The Case Against a High Speed Rail in Canada

The Liberals and socialists from time to time like to propose the construction of a high-speed rail line (with taxpayer money) in the Windsor to Quebec City corridor. The reasons are varied including the supposed benefit to the environment, or to make us more European since we are the only G7 nation without high speed rail. Thankfully for taxpayers this idea only wasted only as much money as the government paid for the salaries of bureaucrats at the Ministry of Transport examining the idea and no doubt countless consultants.

If building a high speed rail was truly a good business venture we would expect to see entrepreneurs promote the idea to investors and try to raise capital in the equity and bond markets to fund the project. There has been no talk of this among business people because there is no solid economic incentive for this project. Consider Via Rail, the federal government's monopoly passenger rail service. This "corporation" is far from being profitable, it is a consistent burden on all taxpayers. Take a look at the "corporation's" financial statements, under the line "Operating Loss Before Funding from the Government of Canada and Corporate Taxes" and "Operating funding from the Government of Canada" for the past few years (in thousands):

2009: 284,203 226,280

2008: 256,832 214,223

2007: 204,465 200,596

2006: 190,657 169,001

2005: 202,392 169,001

2004: 208,513 177,444

2003: 228,560 181,115

Source: http://www.viarail.ca/en/about-via-rail/our-company/annual-report

As we can see, even with a near monopoly (personal cars, bus lines, and airlines are close substitutes) rail service in Canada is not a very profitable enterprise. There are many reasons that Via Rail is consistently a losing enterprise:

1. Via managers know that if they lose money the government will bail them out. This gives does not give managers the incentive to cut costs, they may simply cave into union demands since managers are not compensated out of profits.
2. Bilingualism: Anyone who has been a passenger on Via knows that customer service is not a priority when hiring employees, knowledge of French seems to be the only requirement.
3. Unions: Like any unionized workforce poor employees remain on the payroll. For this company salaries are likely even more elevated than they should be because there is no worry about bankruptcy.
4. Too many useless passenger rail lines (Gaspe, Pukatawagan, Jonquiere, Senneterre, White River).

Air Canada was successfully privatized, it is about time we take the money losing Via Rail off the public purse.