The Treasury Board of Canada Secretariat announced a new Cabinet Directive on Regulatory Competitiveness and Red Tape Reduction on October 21, 2026.
What the new directive requires
Starting December 31, 2026, federal regulators will have to offset $2 in regulatory burden costs on business for every $1 they add, measured over a three-year period and under definitions set by the Treasury Board Secretariat.
The directive replaces the 2018 Cabinet Directive on Regulation. It changes how departments and agencies develop, amend and review federal regulations; it does not, by itself, repeal a list of rules on its start date.
Regulators must also undertake and communicate dedicated competitiveness assessments for proposed measures, consider recognized national or international standards and adopt them by default where appropriate, remove outdated or inactive rules quickly, and review significant-impact measures within five years of coming into force. Other regulations must be reviewed at least once every 10 years.
The directive applies to regulations registered under the Statutory Instruments Act and made by, or with the approval of, the Governor in Council, the Treasury Board or a federal minister. Other regulation-making authorities are strongly encouraged to follow it.
It also preserves legal constraints. The directive says it remains subject to statutes, regulations, government-wide policy instruments and international agreements. Regulators must comply with obligations to First Nations, Inuit and Métis communities, including the legal duty to consult and accommodate where required.
Costs, not a count of rules
The central change is often described as a two-for-one rule, but the measure is about dollars of burden, not simply deleting two regulations every time one appears.
That makes measurement the hard part. Current federal guidance for the older one-for-one rule separates administrative activities from substantive compliance obligations. Administrative burden includes work such as collecting, processing, reporting and retaining information or completing forms. Compliance costs can include capital costs, maintenance and training connected to a regulation.
The new directive uses the broader phrase regulatory burden costs, while saying the definition will come from the Treasury Board Secretariat. The government’s news release says supplementary resources for developing regulatory proposals will be made available shortly. Until that guidance appears, the practical reach of the $2-for-$1 test will depend on which costs are counted, how offsets are validated and when exemptions are granted.
How this differs from the older one-for-one rule
Canada’s Red Tape Reduction Act, established in 2015, already requires regulators to offset an equal amount of administrative burden when a new or amended regulation increases administrative burden on business. The existing rule also requires regulators to remove a regulation when they introduce a new regulation that imposes new administrative burden, with offsets required within two years.
The new directive adds a different policy test: a $2 offset for every $1 increase in business regulatory burden costs over three years.
A cost-offset rule does not guarantee that every firm facing a new obligation receives a matching reduction in its own filings or expenses. The business impact will depend on where cost increases land, where offsetting reductions are made and how Treasury Board applies the definitions in practice.
Business groups see the rule as a measurable test
The Canadian Federation of Independent Business said the $2-for-$1 requirement was a significant step and called for results that show up as fewer forms, lower compliance costs and more time for business owners to run their companies. CFIB also cautioned that using recognized standards should not create new costs for small firms through paid access to standards or unnecessary certifications.
The Canadian Chamber of Commerce also welcomed the directive, saying the next priority is turning the commitments into measurable reductions in red tape.
Environmental lawyers warn against arbitrary cost targets
The Canadian Environmental Law Association criticized the measure on October 26, calling the $2-for-$1 provision arbitrary and urging federal Cabinet to remove it. The association warned that treating health and environmental safeguards as red tape could weaken protections.
That criticism points to the central tradeoff in the directive. Treasury Board says the system must reduce unnecessary burden while maintaining protections for health, safety, security, social and economic well-being and the environment. Supporters will likely judge the rule by whether it removes paperwork and duplication. Critics will likely watch whether cost-offset pressure affects the speed or strength of protective regulation.
Bill S-7 is related, but separate
The directive arrived two weeks after the government introduced Bill S-7, the Cutting Red Tape for All Canadians Act, on October 7. Treasury Board says the bill proposes targeted amendments to 31 pieces of legislation and their accompanying regulations across 11 federal departments and agencies.
The proposed changes touch areas including agriculture, food inspection, environmental enforcement, radiocommunication, bankruptcy and insolvency, transportation, border processes and digital regulatory administration. Examples in the government backgrounder include replacing certification requirements for some low-risk wireless devices with registration, supporting electronic administration and enforcement for several agencies, and creating simplified bankruptcy and restructuring procedures for small businesses.
As of October 27, 2026, Parliament’s LEGISinfo record listed Bill S-7 at second reading in the Senate. It had not reached the House of Commons stages, and no House recorded votes were listed.
What to watch next
Questions remain about how regulators will document $2 in offsets, whether reductions must be connected to the same sector as the new cost and how results will be reported publicly. The directive’s effect will become clearer only as departments begin publishing regulatory proposals under the new rules and explaining the cost calculations behind them.
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