Alternative federal budget 2026-27: Regulation

This is from a larger publication, Alternative federal budget 2026-27: Bridge to independence

Introduction

Regulations are a critical—though often under the radar—function of government.¹ They interpret, implement, and enforce government laws and policies largely away from public scrutiny. The number of regulatory agencies is extensive, covering, health, food, drugs, energy, finance, transportation, workplace health and safety, environment, etc.

According to the government’s Cabinet Directive on Regulation,² their primary purpose is to advance the public interest including protecting citizens’ health, safety, security, social and economic well-being, and the environment.

Their purpose, as stated, is also to support a fair and competitive economy that benefits Canadians and Canadian businesses. The regulatory apparatus is, however, being undermined by the Red Tape Reduction Act, which contains the “one-for-one” rule that mandates each new regulation put forward by a regulatory agency be offset by the removal of an existing regulation.³

The tension between these goals, under the current corporate-government power relationship—termed regulatory capture—has often compromised the public interest in favour of corporate interests of profits and shareholder value.⁴

Particularly given the current government’s centralization of power in the prime minister’s office, regulations prioritizing the public interest over corporate interests are increasingly at risk. Prime Minister Mark Carney’s statement that “Canada has too much regulation and not enough action,” underlines the risk.⁵

Overview

Carney government measures eroding regulations that prioritize public interest

The government’s “Red Tape Review” of regulations across federal departments, seeks to eliminate “outdated regulations” and “reduce duplication with provincial rules.⁶ If history is any guide,⁷ “eliminating red tape” (that is, deregulation) is invariably accompanied by fiscal austerity—including cuts to regulatory agencies.

Past governments’ obsession with eliminating red tape putting corporate interests before the public interest, has at times led to disastrous consequences such as the Lac-Mégantic railway catastrophe.⁸

The Red Tape Review is consistent with the Carney government’s Free Trade and Labour Mobility in Canada Act and Building Canada Act (Bill C-5).⁹ The so-called One Canadian Economy Act, risks lower regulatory standards.¹⁰

Acceleration of major project approvals

In May, the government announced further changes to the regulatory architecture to accelerate the deregulation process,¹¹ and speed up and broaden major project approvals it deems to be in the national interest.

It released two discussion papers, Getting Major Projects Built and Strengthening One Economy Through Trade and Transportation,¹² detailing its planned changes to regulations and legislation, which will be implemented after a 30-day consultation period with the public, organizations, etc. The consultations are largely rubber stamps for what the government plans to implement.

The cabinet will be granted power to pre-approve projects in “federal economic zones”—namely, transportation corridors, telecommunications networks, energy production and transmission infrastructure including pipelines, and industrial regions—thereby removing the need for separate project reviews, and exempt projects from requiring individual environmental reviews.

It will be granted exemptions from rules governing fossil fuel and nuclear oversight, habitat preservation, and laws which protect species at risk of extinction. It will also have the power to declare pipelines “in the public interest,” before the energy regulator is required to complete its review of the project’s conditions or path of the pipeline.

Proposed changes to major project development rules risk trampling on the rights of First Nations.

Several weeks after the release of the proposed regulatory changes, the federal and Alberta governments reached an Orwellian style climate and energy agreement that could see construction of an oil pipeline to the West Coast begin as early as September 2027.¹³

The 2025 federal budget outlined plans to reduce federal spending by $60 billion over the next five years—eliminating an estimated 40,000 positions in the public service by 2028-29, roughly 10 per cent of the total workforce. This will undoubtedly include cuts to regulatory agencies, including staff that design, implement, oversee, and enforce regulations.

One example: 800 positions at Environment and Climate Change Canada will be cut removing the scientists on which the regulatory system depends.¹⁴ This will weaken the health of Canadians and remove environmental protection

Actions

The AFB will ensure that regulations protecting the public interest are prioritized over corporate interests.

The AFB will ensure that the constitutional rights of First Nations are protected.

The AFB will rebalance the executive-legislative branch relationship. Cabinet will no longer be able to exempt a company from any law or regulation without parliamentary approval.

Under the AFB, federal and provincial governments working to smooth out trade restriction differences should adopt an upward harmonization of regulations framework.

The AFB will ensure that all regulatory agencies are adequately funded, including with the necessary staff to develop, evaluate, implement, oversee, and enforce regulations consistent with legislation. To do this, the AFB will increase the regulatory budgets of multiple departments by 25 per cent including: Health Canada, Canadian Food Inspection Agency, the financial institutions and pension plan regulator, the Competition Bureau and others.

The AFB will ensure that strong regulatory architecture is constructed to prevent AI harms to privacy and human rights, safety, transparency, accountability, proper governance, systemic bias, environmental harms, and job displacement¹⁵ (see the Artificial Intelligence chapter).

The AFB will adopt the updated version of the Climate Aligned Finance Act (Bill S-238),¹⁶ re-introduced by Senator Rosa Galvez. It enables the alignment of federal financial institutions and federally regulated entities with Canada’s legally binding international climate commitments notably the 2015 Paris treaty.

The AFB will reverse budget 2025’s amendments to the Competition Act weakening fossil fuels industry anti-greenwashing regulations.

The AFB will ensure that with respect to mega projects under the Build Canada Act, federal laws and regulations designed to safeguard the environment, health and safety, and Indigenous rights will be upheld.

The AFB, in accordance with the findings of pharmacology expert Joel Lexchin,¹⁷ will not cave to the demands of the Canadian drug industry and ensure Health Canada does not rely on foreign regulatory agencies’ drug approval decisions as the basis for automatically approving new drugs in Canada. It will also ensure that speed of drug approval does not sideline public safety.

The AFB will create a $10 million a year citizen engagement fund. Its goal will be to provide financial and other forms of support to public interest groups, municipalities, etc., to enable broad-based citizen engagement in the legislative and regulatory process.

The AFB will ensure mechanisms for public participation in regulatory processes, including ensuring that notice and comment requirements, rights of third-party appeal, are strengthened.