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Government red tape strangling Canada’s economy

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4 minute read

From the Fraser Institute

By Kenneth P. Green

The cost of regulation from all three levels of government to Canadian businesses totalled $38.8 billion in 2020, for a total of 731 million hours—the equivalent of nearly 375,000 fulltime jobs.

One does not have to look too deeply into recent headlines to see that Canada’s economic conditions are declining and consequently eroding the prosperity and living standards of Canadians. Between 2000 and 2023, Canada’s per-person GDP (a key indicator of living standards) has lagged far behind its peer countries. Business investment is also lagging, as are unemployment rates across the country particularly compared to the United States.

There are many reasons for Canada’s dismal economic conditions—including layer upon layer of regulation. Indeed, Canada’s regulatory load is substantial and growing. Between 2009 and 2018, the number of regulations in Canada grew from about 66,000 to 72,000. These regulations restrict business activity, impose costs on firms and reduce economic productivity.

According to a recent “red tape” study published by the Canadian Federation of Independent Business (CFIB), the cost of regulation from all three levels of government to Canadian businesses totalled $38.8 billion in 2020, for a total of 731 million hours—the equivalent of nearly 375,000 fulltime jobs. If we apply a $16.65 per-hour cost (the federal minimum wage in Canada for 2023), $12.2 billion annually is lost to regulatory compliance.

Of course, Canada’s smallest businesses bear a disproportionately high burden of the cost, paying up to five times more for regulatory compliance per-employee than larger businesses. The smallest businesses pay $7,023 per employee annually to comply with government regulation while larger businesses pay a much lower $1,237 per employee for regulatory compliance.

And the Trudeau government has embarked on a massive regulatory spree over the last decade, enacting dozens of major regulatory initiatives including Bill C-69 (which tightens Canada’s environmental assessment process for major infrastructure projects), Bill C-48 (which restricts oil tankers off Canada’s west coast) and electric vehicle mandates (which require all new cars be electric by 2035). Other examples of government red tape include appliance standards to reduce energy consumption from household appliances, home efficiency standards to reduce household energy consumption, banning single-use plastic products, “net zero” nitrous oxide emissions regulation, “net zero” building emissions regulations, and clean electricity standards to drive net emissions of greenhouse gases in electricity production to “net zero” by 2035.

Clearly, Canada’s festooning pile of regulatory red tape is badly in need of weeding. And it can be done. For example, during a deregulatory effort in British Columbia, which appointed a minister of deregulation in 2001, there was a 37 per cent reduction in regulatory requirements in the province by 2004.

Rather with plowing ahead with an ever-growing pallet of regulations to be heaped upon Canadian businesses and citizens, government should reach for the garden shears and start reducing the most recent regulatory expansions (before they have time to do too much harm), and then scour the massive strangling forest of older regulations.

Whacking through the red tape would go a long way to help Canada’s economy out of its dismal state and back into competitive ranges with its fellow developed countries and our neighbours in the U.S.

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Automotive

Government subsidies cost more than EV capital investments

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From the Canadian Taxpayers Federation

Author: Franco Terrazzano

The Canadian Taxpayers Federation is calling for an end to corporate welfare following today’s Parliamentary Budget Officer report showing government subsidies are 14 per cent more than the capital investments corporations are making in the electric-vehicle supply chain.

“Putting taxpayers on the hook for more money than these corporations are spending to build their own factories is an awful deal for ordinary Canadians,” said Franco Terrazzano, CTF Federal Director. “Taxpayers are being taken to the cleaners with this EV corporate welfare.”

The PBO released a report regarding recent government subsidies for EV factories.

“For the $46.1 billion in investments (capital expenses) across the EV supply chain, PBO estimates total corresponding government support (for capital and operating expenses) to be up to $52.5 billion, which is $6.3 billion (14 per cent) higher than announced investments,” according to the PBO report.

Of the $52.5 billion in taxpayer subsidies, the PBO estimates $31.4 billion is coming from the federal government and $21.1 billion is coming from provincial governments.

“These lopsided numbers show that these corporate handouts are nothing more than a vanity project for politicians,” said Jay Goldberg, CTF Ontario Director. “If these politicians want to grow the economy, they should cut taxes and red tape rather than make bad bets with taxpayers’ money.”

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Alberta

Alberta gets credit boost because of budget discipline

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News release from the Canadian Taxpayers Federation

Author: Kris Sim

“bringing net adjusted debt to an estimated CAD 57.5 billion in fiscal 2024 (ended on March 31) from CAD 74.6 billion in fiscal 2022”

The Canadian Taxpayers Federation is applauding the Alberta government for its fiscal discipline which earned the province a boost in its credit rating.

“Alberta is one of the only provinces in Canada with a balanced budget, and it shows with this credit upgrade,” said Kris Sims, CTF Alberta Director. “Paying down the debt, restraining spending and saving for the future were very good moves by this government.”

In its most recent budget, Alberta reported a $367-million surplus. That stands in contrast to neighbouring Saskatchewan’s $273-million deficit and British Columbia’s record-breaking $7.9-billion deficit.

The rating agency, Fitch, upgraded Alberta’s credit from AA- to AA this week, highlighting its debt repayment as a key reason for the improvement.

“Alberta used its recent economic rebound to accelerate fiscal improvements and lower its debt, bringing net adjusted debt to an estimated CAD 57.5 billion in fiscal 2024 (ended on March 31) from CAD 74.6 billion in fiscal 2022,” the Fitch report reads.

The agency also cited Alberta’s spending restraint as a reason for the positive outlook.

“The rapid decline in debt and adherence to spending restraint in recent budgets have been complement with last year’s introduction of a fiscal framework requiring balanced budgets, annual contingencies and using surpluses for debt repayment, savings or one-time investment, is likely to bolster future resilience,” the Fitch report reads.

Interest charges on the province’s debt are estimated to cost taxpayers $3.3 billion this year.

“Credit ratings matter because Albertans pay billions of dollars on interest payments on the debt every year, better credit ratings make it less expensive to pay for that debt, and the less money we waste to pay debt interest charges the better,” said Sims.

 

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