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Regulatory Reform Series – One-for-One Rule

This post is part of an ongoing series on the Government of Canada’s regulatory reform efforts. This post will discuss the One-for-One rule.

One-for-One Rule

In 2012, the Government of Canada introduced the “One-for-One” rule to “reduce administrative burden (i.e., the time and resources spent by business to show compliance with government regulations)” through the implementation of the following two elements of the rule:

  • When a new or amended regulation increases the administrative burden on business, regulators are required to offset – from their existing regulations – an equal amount of administrative burden cost on business.
  • It requires regulators to remove a regulation each time they introduce a new regulation that imposes new administrative burden on business.
    • Regulators are required to provide offsets within two years of receiving final approval of regulatory changes that impose new administrative burden on business.
    • The value of the administrative burden cost savings or cost increases to business are made public in the Regulatory Impact Analysis Statement when the regulatory change is published in the Canada Gazette.

The One-for-One Rule was implemented along with the other systemic reforms in the Red Tape Reduction Action Plan.”1

International Context

Many countries work to limit administrative burden on businesses.  The Standard Cost Model used in the calculation of One-for-One rule burdens was developed in the Netherlands and is used by many jurisdictions.  The United Kingdom and Australia both use models which have compulsory offsets to introduced regulation.  Additionally, the UK and the Netherlands have regulatory burden reduction targets.  Canada was the first country to legislate the control of administrative burden through a mechanism similar to the One-for-One rule2.  In the United States,  President Donald Trump signed Executive Order 13771 “Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs,” colloquially known as the Two-for-One rule as it requires two rules (regulations) be repealed for every regulation introduced.

Canada’s Implementation

The core of Canada’s regulatory reform designed to reduce burden on business is the One-for-One Rule.  The rule was introduced in January 2012 and quickly implemented by the Treasury Board Secretariat of Canada (TBS) on April 1, 2012.  Departments and agencies began implementing the One-for-One rule and in the first year of implementation had reduced administrative burden to businesses by $20 million dollars annually.  The Government committed to enshrining the rule in legislation in the 2013 Speech from the Throne3.  The Government introduced the Red Tape Reduction Act on January 29, 2014 and it received Royal Assent on April 23, 2015.  Subsequently, the Red Tape Reduction Regulations were introduced providing explicit instructions on the calculation of administrative burden to ensure that calculated values would be comparable over time.

Finally, the Government began reporting on the effects of the rule starting with the 2014-2015 Annual Report on the Application of the One-for-One Rule, summarizing the impact of Canada’s regulations on administrative burden over the fiscal year and listing all regulations which triggered the rule as well as the individual impacts on the balance of regulatory burden imposed on businesses.

In practice every regulating department or agency must use the Standard Cost Model to analyse the net administrative benefit to Canadian businesses during the Triage stage.  If the One-for-One rule applies (there is an impact to businesses), then a detailed and substantiated calculation of administrative costs and benefits is performed in consultation with impacted stakeholders and reported in the Regulatory Impact Analysis Statement(RIAS) in a dedicated section.  In addition to publication of the effects of the regulation on administrative burden in the RIAS, the regulating department or agency my submit a template describing the impact to Canadian businesses and whether a carve-out (non-discretionary, tax, or emergency) applies.  If the regulation is new and imposes burden (IN), the regulating department or agency (or portfolio, in the case of portfolio departments) has 24 months to remove a regulation from the stock of regulations (OUT) to offset the increase.  Additionally, for every dollar of burden imposed, the agency has 24 months to offset the additional cost. Regulations removed or administrative burden reduced (OUTs) remain on the balance sheet to offset future burdens (INs).

Assessment of Current Implementation

What is working well?

  • Since the introduction of the rule, Canadian regulators have reduced administrative burden on Canadian businesses by $24.7 million annually. 4
  • More emphasis is placed by TBS on calculating and documenting administrative burden in the Triage and RIAS, which in turn means that regulators are spending more time determining administrative impacts of proposed regulations.
  • Ministerial accountability over a 24-month period ensures that senior management is keenly aware of administrative burden imposed on regulated businesses in their purview.

Potential issues that should be addressed

  • There are two components to the rule: Element A (every dollar of imposed administrative burden must be offset by removing a dollar of administrative burden) and Element B (every new regulation must be offset by the repeal of a regulation.) . Element A places strong limits on the growth of the administrative cost to regulated businesses.  Element B doesn’t directly relate to the burden experienced by business.  Some individual regulations may count as several INs, while a larger regulation would count as a single IN, but impose more burden.  Additionally, while review of regulatory stock and removal of expired or unnecessary regulations is necessary, I do not believe there is evidence to suggest that a one-for-one ratio should exist for regulatory titles.  Innovation and changing regulated landscapes drive the need for new regulations to protect the health and safety of Canadians and do not necessarily mean that existing regulations are burdensome and should be remove.  I would suggest Element A be retained, and element B be retired in favour of strong language requiring ex post facto regulatory review and reporting.
  • While consultations are a mandatory component of regulatory development, the One-for-One Rule implementation could benefit from guidance directing regulating bodies to consult on administrative costs and benefits.
  • Departments and agencies publish One-for-One results and do not perform any ex post facto regulatory review of assumptions and costs/benefits used in the One-for-One Rule to validate impacts.

Recommendations

  • The One-for-One Rule is, in my opinion, one of the most successful regulatory reforms introduced as part of the Red Tape Reduction Action Plan.
  • The Element B (Title Stock) component does not seem to provide a rein on administrative burden, but does increase work for departments and agencies and encourages single monolithic regulations over smaller and clearer regulations.  I recommend eliminating the Element B component and replacing it as a component of a newly introduced mandatory ex post facto regulatory review.
  • Departments and agencies should be encouraged to evaluate assumptions of administrative costs and benefits after implementation of regulations to ensure that claims about reducing administrative burden are real and validated by industry and not theoretical.
  • While annual reporting is good (and required by the Act), I would like to see a website hosted by TBS which lists all regulatory actions and their associated impacts.  One could search by Department or Agency and time period.  One could look at a regulation over time and see the cumulative impact to administrative burden.  The data is already all held by TBS, all that is required is a user-interface, and most likely a better backend to store One-for-One data.  I believe Canadian businesses, media, and even average Canadians would benefit from the transparency of being able to determine where the greatest increases/decreases in administrative burden are coming from, which industries are most heavily impacted, which regulations impose the most administrative burden, etc.
  1. Canada, Treasury Board of Canada Secretariat. Red Tape Reduction Action Plan, 2012.
  2. Canada. Treasury Board of Canada Secretariat. Backgrounder – Legislating the One-for-One Rule, 2015
  3. Canada. Speech from the Throne to Open the Second Session of the 41st Parliament. Ottawa, 2013.
  4. $22 million from the pre-legislated period and $2.7 million from the 2014-2015 fiscal year
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