In criticizing the federal government's high-speed rail line project, Conservative leader Pierre Poilievre has found the issue that may save his leadership.Jennifer Gauthier/Reuters
Has Pierre Poilievre found the issue that can save his leadership? It’s certainly worth a try. In taking a stand against the galloping fiscal and economic disaster that is the federal high-speed rail project, the Conservative Leader has not just drawn a clear line of differentiation between the Conservatives and the Liberals – at a time when many Conservatives seem to be having a hard time telling between the two – but has done so on the high ground of principle: conservatism at its best.
The project to build a high-speed rail (HSR) line from Toronto to Quebec City, to be overseen by a new Crown corporation (Alto) but designed, built and operated by Cadence, a consortium of mostly private-sector companies (as well as a unit of the French national railway and, improbably, Air Canada), has been floating along until now on a cloud of fond hopes, vague generalities and good vibes. It’s time we built things again in this country! They have high-speed rail in Europe and Japan – why not here? It will be good for national unity/cutting emissions/reducing congestion!
So when Mr. Poilievre announced he would scrap it, calling it another “ridiculous pie-in-the-sky Liberal spending initiative,” the response in many quarters was an audible gasp of incomprehension. How could he be against something so obviously beneficial, so inspiring, so ambitious? Why, it was a railroad that built this country!
Katie Koopman, a co-lead for Save South Frontenac citizen-led advocacy group, holds a protest sign along the Cataraqui Trail where the tracks of the high-speed rail line could possibly go through.Kaja Tirrul/The Globe and Mail
Mr. Poilievre did not help his cause by appearing to align himself with the protest groups, already forming among those in the general vicinity of the proposed line, who worry their property might be expropriated to make way for it. That’s certainly a valid concern from their perspective. But it is an established point of law that property rights, whether of the conventional fee-simple or aboriginal kind, are not absolute: So long as fair compensation is provided, they can be overridden. Justice, however, not to say sound public policy, would suggest that governments should also have a good reason, one that is rooted in a compelling public interest and a rigorous comparison of costs and benefits.
This is where Mr. Poilievre is on firmer ground. At this point, for all the momentum the project has built up, we still have very little hard information, even on such matters as what precise route the line will take, where it will enter major cities, how often trains will run and how often they will stop, interaction with other modes of transport and so on. Moreover, we have only the faintest attempts – sketches in the air, nothing more – to quantify such fundamental elements as how much it will cost, how many passengers it will carry, and what other associated benefits it will bring.
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The project’s sponsors have estimated total construction costs at $60- to $90-billion for the 1000 kilometre line from Toronto to Quebec City. That should set off alarm bells right there: when $30-billion shows up, not as the cost of the project, but just as the margin of error, you know you’re in trouble. In fact, experience at home and abroad suggests the final cost could be much more than that.
There have been at least two-dozen studies of high-speed rail in the southern Ontario-Quebec corridor going back more than 40 years. Every time they do a new one, the cost jumps. For example, a joint 1995 study by the Quebec, Ontario and federal governments put the cost at $9.5 billion (for service at 200 km/h) to $10.5-billion (for 300 km/h), or roughly $18- to $20-billion in today’s dollars.
By 2011, an updated feasibility study had revised those estimates to $18.9-billion and $21.3-billion respectively (in 2009 dollars), or $27- to $31-billion in current dollars. We’re now at two to three times that, but who knows where we’ll be once they actually start to put shovels in the ground, or where we’ll end up, once they deal with the inevitable lawsuits, labour stoppages, unexpected detours, and the rest. Research by Bent Flyvbjerg, a Danish expert in megaproject management, shows that high-speed rail projects around the world have incurred average cost overruns of 39 per cent.
But in Britain and the United States, with political cultures and legal systems closer to our own, the results have been even worse.
And in Canada? Does the record in this country, whether with regard to trains (Ontario Line, anyone? Ottawa LRT? Montreal’s REM de l’Est?) or any other kind of infrastructure (Trans Mountain pipeline, Pickering nuclear reactor, etc. etc. etc.) give any reason to attach any significance whatever to some bit of napkin-scribbling about “$60- to $90-billion”? Or should we regard it as the opening bid?
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Not only have we no idea of how much the project will cost, we have no idea who will pay for it – though we can guess. The government has already ponied up $3.9-billion just for the predevelopment expenses. Whatever creative accounting may be deployed to suggest the project’s private-sector developers will bear some share of the cost, you may be assured that most of the cost, and all of the risk, will be on the taxpayer. There may be private financing up front, but it will all be backstopped by public guarantees, and repaid, where fare revenues prove inadequate, out of public funds.
A rendering of Canada’s future high-speed rail.Supplied
And those are just the capital costs – amortized over 40 or 50 years, plus interest, probably in the low billions annually. Then there are the operating and maintenance costs, likely to run to hundreds of millions a year. Alto insists these can be covered out of operating revenues, but this is based on projected ridership numbers – 24 million trips annually, in the 2050s, rising to 43 million by the 2080s, up from three million today – that are, as one analyst delicately puts it, “highly ambitious.”
Even relatively successful high-speed rail networks do not post these kinds of numbers. Amtrak’s Acela service, which runs from Boston to Washington – an area with roughly 55 million people, three times that of the Toronto-to-Quebec City corridor – currently carries about three million a year. The Eurostar network serving western Europe – one of the richest, most densely populated regions on Earth, with multiple major world centres within two or three hours’ travel of each other – carries less than 20 million. And a single line in Canada, with fewer, smaller cities laid out not in a tight cluster but an elongated row, is going to pass them all?
A better estimate is probably the 10.3 million McGill’s Transportation Research Lab forecasts by 2050. But of that, international evidence suggests, a large fraction, perhaps a third, will be passengers who would have taken the existing, conventional train service and have simply upgraded. Another third, roughly, would be new passengers. The remaining third would be diverted from other modes of transportation – air, bus or car – often cited as the point of the exercise. Let’s say annual costs, operating and capital combined, are on the order of $3-billion. That’s roughly $1,000 per passenger diverted.
Of course, a good chunk of those would probably have been diverted by the earlier, much less costly proposal to provide High-Frequency Rail (HFR) service – that is, on conventional, but dedicated rail lines, avoiding the delays that currently plague train service in the region, owing to the necessity of sharing the tracks with CN and CP. The projected time saving from HFR over current service is in the 40-to-90 minute range, depending on the route. HSR saves another 20-to-60 minutes.
The point is not that we should not wish to get people out of their cars and onto the train. There are indeed social costs associated with car use, both in congestion and emissions terms, that society should wish to reduce. But there are much cheaper ways to do this than by subsidizing rail travel for everybody, whether or not they were going to take the train anyway. Charge a carbon price, put a toll on the 401, and you not only “internalize” the costs of climate change and congestion, encouraging many drivers to consider other options, but you automatically make rail travel more competitive.
Then put the call out to entrepreneurs: If you think you can build and operate a competitive rail service, one that can make a buck without public funding, have at it. We’ll see to the political risk, the regulatory approvals and so forth. But you’re on the hook for the rest.
But wait: Why the insistence that rail service make a profit? Aren’t the trains a public service? Isn’t subsidy the Canadian way? But whether a service is publicly or privately provided, the obligation is, or ought to be, the same: the service should offer more value to society, measured by what consumers are willing to pay for it at the margin, than it costs society to produce, measured by the costs of the labour, capital and materials that went into its construction and operation. We think of profit as a private reward, but it’s really a social obligation: unless you can achieve that social surplus, you will be driven mercilessly out of business.
That’s not the whole story, of course. There are such things as public goods, like national defence, where it is impossible to charge a price to “consumers,” or to exclude those who do not pay from receiving their benefits, and which therefore must be paid for out of public funds: neither of these conditions apply to trains. Likewise, there are costs to society, as we’ve mentioned, that aren’t always reflected in the price consumers pay for a good or service. But once these are corrected for, in this case by the combination of carbon prices and road tolls, whatever case for subsidy there might have been disappears. Rather than subsidizing the trains and the roads and air travel, why not drain all the subsidies out of the system, so that travellers have an accurate picture of what their choices cost?
That’s especially vital, when a country is facing the kinds of fiscal challenges that Canada is facing: with a national debt already in excess of $1.2-trillion, a rapidly aging population pushing health care costs skyward, and a generational defence buildup, long deferred but no longer avoidable, just getting under way.
And at this, of all times, we are going to throw $90-billion or more at one project, delivering one mode of transport, in one part of the country? On this one, I’m with Pierre.