announcing a tally of 404,000 provincially imposed regulatory requirements.

The government reviewed a total of 3,654 pieces of legislation, regulations, and related policies which they define as any “compulsion, obligation, demand or prohibition placed on an individual, entity or activity.” This is a good way to count the volume of regulation. Previous studies have counted the number of regulations but that is misleading since any one regulation can have hundreds of requirements associated with it.

The Workers’ Compensation Act, regulations and related policies have 35,308 regulatory requirements associated with them. The Forest Practices Code, widely regarded as a regulatory nightmare, has 10,616 regulatory requirements. Even the Liquor Control and Licensing Act has an astonishing 5,931 regulatory requirements.

The count is also available by Ministry. The Ministry of Community, Aboriginal and Women’s Services, for example, oversees 78,000 regulatory requirements while the Ministry of Finance oversees 68,000, and the Ministry of Skills Development and Labour oversees close to 46,000 requirements.

Finding new ways to measure the regulatory burden is critical. Excessive regulation affects the economy in much the same way too much taxation does: it dampens innovation and slows productivity growth. In other words, too much regulation lowers our standard of living. But regulation is, in effect, a hidden tax because most of the costs of regulation are not borne by governments but by businesses and consumers who must comply with the rules. The few attempts that have been made to measure these costs suggest they are not trivial.

One study suggests that for every dollar spent by the public sector administering regulations, the private sectors spends between seventeen and twenty dollars on compliance. According to this formula, Canadians spend roughly $103 billion dollars a year or roughly $13,700 per family of four complying with regulation. This is only slightly less than an average family would pay in income taxes.

Because most of the cost of regulation is passed on to businesses and consumers, many governments find regulating attractive. Former BC premier Glen Clark explained his government’s penchant for regulation to a reporter for the Vancouver Sun earlier this year: “We were an old-fashioned activist government, with no more money. So you’re naturally driven to look at ways you can be an activist without costing anything. And that leads to regulation.”

Clark’s confession illustrates what is particularly perplexing about regulation: it escapes the regular scrutiny that taxing and spending decisions receive from political opponents and media pundits. When governments annually table their budgets, there is no corresponding tabling of a regulatory plan, complete with cost estimates, for the year. Incredibly, no government in Canada has ever provided an annual estimate of the cost of their regulatory activity. Imagine how much waste their would be if governments did not have to account for how they spent our tax dollars.

Since measurement is the first step towards accountability, the Liberals should be commended for their accomplishment in measuring regulatory requirements and their commitment to reduce them. But there is much more work to be done. Now that the BC government has found a way to measure the volume of regulation, they must look for ways to measure the cost. Then, these measures should be published on an annual basis.

Finally, each Ministry should be required to detail their regulatory plans and the costs of those plans along with their annual spending plans. We need an institutionalized, annual accounting for both the amount of regulatory activity and its costs. This will prove even more difficult than counting administrate requirements. Let’s hope the Liberals are up to the challenge so they can provide a model for the rest of the country.