Canada Implements New Two-for-One Regulatory Cost Rule
The federal government is requiring departments to offset new regulatory expenses by cutting double the amount in existing costs.
Updated on Oct. 21, 2026 in Economic Policy
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Treasury Board President Shafqat Ali announced a new cabinet directive mandating that federal departments remove $2 in regulatory costs for every $1 of new costs added. This initiative, set to take effect on December 31, 2026, aims to modernize the federal regulatory framework.
Why it matters
The government is seeking to lower the regulatory burden on businesses to bolster national economic growth and competitiveness. This policy also mandates periodic reviews of all existing regulations to ensure they remain current.
Departments must reduce regulatory costs by a 2:1 ratio over a three-year period. Additionally, the government has identified 500 regulatory initiatives for review, with 160 already completed.
The players
Shafqat Ali
Shafqat Ali serves as the President of the Treasury Board of Canada.
The details
The directive introduces mandatory review cycles, requiring significant impact measures to be assessed every five years and all other regulations every 10 years. Complementing this, Bill S-7 proposes amendments to 31 laws, which is projected to save $264 million over 10 years if passed.
Timeline
In July 2025, ministers received a 60-day deadline to identify outdated regulations.
Bill S-7 was tabled in the Senate in early October 2026.
Treasury Board President Shafqat Ali announced the new cabinet directive on October 21, 2026.
The new regulatory directive comes into effect on December 31, 2026.
Macro View
The new policy replaces the 2018 cabinet directive governing federal regulation development, marking a shift in how the government manages federal oversight. It represents a pivot toward stricter cost-containment measures compared to the previous administrative framework.
This policy aims to reduce red tape, which could eventually lower compliance costs for businesses operating across Canada. By streamlining 31 laws through Bill S-7, the government hopes to foster a more competitive environment for local commerce.
The takeaway
The government is systematically auditing hundreds of regulatory initiatives to identify and remove obsolete requirements. Businesses should monitor how these changes to the 31 affected laws influence their specific compliance obligations over the next decade.
Further reading
Learn more about the federal approach to Economic Policy.
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