Business group charges that federal cost recovery policy is crippling innovation

The federal government’s cost recovery policy for regulatory programs stifles science-based innovation and a Treasury Board (TB) draft paper outlining a new policy is only compounding the problem. The result is reduced R&D investment, fewer science-based jobs and lost sales of nearly half a billion dollars. These are the conclusions of business lobby group that recently outlined its concerns to the House of Commons Standing Committee on Finance.

The Business Coalition on Cost Recovery (BCCR) is calling on TB to completely revamp its proposed policy by acting on the recommendations made by the Finance committee two years ago, as well as reports issued by the Auditor General of Canada and TB’s own expert advisory panel.

The BCCR says the current 1997 policy has resulted in longer approval times for everything from new health and veterinary pharmaceuticals to household chemicals and pesticides. Approvals for these products are generally provided by Health Canada and the Canadian Food Inspection Agency. It also contends that fees must be linked to performance and accountability to Parliament by departments and agencies charging fees must be substantially improved. The four-year-old industry lobby group represents many industry sectors, the majority of which are dominated by large multinationals seeking fast market access for new products.

“If the policy isn’t changed, companies won’t come here to do R&D. They’ll do it in other parts of the world,” says Jean Szkotnicki, BCCR’s co-chair and president of the Guelph ON-based Canadian Animal Institute. “Right now there’s no predictability in the system so it’s hard for companies to make the decision to do R&D in Canada.”

FAILURE OF VISION

The estimates of lost jobs and R&D investment were generated by Rias Inc, an Ottawa-based consulting firm. It used 1998 sales data and proprietary regulatory impact models, applied to specific health care sectors and extrapolated to the entire health industry sector. RIAS was engaged by BCCR in 2000 to produce a report supporting the need for change and it has followed up with a discussion paper of TB’s current and draft policies. Its assessment of the policy’s failings is brutally frank.

“The Treasury Board’s current cost recovery policy is directly implicated in these failings in our market access regulatory programs. The proposed new policy is even worse. It is a serious failure of vision,” states the February 25/02 discussion paper. “Regulatory fees will look even more like taxes; there is still no commitment to improving efficiency and to competitive performance standards; and, still no meaningful accountability for results.”

The paper say the new policy must:

• be consistent with the federal innovation strategy and federal regulatory policy;
• focus on efficient resource allocation;
• recognize that these programs serve a mix of public and private interests;
• tie fees to internationally competitive performance standards;
• properly assess the impact of regula-tory fees; and,
• improve accountability to Parliament and the public.

OPTIMISM GROWING

Since the discussion paper was issued and the BCCR appeared before the Finance committee in May, the group is optimistic that positive changes may be on the way. Szkotnicki says early indications are that TB has listened to the BBCR’s concerns and those of other groups and may be willing to consider altering the proposed policy.

“The Finance committee is committed to the need for accountability and performance standards and it is the strongest Parliamentary committee there is. There was unanimous consent in 2000 to write the recommendations they did. One has to be confident that the policies in place are in the best interests of all Canadians,” she says. “Treasury Board has gone back with some serious sober thought. They realize there has to be better management of budgets. It’s a learning process for government because it’s not something they are used to.”

Szkotnicki says she will be meeting again with TB officials in September and the revised draft paper is due at about the same time. Pressure on TB to alter the policy will coincide with with BCCR’s participation in the engagement process of the innovation agenda. It has prepared a submission that will be presented to government this week.

“That’s exciting for those of us in the user fee campaign. Many of our companies are transnationals and they must compete internally with their global counterparts,” she says.”

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