TRAN Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Transport

EVIDENCE

CONTENTS

Monday, June 9, 2003

¹

1530

The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.))

¹

1535

The Honourable David Collenette (Minister of Transport)

The Chair

Hon. David Collenette

Mr. Stan Keyes (Hamilton West, Lib.)

The Chair

Mr. Stan Keyes

The Chair

Mrs. Bev Desjarlais (Churchill, NDP)

The Chair

Mrs. Bev Desjarlais

The Chair

Mrs. Bev Desjarlais

Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance)

The Chair

Hon. David Collenette

¹

1540

Mr. Ovid Jackson (Bruce—Grey—Owen Sound, Lib.)

Hon. David Collenette

The Chair

Mr. Jim Gouk

Hon. David Collenette

The Chair

Hon. David Collenette

¹

1545

Mr. Jim Gouk

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

¹

1550

The Chair

Hon. David Collenette

¹

1555

Mr. Jim Gouk

Hon. David Collenette

The Chair

Hon. David Collenette

The Chair

Mr. Jim Gouk

º

1600

Hon. David Collenette

Mr. Jim Gouk

Hon. David Collenette

º

1605

Mr. Jim Gouk

Hon. David Collenette

Mr. Jim Gouk

Hon. David Collenette

Mr. Jim Gouk

Hon. David Collenette

Mr. Jim Gouk

Hon. David Collenette

Mr. Jim Gouk

º

1610

Hon. David Collenette

Mr. Jim Gouk

The Chair

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ)

Hon. David Collenette

Mr. Mario Laframboise

Hon. David Collenette

Mr. Mario Laframboise

º

1615

Hon. David Collenette

Mr. Mario Laframboise

L'hon. David Collenette

Mr. Mario Laframboise

Hon. David Collenette

Mr. Mario Laframboise

Hon. David Collenette

Mr. Mario Laframboise

Hon. David Collenette

º

1620

The Chair

Mrs. Bev Desjarlais

Hon. David Collenette

Mrs. Bev Desjarlais

Hon. David Collenette

º

1625

Mrs. Bev Desjarlais

Hon. David Collenette

Mrs. Bev Desjarlais

Ms. Helena Borges (Executive Director, Rail Policy, Department of Transport)

Hon. David Collenette

Mrs. Bev Desjarlais

Hon. David Collenette

Ms. Helena Borges

Hon. David Collenette

Mrs. Bev Desjarlais

Hon. David Collenette

Mrs. Bev Desjarlais

Hon. David Collenette

Mrs. Bev Desjarlais

Hon. David Collenette

Mrs. Bev Desjarlais

Hon. David Collenette

Mrs. Bev Desjarlais

Hon. David Collenette

Mrs. Bev Desjarlais

Hon. David Collenette

Mrs. Bev Desjarlais

The Chair

Hon. David Collenette

The Chair

Mrs. Bev Desjarlais

The Chair

Mr. Stan Keyes

º

1630

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

º

1635

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

º

1640

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

The Chair

Mr. Stan Keyes

The Chair

Mr. Stan Keyes

Hon. David Collenette

The Chair

Hon. David Collenette

º

1645

The Chair

Mr. Roger Gallaway (Sarnia—Lambton, Lib.)

Hon. David Collenette

Mr. Roger Gallaway

Hon. David Collenette

Mr. Roger Gallaway

Hon. David Collenette

Mr. Roger Gallaway

Hon. David Collenette

º

1650

Mr. Roger Gallaway

Hon. David Collenette

Mr. Roger Gallaway

Hon. David Collenette

Mr. Roger Gallaway

Hon. David Collenette

Mr. Roger Gallaway

Hon. David Collenette

Ms. Helena Borges

Hon. David Collenette

Mr. Roger Gallaway

º

1655

Hon. David Collenette

The Chair

Mr. Roger Gallaway

Hon. David Collenette

The Chair

Mr. Jim Gouk

»

1700

Hon. David Collenette

Mr. Jim Gouk

Hon. David Collenette

Mr. Jim Gouk

Hon. David Collenette

»

1705

Mr. Jim Gouk

Hon. David Collenette

Mr. Jim Gouk

The Acting Chair (Mr. Joseph Volpe (Eglinton—Lawrence, Lib.))

Hon. David Collenette

The Acting Chair (Mr. Joseph Volpe)

Ms. Pauline Picard (Drummond, BQ)

Hon. David Collenette

Ms. Pauline Picard

Hon. David Collenette

Ms. Pauline Picard

The Chair

Mr. Stan Dromisky (Thunder Bay—Atikokan, Lib.)

The Chair

Mr. Stan Dromisky

The Chair

Mr. Larry Bagnell (Yukon, Lib.)

Hon. David Collenette

»

1710

Mr. Larry Bagnell

Hon. David Collenette

Mr. Larry Bagnell

Hon. David Collenette

The Chair

Mr. Joseph Volpe (Eglinton—Lawrence, Lib.)

»

1715

Hon. David Collenette

»

1720

Mr. Joseph Volpe

Hon. David Collenette

The Chair

Mr. Stan Dromisky

The Chair

Mr. Stan Dromisky

The Chair

Mr. Stan Dromisky

The Chair

Mr. Stan Dromisky

»

1725

The Chair

Mr. Stan Dromisky

Mr. Joseph Volpe

Mr. Stan Dromisky

Hon. David Collenette

The Chair

Hon. David Collenette

The Chair

Mr. Ovid Jackson

The Chair

Mrs. Bev Desjarlais

Hon. David Collenette

»

1730

Mrs. Bev Desjarlais

The Chair

Mrs. Bev Desjarlais

The Chair

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

»

1735

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

The Chair

Mr. Stan Keyes

Ms. Helena Borges

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

Ms. Helena Borges

Mr. Stan Keyes

Hon. David Collenette

Mr. Stan Keyes

The Chair

Hon. David Collenette

Mr. Stan Keyes

Hon. David Collenette

»

1740

Mr. Stan Keyes

The Chair

Mr. Roger Gallaway

The Chair

Hon. David Collenette

The Chair

Mr. Roger Gallaway

Hon. David Collenette

Mr. Roger Gallaway

The Chair

Hon. David Collenette

The Chair

Mrs. Bev Desjarlais

The Chair

Hon. David Collenette

The Chair

Hon. David Collenette

»

1745

The Chair

Mrs. Bev Desjarlais

The Chair

Hon. David Collenette

The Chair

---

CANADA

Standing Committee on Transport

---

NUMBER 033

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Monday, June 9, 2003

[Recorded by Electronic Apparatus]

¹  (1530)  

[English]

    The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.)): I call the meeting to order, pursuant to Standing Order 108(2), study of the mandate, management, and operation of Via Rail Canada Inc.

    By way of background, after meeting with the Standing Committee on Transport on the morning of February 26, a vote was taken. As a result, your committee has considered vote 25 under Transport, Via Rail Canada Inc. for the fiscal year ending March 31, 2004. Vote 25 has been reduced from $260,201,000 to $257,201,000, which is equivalent to a 2.95% reduction of $9 million. A copy of the relevant minutes of proceedings is tabled, and that was submitted to the House on May 29, 2003.

    Subsequent to that, Minister, the House leader procedurally challenged the procedure aspects of how this vote was taken, and asked the Speaker on four particular counts why the report should not be accepted. The Speaker rendered his decision on the following Tuesday. He went over in some detail the allegations made by the House leader. He found that the four points the House leader had made were without validity and allowed the report to stand.

    Subsequent to that, Minister, I think you made a statement that in the event this reduction was upheld, you intended to take it to the President of the Treasury Board and have it reinstated—I think that's correct. You then requested a meeting of this committee to convene today to reconsider your further information on the amount by which the $9 million was reduced. I think that accurately reflects the process as it stands today.

    I would ask the chair to please give me the names of the members who attended the May 29th meeting, although I don't want to know how they voted.

¹  (1535)  

    The Honourable David Collenette (Minister of Transport): Mr. Chairman, could I just interrupt for one second, if you don't mind?

    The Chair: Sure

    Hon. David Collenette: The issue I commented on was not what Mr. Boudria did. He made certain representations and the Speaker ruled--that's fine. I said I would ask the President of the Treasury Board to put down a motion to reinstate the clause. But I don't believe the committee has the authority to reverse itself now, even if it wanted to, because you've reported, the Speaker has accepted the report, and the $9 million reduction is before the House.

    In Question Period in the House the other day I asked for the motion to be reinstated, and that motion will be before members on Thursday night.

    Mr. Stan Keyes (Hamilton West, Lib.): Point of order, Mr. Chairman.

    The Chair: Yes, Mr. Keyes.

    Mr. Stan Keyes: I don't know how other members feel about it, but I'm grateful the minister is here today so I can hear why he would move to reinstate the money. We need answers to that because that will dictate how I vote in the House of Commons. If the minister can convince me why that money he has asked the Treasury Board to reinstate is an argument that can be put and I can understand and go along with, then certainly I will vote in favour of the reinstatement.

    The Chair: Thank you.

    Mrs. Desjarlais.

    Mrs. Bev Desjarlais (Churchill, NDP): On a point or order, Mr. Chair, unless I've missed something here--and I quite frankly want to get to the questions we have for the minister--I'm kind of curious as to why there's a need to go through who was here or not. The bottom line is the committee made a decision and everybody, whether they were there or not, abides by that decision and will vote the way they're going to vote. If there's a wish to do anything else, I don't know why it's there because--

    The Chair: I just think it's wise to have the names of the members who voted.

    Mrs. Bev Desjarlais: It doesn't change anything.

    The Chair: Okay.

    Mrs. Bev Desjarlais: I just want to get on with asking the questions.

    Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance): Let's get the train out of the station.

    The Chair: You want to get the train out of the station, Mr. Gouk?

    Minister, I think this is a highly unusual procedure--that the committee has asked you to come back, at your request. But after you make your submissions on why that amount should be reinstated, the question that is so relevant is if the committee should follow through--I'm taking a hypothetical--and say they will adhere to the recommendation that was made to the House on May 29, will you then support the committee's position at that time?

    Hon. David Collenette: Mr. Chairman, I've made it clear that as far as I'm concerned I believe, with great respect, the committee erred in its decision on May 29 and its motion, and I will vote accordingly on Thursday night. That is why, as Minister of Transport, I asked the President of Treasury Board to reinstate. I felt that perhaps the committee didn't get the answers it was looking for, which led them to make the decision.

    I don't question the committee's right to make the decision it did. You're obviously unhappy about the answers you got. Your decision has been taken, that has been upheld by the Speaker, the money has been deleted, and there will be a government motion to reinstate with the estimates.

    I suggested coming this afternoon so I could hopefully justify to the committee why I believe the $9 million that was taken out of the budget should be reinstated. My mind is made up, because as the minister responsible I'm pretty much aware of the spending of VIA, and I think there's a good explanation. But it appears that you didn't get a satisfactory explanation when VIA was before you, which led the members to do what they did. There's nothing wrong with that, in the same way there's nothing wrong with me trying to justify the $9 million. I'm very grateful for you allowing me to come.

¹  (1540)  

    Mr. Ovid Jackson (Bruce—Grey—Owen Sound, Lib.): Mr. Chair, on a point of order, just to get on with the meeting, as I understand it the committee has already made a decision and the minister has already said the committee probably can't reverse it procedurally. But I think the procedure here is that the decision of the committee can be overturned only by the whole House. I don't expect the vote here to overturn it. The minister could explain that this is after what we've heard as a committee--I wasn't there at the time.

    So the procedure is that the decision of the committee cannot be overturned--or it might not change what they said before. It takes the whole House to overturn a committee procedurally. That's what I understand we're dealing with here. This is a procedural matter.

    Hon. David Collenette: Mr. Keyes did say a few minutes ago--and I'm very grateful and humbled that he's put it on my shoulders--he hopes to be convinced that it was not the right decision to make the other week, and I'll try to convince him.

    The Chair: Mr. Gouk.

    Mr. Jim Gouk: Just for clarification, because everybody seems to be getting hung up on semantics, the committee did not err. The committee made a decision, and the decision is automatically right because we made it. The minister has come here to show us there are explanations we were not given; that we may or may not wish to reconsider our position, given new information we have not yet heard. But the committee did not err because we did not get the answers we required.

    Hon. David Collenette: We're getting into semantics here. As the minister responsible I feel, with great respect, that if the committee had the benefit of what I'm going to say, it hopefully wouldn't have made that decision. It might still have made the decision, but I still think it will be an error to deny VIA the funding. That's a personal value judgment on my part. That doesn't take away from the committee's right to make the decision it did, which was upheld by the Speaker.

    The Chair: That leads us to fact that at the end of the day, after we're all through, there'll be no vote taken because we can't rescind a vote we've already taken. I just want an understanding that's where we're headed.

    We're going to listen to the minister, and at the proper time when the vote is cast in the House on that motion, each of you will be able to either support the committee or have some reason for changing your mind. Are we okay there now, so we're all operating from the same ground rules?

    Are there any other interventions?

    Mr. Keyes, are you putting that in your ear, or putting your hand up for an intervention?

    Minister, please proceed.

    Hon. David Collenette: Mr. Chairman, I'm grateful to be here to hopefully answer some of your questions and give you answers you didn't think you got when VIA was here.

[Translation]

    For the members of the committee's reference, I am providing two reports, recently tabled in the House of Commons, that speak to VIA's operating performance and financial requirements for the next five years--VIA's Annual Report for 2002 and the summary of its Corporate Plan for 2003-2007.

    I am confident that these documents will respond to your concerns and demonstrate that VIA is accountable to Canadian taxpayers.

[English]

    Obviously, VIA is Canada's national passenger rail service, and it has an important role to play in providing safe, high-quality, efficient passenger services to Canadians.

    Moving people out of their cars and onto trains is one solution to the problem of congestion we see each and every day in and around our cities and on our major highways. Not only is congestion a personal frustration, it also slows our business down. In talking about congestion, one will recognize that I come from Canada's largest city, but there are other members around the table who come from the Quebec-Windsor corridor who can speak to the congestion we have to face.

    Certainly passenger rail gives Canadians a convenient and economic choice, whether travelling for business or pleasure. It enhances our ability to deal with congestion in the most populous parts of the country.

    Of course, for many Canadians in northern and remote parts of the country rail provides an invaluable lifeline, especially when no other transportation options are available. I can think of particular parts of Quebec, northern Ontario, and Manitoba.

    The government is dedicated to passenger rail and its revitalization, not only as a viable transportation option that's central to our identity as Canadians, but also as one that makes good economic sense. We think that a strong passenger rail system also contributes to building stronger communities. Passenger rail provides a vital link for the movement of people, encouraging business development and growth. It connects some 450 communities with services that run across the country.

    The committee apparently was concerned that VIA couldn't explain why it needed more funding for the current year. The main estimates identify $266.2 million for 2003-04, compared to $255.7 million for 2002-03. Obviously the government provides funding for VIA in the form of an operating subsidy and a capital budget.

    I read the transcript of the meeting when Mr. Pelletier was in the chair, and I don't believe he was asked specifically about the dollar items; I think there were more general questions. But I'd be prepared to answer the specifics on why there's a jump of $10.5 million in the estimates. I'd also like to ask the committee about the $9 million. I don't know how that relates to the $10.5 million, but perhaps we can talk about it.

    Sorry, Mr. Gouk, did you say something on the record?

¹  (1545)  

    Mr. Jim Gouk: Yes. We obviously should have cut more.

    Hon. David Collenette: These operating subsidies have been fixed since 2000 at $171 million a year, so VIA cannot request more than that for its operational requirements. It can't transfer funding from its capital budget to cover operating requirements without government approval.

[Translation]

    I will speak more about VIA's budget in a few moments. Before doing so, I think it is important for us to review VIA's operating performance over the last year and compare this performance to a decade ago before VIA underwent major rationalization.

    More Canadians are using the train today than ever before. In 2002, VIA Rail carried 116,000 more passengers than in 2001 and over half a million more passengers than in 1990.

[English]

    As a result of this growth and improved yields per customer, VIA's passenger revenues grew by $17 million to reach $270 million in 2002. In fact, revenues have grown steadily over the past 10 years, enabling VIA to steadily improve the cost-effectiveness of its service.

    VIA's total operating funding requirement is now 63% lower than in 1990. As a result of this demonstrated growth in improved cost-effectiveness, the government decided in 2000 to fix the operating subsidy to $171 million a year for 10 years, compared to $410 million in 1990.

    VIA's cost recovery ratio now stands at 64.5% for the entire network, including the regional and remote services. This is a remarkable increase of 123% since 1990. Similarly, government funding per passenger mile has been reduced from 45.6¢ in 1990 to 15.8¢ in 2002. I think you'll all agree that this performance is remarkable, and VIA services across the country continue to improve.

    So not only has the annual operating subsidy been severely and significantly reduced, but the cost-recovery ratio and the government funding per passenger mile have improved remarkably.

    In January 1998, I asked this committee to review passenger rail service in Canada. At the time, the committee carried out public consultations and made 11 recommendations in its report, “The Renaissance of Passenger Rail in Canada”. Mr. Keyes may have been the chair at the time, for that landmark report.

    Mr. Stan Keyes: Yes, I think I was.

    Hon. David Collenette: I think Mr. Cannis and Madam Desjarlais were also members at the same time.

    The committee's report stated unanimously that the status quo was unacceptable. The report concluded that government support, particularly an explicit long-term policy commitment, was required to provide for a sustainable system of passenger rail in Canada. It included 11 recommendations with respect to the provision of long-term stable funding for passenger rail; the review and protection of funding of remote services; and participation in further studies for high-speed rail in the Quebec-Toronto corridor.

    The committee's first recommendation stated, and I quote:

That the Government define and commit to long-term support, not less than 10 years, for passenger rail objectives in Canada, including the route network, level of service and long-term stable funding to allow stakeholders to recapitalize rolling stock and infrastructure and enhance passenger rail service.

    Further, the committee's fourth recommendation stated:

That the Government commit to stable funding for passenger rail in the amount of $170 million annually....

In October 1998, the government tabled its response.

    As honourable members know, I'm very respectful of the work of this committee, and I'm very proud to say that the government basically agreed with everything this committee put forward. Everything I will be saying today is predicated on not only our policy since, but of course on the landmark report done by this committee in 1998.

    We committed to revitalize passenger rail operations by providing the long-term financial support, protecting truly remote services, and better defining access arrangements for passenger rail in the absence of an agreement with rail infrastructure use owners.

    To this end, in addition to stabilizing VIA's annual operating subsidy at $171 million, as recommended by the committee, the government announced in April 2000 that it would provide VIA with an additional $401.9 million in capital funding over the next five years to allow the company to address urgent capital requirements related to rolling stock, infrastructure, and health and safety, and to provide for modest growth in services.

    These funds are being invested in new Renaissance cars for additional capacity, new locomotives, the installation of waste retention tanks on existing fleet, track upgrades, and the refurbishment of passenger stations. The government and VIA are continuing to implement this initiative.

    VIA has already made improvements as a result of this funding. The company purchased 139 new passenger cars that are being assembled in your hometown, Mr. Chair, of Thunder Bay. It began operating 21 new high-speed locomotives in December 2001. It has completed the refurbishment of several stations across the country, including a new station in Mr. Fontana's hometown. He's not here today, but Mr. Fontana and I shared the platform there, and I know he was exceptionally delighted at the beautiful job VIA did in restoring the station in London, Ontario.

    Of course, there was a new station west of Ottawa in Barrhaven, and as Mr. Keyes knows, VIA is in the process of finalizing the purchase of a choice piece of land in his hometown of Hamilton, so VIA can once again serve the wonderful citizens of that great city just west of Toronto.

¹  (1550)  

    The Chair: You're pulling out all the stops.

    Hon. David Collenette: Let's see if the next one's a stop.

    The corridor fleet has been fitted with waste retention systems. VIA has had the existing rail diesel cars used on regional and remote services on Vancouver Island and in northern Ontario, between Sudbury and White River junction, completely refurbished by a company in New Brunswick.

    As you'll note in the summary of the annual corporate plan, more capital work will be undertaken over the next couple of years if, of course, VIA has access to the funding requested in the plan and included in the main estimates the committee reviewed some 10 days ago.

    Unlike the fixed annual operating subsides, VIA's capital budget, which flows from the $401.9 million approved in 2000, fluctuates on a yearly basis depending on planned commitments and requirements. The committee will be interested to note that VIA's capital budget for 2002-03 was $85 million. The capital budget intended to fund this year's portion of the projects I've just described for 2003-04 is planned to be $95 million. This explains why VIA needs the $9 million you recommended be cut.

    Without the requested funding, the completion of the capital works that were approved and planned from the $401.9 million will be in jeopardy. For example, VIA Rail's 2003-07 corporate plan reserves $64.2 million to complete 106 Renaissance passenger cars by the end of the first quarter of 2004. Completion of this work could be jeopardized, affecting several hundred jobs at the Bombardier plant in Thunder Bay, and depriving passengers of the benefits of new equipment and additional capacity.

    I spoke with Mr. Hargrove on Friday about the air traffic controller situation. He certainly was very mindful of the very serious issue we have in trying to keep the Bombardier line open to deal with the Renaissance cars.

    I understand that you heard from GO Transit last week that its contract with Bombardier at the same plant is coming to an end. I think we all agree we want to make sure Thunder Bay does not suffer any undue problems as a result of decisions that may be taken.

    VIA has also planned capital expenditures totalling $13.3 million over the next three years to complete the installation of new waste management systems to its 141 long-distance passenger cars used on the western services. This work could be delayed, hampering VIA's ability to meet its environmental commitments.

    Mr. Gouk doesn't particularly care for VIA operating anywhere, including western Canada. But given the fact they do, I'm sure he will agree with me it's better that waste be retained rather than spewed on the tracks in western Canada.

¹  (1555)  

    Mr. Jim Gouk: That's what we're trying to do, David--contain the waste.

    Hon. David Collenette: VIA has also identified $30.2 million over the planning period to continue the refurbishment and modernization of its passenger stations across the country. Some of these improvements may have to be delayed or dropped altogether, inconveniencing many travellers.

    For 2003, VIA has also planned track infrastructure improvements of $7.6 million. These too may be delayed, depriving passengers of improved operating performance.

    I think this gives you a sense of some of the implications of any move to reduce VIA's funding. I don't think we can ignore the fact that VIA has existing contracts for many of these capital projects, and may incur financial penalties and legal costs for not complying with such contracts.

    As you'll see from the corporate plan, VIA has to plan its expenditures over rolling periods of five years. Like other companies, VIA needs certainty that the requested funds will be available when needed to cover its contractual commitments.

    The particular anticipation of the $9 million being cut here was forecast in the 2002-06 corporate plan, which I believe this committee had before it last year and did not raise questions on. I can certainly give you a copy of table 4, which clearly shows how the money is profiled over the seven years. It talked about $84.7 million in capital in 2002-03, and $95.2 million in 2003-04.

    So the particular money the committee objected to in its motion actually went through the committee a year ago without comment. Therefore, I believe the focus of your concerns wasn't necessarily the substance of how this money was profiled, but more how it would be spent in general terms.

    That's probably enough, Mr. Chairman. I'll be open to some questions.

    The Chair: Thank you, Mr. Collenette.

    Am I supposed to conclude from your remarks that in the event the contract doesn't go forward, it won't be because of the decision the committee made?

    Hon. David Collenette: As I just stated, if you're running a business--and you ran a business in Thunder Bay--you have to plan ahead. If you have money authorized, you have a business plan, and you enter into contracts, obviously if you don't have enough money then you have to make adjustments to those contracts. Now I don't know what VIA will do if the $9 million is taken from the capital budget, but it's going to have some effect.

    I think you would agree with me that certainly one priority is to try to re-profile some of this money so the balance of the Renaissance cars can be refurbished and put into service, which will result in lower maintenance costs and better fuel efficiency.

    I don't know how VIA would apply it. I'm just arguing that they need it, we've been through all their capital plans, and we believe the figures are justified.

    The Chair: I'm not sure what you said.

    Mr. Gouk.

    Mr. Jim Gouk: Thank you, Mr. Chair.

    One of the things we've heard is that VIA needs $9 million more than this committee is prepared to give it; $10.5 million more than it got last year. The minister today said that VIA made $17 million more in revenue last year than the year before. He said that cost recovery has improved, and they now recover 64.5% of what they spend.

    That means they got about $11 million net, after the subsidy part was taken off, in increased revenues in 2002. So why are they coming back to the government--and by way of the government, the taxpayer--saying, “Hey, we made $11 million more than last year, but we want another $10.5 million on top of that”? That suggests they really want to spend another $21 million, not another $10.5 million. So why is there a conflict in those numbers, and why does the taxpayer have to put up $10.5 million, if by the minister's own words they made a net of $11 million more last year than they did the previous year?

º  (1600)  

    Hon. David Collenette: As in any good business, VIA ploughs the money back into the corporation. The $401.9 million is not the total extent of their capital needs. You know, Mr. Gouk, that in business, if you can invest and plan in equipment it invariably helps you compete and lower costs, especially when you're dealing, in the case of VIA, with a lot of older equipment, older rail cars; some switches and some tracks it owns need to be replaced; and there's a need for better efficiencies at stations. Mr. Blaikie has asked me about a small station in northern Ontario that was not involved with the VIA capital plan. I'm trying to bring that to their attention.

    In other words, there are other capital needs. So the money is plowed back in to improve the network. If you improve and have better equipment, you become even more competitive and can offer better service.

    The point is that VIA is not asking, just out of the blue, for an additional $10.5 million over the $11 million you state it made in excess revenues over projections. The fact is that this business plan has already been approved. This is a question of the profiling of the monies that have already been approved and that this committee has actually seen before and never questioned.

    Mr. Jim Gouk: One of the things that was mentioned to us as one of the costs was waste containment. Interestingly enough, outfits like the Rocky Mountaineer did that quite some time ago. They took money out of their own company--profits, shareholder money, whatever--and cut other costs in order to put that in because CN and CP workers, certainly where VIA runs, said, “We are at the point where we don't like working on the rails anymore because of the sewage dumped out of VIA cars, especially if you happen to be working on a bridge. It could be particularly hazardous working anywhere near VIA Rail”.

    The other private operators have to take that out of their own revenue. They compete at times, at least. We can argue semantically all day about what level of competition there is, but VIA competes against the private sector in certain areas. Given that, why should VIA get to come to the government and take the taxpayer's money to put in what the private sector has to do on their own? Why are we subsidizing VIA to put in what the private sector does on their own?

    Hon. David Collenette: You just can't get away from the fact that VIA is not a private sector corporation. It is a crown corporation and has always existed with government subsidy.

    A few years ago, the unions came to us and said, “Look, we find this intolerable”. In another era, in another age, disposing of human waste along railways was sort of a time-honoured tradition. But most countries of the world have moved to a more acceptable state of sanitation. VIA didn't have the money, so that's why, when we went to the $401.9 million, part of that was allocated for the retention tanks.

    On the question of Rocky Mountaineer, I assume they got the money through investments they made or the financing they received from the private sector company. I know you're a great partisan of the Rocky Mountaineer--I am too; I think they do a wonderful job--but let's not forget that the Rocky Mountaineer, which is a private sector operation, in effect operates a passenger monopoly they bought for a five-year term from the Mulroney government. That was extended more than seven or eight years beyond that.

    They were given the guarantee, I believe, of five years of non-competition from VIA, and they have, in effect, a monopoly. I think they do a wonderful job, and they obviously make money. There may be some other questions you may raise about whether or not VIA should go back on that route. But in setting them up, VIA did a lot of the maintenance--

º  (1605)  

    Mr. Jim Gouk: “Setting them up” are the good operative words.

    Hon. David Collenette: Of course, the Mulroney government took the most lucrative rail segment in the network, at the height of the recession, and sold it to the private sector. I don't think that's necessarily good public management.

    Mr. Jim Gouk: VIA Rail recently spent a considerable sum of money to hire the public relations firm of Hill & Knowlton to lobby communities in British Columbia on its behalf, to try to get them on side to support them going back on the southern route in British Columbia, in direct competition with the Rocky Mountaineer.

    Perhaps the minister can tell us if that was a capital expenditure or an operational expenditure.

    Hon. David Collenette: We'll have to get the answer for you there, but I assume it's operational. By virtue of the description it's not capital--it's not track, rolling stock, or signals.

    Mr. Jim Gouk: Some of the communities along there went to the B.C. Chamber of Commerce and put in a motion to show some support--and it was temporary support, I might add--specifically to reinstate passenger service, until such time as the Trans-Canada Highway was upgraded. That process is now underway between federal and provincial jurisdictions.

    That was defeated. Then a motion was passed unanimously calling on the minister to not reinstate VIA Rail on the B.C. southern route between Vancouver and Calgary. I assume that was communicated to the minister--

    Hon. David Collenette: Where was that from--what community?

    Mr. Jim Gouk: It was from the B.C. Chamber of Commerce.

    I assume the minister also has the letter addressed to him from the Premier of British Columbia stating he does not at all support VIA being put back on the southern route.

    I hope he has been forwarded, from the Prime Minister's office, a letter from the Premier of Alberta stating they do not support VIA going back on the southern route.

    Given this input, why is VIA spending the taxpayers' money--because that's what they're doing--to hire a public relations firm to try to sway the communities to back them returning to that route and competing against the Rocky Mountaineer?

    Hon. David Collenette: Any service that VIA puts on the Calgary-Vancouver route would not be competition, in the way you describe it. The Rocky Mountaineer is a premium service, where people are overnighted, I think, at Kamloops. VIA's proposal would be to extend the same kind of service they have right now on the Edmonton to Vancouver portion, which would be a through service, not an overnight service.

    We've also judged that the market is mature enough to sustain a competitive option. I'm very surprised we have a member from the Canadian Alliance arguing in favour of a monopoly and not arguing for competition. We on the Liberal side believe there should be competition, even if that competition comes from a crown corporation.

    Mr. Jim Gouk: Certainly if another company in the private sector came along, you would not hear a word against it from me. I only object when it's a subsidized government operation.

    I point out to the minister that a letter to him from the B.C. Chamber of Commerce states, in paragraph two:

While VIA Rail will attempt to convince you they would not compete with the private operator, it is simply a further demonstration of their lack of understanding of the marketplace and basic business principles.

    There is no such thing as viable passenger traffic between Calgary and Vancouver, any more than there is from Edmonton to Vancouver. VIA, with all its subsidies, is the most expensive way to go to Vancouver. It's 37% more expensive than flying and takes 16 times as long.

    So no argument can be made for providing a passenger service. It's a rail experience; it's tourism, pure and simple. So why are you promoting, through VIA Rail, the expenditure of funds for VIA to go into a tourism service in British Columbia to compete against an existing private sector tourism operation?

º  (1610)  

    Hon. David Collenette: Even if I accept that it's a “rail experience”--because you're right that the bulk of the traffic would not be through passengers or picking up people on a normal sort of run--the fact is it would be a totally different type of rail experience, and the price differential would reflect that.

    The Rocky Mountaineer is a premium service geared to foreign tourists, and no one would try to replicate that. VIA Rail would perhaps offer a rail experience as part of its service, but it would also operate a coach, and the price differential would be considerable. So there are two different types of services for two different types of markets that exist. I don't think there's anything wrong with that in a capitalist society, and I would support that kind of competition.

    Mr. Jim Gouk: Maybe the Rocky Mountaineer fare would be cheaper if they got $500,000 a day in government subsidies too.

    The Chair: Mr. Laframboise.

[Translation]

    Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ): Mr. Minister, with regard to the capital budget, according to its financial statements, VIA Rail is making a profit; in other words, there is net income. For example, in 2002, there were net earnings of $15 million , and in 2001, the net earnings were of $54 million . When we look at the capital expenditures, we see that they totalled $98 million on December 31.

    You are telling us that that is for 2002-2003. I am prepared to accept that that is over two years, but the capital budget should have been of $85 million , and we see that in 2002, it was at $98 million .

    My impression is that VIA Rail is investing more than had been forecast. I would invite you to confirm if such is the case.

    Hon. David Collenette: We will study the matter. On Table 4, dealing with the company's plan for 2002-2006, you have all of the numbers, more particularly $84.7 million for last year and $95.2 million for 2003-2004. I do not believe there is a problem.

    Mr. Mario Laframboise: On page 29, in the part dealing with investing activities, in the third block up from the bottom of the page, third line, the number quoted is $98,377,000 for acquisition of capital assets in 2002.

    In 2001, there were term deposits and you had $11 million in liquid assets, and in 2002, it drops off to $5 million . I am convinced that they dipped into their liquid assets to invest in these capital assets.

    I would like to know how it is that the company can spend more than it had forecast.

    Hon. David Collenette: It is because there was internal regeneration of the savings, which means

[English]

    regenerated savings internally, through greater efficiencies and better productivity of workers.

[Translation]

This is why you have another number.

    Mr. Mario Laframboise: I would like to know, yes or no, if they invested more than they had budgeted for in the estimates they tabled with you. My impression is that this is costing them more than they had planned.

º  (1615)  

    Hon. David Collenette: You will find the explanation in the summary of the annual report. You will note that VIA Rail invested $425.2 million and that we have $401.9 million for the program over seven years. There is in fact a difference of $23.3 million .

    Mr. Mario Laframboise: In other words, it is costing them more than they had forecast.

    L'hon. David Collenette: Yes, because the refitting of the Renaissance cars for the railway...

[English]

    I heard the translation. My French is all right.

[Translation]

    We have noted that there were other costs for equipment, for changes inside and for changes in the area of security. For example, it is Transport Canada that asked VIA Rail to carry out these changes so as to ensure passenger security in the washrooms. The company was required to move the washrooms in order for them to not be at the back of railcars. That is another cost that was added onto the rest.

    Mr. Mario Laframboise: I have a second question. When Mr. Pelletier tabled his report, he talked in his statement about the Quebec City-Windsor corridor. I was surprised to see that in the medium term a rapid train, among other things, is not in the works. The witness simply told us with regard to the Quebec City-Windsor corridor:

VIA is of the belief that rail passenger service could play a much more important role within an integrated public transportation system. However, in order to move forward, VIA must invest and increase its rail capacity (in order to increase frequency) and reduce the duration of its trips...

    For Western Canada, he clearly told us:

VIA and several of its partners are looking into the profitability of a high-speed train between Calgary and Edmonton.

    There is no longer talk of a rapid train between Quebec City and Windsor. Is this something that has been completely put aside, Mr. Minister, or is it simply because the company does not have a budget, that it is no longer carrying out this type of project within its present budgets and that it must await further funding?

    Hon. David Collenette: No, that is not true, because there are studies being carried out at present within my department with regard to the high speed train, VIA Fast, linking Quebec City and Windsor. I am studying a project in order for the Van Horne Institute of Calgary to look into the possibility of there being a link between Edmonton and Calgary.

    There are various studies on high speed train services, but these are but studies. There is no money in the present budget for high speed trains. This is why we are encouraging Mr. Manley and the Prime Minister to add money to the pot for the VIA Fast project.

    Mr. Mario Laframboise: At present, therefore, VIA is not spending money on this. Is it your department that is paying for this study? Who is covering these costs?

    Hon. David Collenette: It is our department that is covering the cost of the studies. I do not know what the exact numbers are, but I could give you an estimate, if you wish.

    Mr. Mario Laframboise: Has a route been chosen for the high speed train between Quebec City and Windsor? Will it follow the South Shore or the North Shore? Have you reached that stage in the project?

    Hon. David Collenette: In the case of that project, we are presently looking at running service along the North Shore of the St. Lawrence, between Quebec City and Montreal, using the railway of the Canadian Pacific, which is presently in charge of the short line. This means for example that we will be restoring passenger service in the city of Trois-Rivières. Later on, using most of the railway lines of CN and also of CP and of VIA Rail, we will set up a Montreal-Ottawa-Kingston-Toronto-Windsor service. It will be possible to make the Montreal-Toronto trip by express train in three hours. Most of the trains between Montreal and Toronto will use the track flowing through Ottawa.

º  (1620)  

[English]

    The Chair: Thank you, Mr. Laframboise.

    Mrs. Desjarlais.

    Mrs. Bev Desjarlais: Thank you for giving us the opportunity to ask the questions on the additional expenditures for VIA Rail. Obviously, from your comments, there's concern that if the money isn't approved in the vote, certain improvements won't happen throughout the country. You mentioned a number of them. I would have liked to have heard about more on the western and northern side, rather than just on the Ontario side. But recognizing that there seems to be an attempt to improve rail service, I won't dwell on it too long.

    On the rail cars that were purchased from the U.K., I believe there was a question from disability groups within Canada about lack of accessibility. Are any additional costs associated with that coming forward in these estimates?

    Hon. David Collenette: There's no question that the original estimates for the refurbishment of the Renaissance cars are higher than what was anticipated, for a number of reasons.

    First, they were required to make more adjustments to accommodate physically challenged people. Second, they were required to add more crash resistance to the cars. As we know, in Canada we follow the Federal Railroad Administration standards of the U.S. to withstand 800,000 pounds of thrust. The cars in Europe, by and large, withstand 250,000 pounds of thrust, I think. There had to be extra strengthening, and there was extra cost associated with that.

    We also found that the placement of the washrooms in the crash zone at the ends of the cars did not afford enough protection for anyone who might be in the washroom when there was an accident. Therefore we requested VIA to adjust the location of the washrooms, so that was an additional cost.

    There might have been some other costs associated with the bogies, the wheels underneath, but we can get you the detailed costs on why there was extra money spent. As a result, there are only 106 cars and we have 139, so we need to get the other 33 cars modified.

    Mrs. Bev Desjarlais: Have those cars had the improvements done? It was my understanding that those improvements still had not happened. There was concern from the disability groups that the cars were still not going to be accessible.

    Just on the strengthening or the standards of the cars that were purchased, was that known prior to the purchase of the cars? Ultimately, wouldn't it have been more cost-effective to just buy new cars?

    Hon. David Collenette: The 106 cars will be finished by January, and they will accommodate all of the changes that appear to be warranted for the physically challenged at this time.

    The CTA has told VIA there are certain things it has to do by a certain time. VIA's in the process of trying to do that. I don't rule out additional things being required to be done at a certain point in the future, but certainly the ones that have not yet been fixed up can have all of the necessary changes made at the same time.

    By and large, I think VIA is trying to live within the spirit of the letter I sent to the chairman of VIA Rail at the time saying, “The government gives you permission to buy these cars because it's such a great deal, but you have to make sure they are fully accessible for those with handicaps”.

º  (1625)  

    Mrs. Bev Desjarlais: So on my question of whether it would have ultimately been more cost-effective to buy new cars rather than making all the changes, what's the difference?

    Hon. David Collenette: Look, there's no question that even with the additional costs this is a deal. New cars would cost upwards of $400 million. These cars, frankly, were a steal. In fact, I'm surprised there hasn't been a question in the House of Commons in Britain, because the British taxpayer really has subsidized these in an incredible way. We paid about $135 million for them, and that included the upgrades. But it will be higher than that by the time it's done.

    Mrs. Bev Desjarlais: Does that include all the costs of the upgrades?

    Ms. Helena Borges (Executive Director, Rail Policy, Department of Transport): That's the initial forecast.

    Hon. David Collenette: It includes the transportation by ship to Thunder Bay. The British almost gave them away.

    Mrs. Bev Desjarlais: I want the ultimate end price, because we're still living in the yellow submarines.

    Hon. David Collenette: We can't give you an ultimate end price. Well, it was $165 million for 106. How much additional do we need?

    Ms. Helena Borges: We need about $70 million for the 33.

    Hon. David Collenette: So if that's $230 million versus $400 million, the taxpayer's still getting a deal.

    Mrs. Bev Desjarlais: Okay, fair enough.

    On reviewing the truly remote rail services in Canada, can you tell us if the department has done anything in that regard?

    Hon. David Collenette: We are working on the review of the remote services. There are some challenges. We have a challenge right now in your own province in your own constituency, as you know. I think it's your constituency--the service from Lynn Lake to Le Pas. We've been working with the local community there. VIA will be reducing its service to twice a week, but I believe it will improve the quality of the service.

    The problem we have there is the short-line operator has given notice to end operations because of the issue of the closing of the mine. The local community wants the track maintained--as does the federal government--for other mining opportunities down the road, but there seems to be an agreement with the community that because there are other alternatives, the proposed reduction by VIA will be something they can live with.

    Mrs. Bev Desjarlais: My question, though, is where is the department in the review?

    Hon. David Collenette: It will go to cabinet in the fall, I'm told.

    Mrs. Bev Desjarlais: So you're really nowhere in the review.

    Hon. David Collenette: Well, come on. If you're going to cabinet in the fall, the way the system operates around here, your work's almost done.

    Mrs. Bev Desjarlais: Okay, but that was my question. If something has been done within the department, is it possible for us to at least see that preliminary work? If you're going to cabinet, I assume there's something substantial there we might be able to see, unless it's really top secret.

    Hon. David Collenette: Well no, but you don't start creating public debate before cabinet. We're working on some options. We'll go to cabinet and then make them public. Then the committee can deal with them.

    Mrs. Bev Desjarlais: Since I have a few remote spots in my riding, I'm not aware of anybody from the department having discussions in the community on the remote service. So if you have something you're going to cabinet with, I would like to know whether there has been any consultation with the communities.

    Hon. David Collenette: I'll get you a detailed answer, but I'm certain all of the existing remote lines have been looked at, and I'm sure there have been discussions with locals. We just don't sit here in Ottawa with our pencils, you know.

    Mrs. Bev Desjarlais: I pretty much know everybody by name in those communities, so if I go back there and I'm told that no one has been there discussing anything with them, I'm not going to be a happy camper.

    Hon. David Collenette: Mr. Chair, we'll get a list of people in Madam Desjarlais' riding, or in Manitoba--a list of groups we've been in discussions with on remote service.

    Mrs. Bev Desjarlais: Try to make it in my riding. It's pretty much most of Manitoba anyway, but if you could do it in my riding that would be great.

    The Chair: Do we have that undertaking?

    Hon. David Collenette: Absolutely.

    The Chair: Are you satisfied with that, Ms. Desjarlais?

    Mrs. Bev Desjarlais: Yes.

    The Chair: Mr. Keyes.

    Mr. Stan Keyes: Thank you, Mr. Chairman.

    Minister, I want to somewhat admit my feelings on your presentation today. I felt they were rather shameless and defenceless. I suppose if you want to justify, with your presentation before us, by making selective examples in the report to try in any way make the member for Thunder Bay or the member from Hamilton or anyone else feel uncomfortable with the job we're trying to do--

º  (1630)  

    Hon. David Collenette: Not at all.

    Mr. Stan Keyes: Well, it appeared that way, and the smile on your face was evident.

    Hon. David Collenette: I'm a happy person, Mr. Keyes.

    Mr. Stan Keyes: All we're trying to do, Mr. Minister, is ensure we're doing the job the Auditor General has asked us to do: look at these estimates; determine whether or not they are valid; and put our recommendation forward. We did that. Based on the information we did or did not get from VIA Rail, we put that suggestion forward on the cut to VIA. So far I haven't been convinced, and maybe after I've asked you some questions I will be. I'm trying to leave myself open to that possibility.

    First I want to draw your attention to page 4 of your presentation where you talked about “The Renaissance of Passenger Rail in Canada”, June 1998. I dug up that report, dusted if off, and found that some of your statements in it were rather a selective edited excerpt from the committee's report. For example, you say, “participation in further studies for high-speed rail in the Quebec-Toronto corridor”. That sounds great, but in fact recommendation 11 of our report said:

Given the potential for high-speed rail in the corridor, the government should participate with the governments of Quebec and Ontario in Phase II of the Lynx proposal....

As we know now, that's pretty well down the drain because of the lack of participation with the governments of Quebec and Ontario. So this wasn't a stand-alone federal government initiative, as you somewhat alluded to in your presentation to us. This was a joint venture we were trying to put together with Quebec and Ontario.

    Recommendation 6 of that report said:

That the government ensure that, with regard to competition in the passenger rail sector, no undue hardship be placed on the private passenger rail operator by a passenger rail subsidy, thus ensuring a level playing field.

That's exactly the argument Mr. Gouk has presented, Minister. History's a great thing, and we should always try to get people who've been on the committee to stay on the committee for some time because they bring a bit of history.

    In the case of the Rocky Mountaineer and Peter Armstrong, the reason why they came there wasn't just because they cut a deal with Brian Mulroney. A real, honest, customer service business plan was put forward by a gentleman who saw how VIA Rail--and I remember these hearings as clear as a bell--was running an overnight service on that route in the dark, and wondering why they weren't making a profit.

    Then along came an entrepreneur who said he was going to cut his deals with the railroads and run on that route during the daytime. My God, can you imagine letting people see the beautiful surroundings of B.C. while you're making money? So he put that idea forward and the deal was made. So VIA had their night run where they weren't making any money, and Peter Armstrong had his day run where he was making all kinds of money. Now, of course, the lights go on for VIA Rail.

    Recommendation 3 was:

That the government allow for and encourage innovative public and/or private partnerships on segments of the rail network so that all services might be delivered in a cost-effective and efficient manner.

That's something we have to do. We have to continue to work to try to form these partnerships. I don't see anything about partnerships in VIA Rail anymore. All I hear about is how much more money can we squeeze out of the government in order to run a railroad that is losing money. They're trying; I'll give them that. I'll be totally honest, they've come a long way, but the fact of the matter is they need the government dole.

    I just want to ask the minister--and this is where we come to crux of the $9 million we're talking about--if he can explain to me how this works. He has an operating subsidy and a capital subsidy--correct? Now as I understand it, you can't take money out of the capital in order to help out with the operating, or vice versa.

º  (1635)  

    Hon. David Collenette: You can with Treasury Board approval.

    Mr. Stan Keyes: Yes, but they have to go to Treasury Board and ask for that.

    We spoke of $9 million. Is it automatically assumed that this $9 million cut will automatically come out of capital and not out of operating? The report you gave us today demonstrated to us that the $9 million was going to come out of capital and it was going to affect Thunder Bay, Hamilton, and anywhere else you chose to pinpoint in the meeting. Is the $9 million coming out of capital or is it coming out of somewhere else? That's the question. Which one does it come out of?

    Hon. David Collenette: Do you want me to answer all the questions?

    Mr. Stan Keyes: Just that one if you could--is it coming out of capital? What is it coming out of?

    Hon. David Collenette: The way we understood the discussion and the motion was that there was an objection to the increase from $255.7 million to $266.2 million in the budget, and that it was capital related. My understanding is that the motion has to be worded--and the clerk can perhaps advise you on it--in such a way that it is a certain percentage of VIA's budget.

    Mr. Stan Keyes: Right. It's the overall budget that we're reducing. I'm getting specific here, though. Is it going to come out of capital or operating expenses?

    Hon. David Collenette: My understanding was that the objection the committee had was to the increase, as I've just cited.

    Mr. Stan Keyes: You're wrong. I stand to be corrected, but I believe this committee is saying that VIA Rail has an overall budget and we want that overall budget reduced by $9 million, and this is why, minister....

    I understand your presentation and I understand VIA's need for capital investment. For example, in 2002-03 VIA needed $154 million for operating expenses. They got $170 million from the government. Since you can't take money out of one pocket to put it in another pocket, that means they got too much money for operating expenses. So armed with the information we as a committee have that their operating expenses have gone up--$154 million, to $164 million, to $170 million--by $16 million, we're looking at that and saying that based on the numbers they're projecting on this year's plan, because they have to submit the plan before they can get the budget money, they're getting $9 million too much money to operate.

    We're all for VIA and the capital investment, but when it comes to the operating side they want all this money but they're not spending it. There's a history of not spending it on the operating side.

    Hon. David Collenette: I'll certainly have to look at the issue of the actual motion, but it was our understanding that this was specifically reduced by about $25 million from $266 million.... That's the total amount.

    Mr. Stan Keyes: That's the total.

    Hon. David Collenette: That's the total amount--a reduction of $9 million.

º  (1640)  

    Mr. Stan Keyes: You see, we can't go into the House and say the committee is reducing the operating side of the estimates to VIA by $9 million. We can only lower it overall.

    Hon. David Collenette: I don't have the exact wording from the committee, but the question was on the difference between last year's “ask” and this year's “ask”. It was actually $10.5 million. The operating subsidy is fixed--it's well-known--at $171 million, and they tie it to the inflation rate. But the specific issue was the reason for the difference this year. The difference is on the increase on the capital side, for the reasons I gave. It is actually $10.5 million and not $9 million.

    Mr. Stan Keyes: We heard that from you. Some of us don't have a problem, with a better understanding as you have provided for us, with the capital side of the operation. But on the operating side, when we look at the numbers and see them getting $10 million too much, or more money than they have spent in the past, we sit back as a committee and say, “Look, they're getting $9 million too much money”.

    Hon. David Collenette: I should say that the $171 million was announced, I believe, in one of the budgets two or three years ago. It's a 10-year commitment that is well-known to cover operational subsidies

    Mr. Stan Keyes: Okay, but let me ask you this: what happens to the $16 million?

    Hon. David Collenette: As we answered to Mr. Laframboise or Mr. Gouk, when they do better with their operating ratios--I think it was Mr. Gouk who asked, and $11 million was the figure used--that $11 million is plowed into additional capital needs. So I guess the issue--

    Mr. Stan Keyes: No, wait. They can't do that. If they're saving money operationally--

    Hon. David Collenette: Not saving...if they have efficiencies and their ridership is such that they have a surplus, that money can indeed be used for the capital budget. But that's not taking it away from the $171 million. That's over and above it.

    Mr. Stan Keyes: I agree. But you see, Minister, it's not a surplus. They're asking for x amount of money, and what they're spending in the year is x less so much money.

    The Auditor General says, “Wow, look at this. They're asking for all this money, but year after year they've demonstrated that they've spent far less than they've actually received”. So it's our job as a committee to say, “Okay, let's cut back their money, because obviously they're getting too much money”.

    The question I have for you--maybe your officials can answer for us--is what happened to the extra $16 million they did not spend on the operational side in 2001? Was it retained by the Crown? Did it get moved over to capital? What happens to that extra money in the next year?

    Hon. David Collenette: First of all, the fact that VIA has what I term a surplus, and what you term as additional money over and above the operational budget, is as a result of increased traffic and increased efficiencies. They're becoming more efficient as the new equipment goes in--the locomotives in particular, and the track improvements on the Alexandria subdivision between Ottawa and Montreal--and all of that produces what I call “savings”--you don't like using that particular word--or additional revenues.

    So VIA has those additional revenues. They still have the operational subsidy, but the cost ratio is going up, in effect, the cost recovery is going up, so the money is plowed back in. I mean in any business, if you--

    Mr. Stan Keyes: What is that extra $16 million being plowed into?

    Hon. David Collenette: It's going into other capital expenditures.

    Mr. Stan Keyes: So it gets moved, with the permission of Treasury Board, out of operational over to capital.

    Hon. David Collenette: Absolutely.

    The operational moneys have been there, so that's why I say it's a surplus on the operating side. It's not that they're cutting back on operations, or cutting corners. They're actually, because of their total operating efficiencies, generating more--and I'll grant you this--than they required on the $171 million on an annual basis. But Treasury Board is saying that because they're more efficient, they can move that into other capital over and above the $401 million outlined here. So that means more stations will get improved more quickly. It allows them to fix up the track they--

    Mr. Stan Keyes: So as I read it, Minister, what we're--

    The Chair: Sorry. This is a very interesting conversation but you're over time.

    Mr. Stan Keyes: I apologize to the committee.

    The Chair: Can you come back on a second round?

    Mr. Stan Keyes: I'd love to ask the next questions.

    Hon. David Collenette: Mr. Chair, I didn't answer the other questions Mr. Keyes posed. If you want, I can give the answers to them very quickly.

    The Chair: You're not next, Mr. Moore.

    Yes, please.

    Hon. David Collenette: On the issue of VIA Fast, Mr. Keyes raised the issue of partnership with the Quebec and Ontario governments. That was for the LYNX program, as he correctly identified, which was a $10.5 billion program, $7 billion of which was sought from governments: $3.5 billion from the federal government and the balance between the Ontario and Quebec governments.

    We looked at that and agreed, in conjunction with the Ontario and Quebec governments, we could not afford that as a society. That is why I said to VIA, “Look, if you can come up with some other plan that costs significantly less money but improves efficiencies and train times, let's look at it”. That's the so-called $3 billion plan that is being put forward with respect to VIA Fast.

    In that case we would not need the participation of those two additional governments. If you're saying we should go out to Ontario and Quebec, although they weren't keen in the first place in participating in the Lynx, that's a valuable suggestion I would certainly have considered.

    On the issue of the Rocky Mountaineer, again this is an issue that's somewhat moot this year because Canadian Pacific doesn't have the capacity on its track, because of one particular bottleneck, to put on an additional train. So it's not going forward. This is something VIA would like to do. So I wouldn't want members to think this was somehow imminent. This matter will be for continued discussion in the future.

    On the issue of public-private partnerships, we have been looking at the remotes to see whether or not you can have the public-private partnerships. In the case of service to Churchill, Lynn Lake, and Le Pas, there are some financial difficulties. In the case Sudbury-White River junction, we think it could be done but CP is reluctant to allow a third-party operator on its track to do that--they own the track.

    The issue on Vancouver Island is an interesting initiative, and the community should be congratulated for what they're doing there to try to make it work. We're saying we're there with the existing subsidy for that Courtenay-Victoria service, but we cannot make capital improvements.

º  (1645)  

    The Chair: Thank you, Mr. Collenette.

    Mr. Gallaway.

    I've put you on the list, Mr. Keyes, for the next round.

    Mr. Roger Gallaway (Sarnia—Lambton, Lib.): We might say this is most interesting. Minister, you've indicated before us today that the President of the Treasury Board will be tabling a motion--or perhaps it's on the order paper--to essentially undo the committee's recommendation, or to reverse or counter the committee's recommendation. I would be interested in knowing if you will be appearing in the House and speaking in favour of that motion.

    Hon. David Collenette: I believe, having done due diligence with our department, that the budget of VIA is an accurate one that should be supported--obviously, we brought it forward. For the reasons I stated earlier--I don't think you were here for my earlier remarks--

    Mr. Roger Gallaway: I was.

    Hon. David Collenette: --I believe the money should be reinstated. Therefore I asked the government House leader to reinstate it, and the government House leader and the President of the Treasury Board agreed, so there will be a motion to that effect. I'm not sure whether debate will be permitted on Thursday night on that particular clause. If it is I will certainly be around, if people want to ask me questions.

    I think that was the whole point of coming to the committee today. If the minister is responsible for the budget of a crown corporation, then the minister should come and defend the estimates, which I've done two or three times in this process. But there was particular dissatisfaction on the part of the committee with respect to VIA's presentation. So I offered to come back here to see if I could enlighten you as to the reasons why I believe that clause should be reinstated.

    Mr. Roger Gallaway: Okay.

    I'm beginning to think that maybe the minister should come to do all of the estimates, that being the case.

    Hon. David Collenette: I'm your servant. I'm here. Just call me and I will come.

    Mr. Roger Gallaway: Minister, you said in your opening remarks that VIA Rail needs certainty, in that this $9 million recommended reduction might create a number of scenarios that you've listed in your presentation. Is it not presumptuous, in a sense, for a department, an agency of a department, or a crown corporation to assume it will get all it requests when the estimates are tabled ?

    Hon. David Collenette: Unfortunately, the practice has arisen in the last 35 years to be the case. Frankly, I'm quite sympathetic with your point of view philosophically. I was elected in another era, but when I was vice-chairman of this committee from 1974 to 1978, there was a lot of resentment from members who were here in the 1960s and used to have the committee of the whole House dealing with estimates. Ministers were forced to defend, and to some degree of regularity there where adjustments made, although in most cases, as I understand it, the whole House usually reinstated the items.

    The notion of going to committees and deeming the estimates to be reported on May 31 was something that parliamentary purists felt was inimical and really not worthy of the parliamentary system. You could probably dredge up speeches I made where I was somewhat sympathetic to that argument. That is why I fully understand the committee being dissatisfied and doing what it did--and the Speaker agreed with the committee.

    I said earlier that Mr. Gouk objected when I said, with great respect, I thought the committee erred. I believe, hopefully, that the explanations I am giving, had I given them earlier, might have led the committee not to delete that item.

º  (1650)  

    Mr. Roger Gallaway: In the $171 million guaranteed annual operating appropriation to VIA Rail, what contingency is built into that?

    Hon. David Collenette: Contingency in the sense of...?

    Mr. Roger Gallaway: Error--most businesses would have a contingency built in.

    Hon. David Collenette: Quite frankly, the way the subsidy has been allocated has been very arbitrary. In fact, that $170 million was something Mr. Young and Mr. Martin agreed to in program review. At the time I felt it was somewhat arbitrary. It was driven by the need to get government's overall expenditures down, and we did this in a lot of departments. As a result, there had to be a lot of cuts made to service.

    So it was highly arbitrary. The $171 million is still arbitrary, but I didn't have the gall to ask for reinstatement of what I thought the VIA subsidy should be, to give the kind of service I think Canadians are entitled to--around a $200 million to $225 million annual subsidy--because I knew I wouldn't get it; there wouldn't be a prayer. So I stuck with the amount that was agreed to in program review, indexed to inflation.

    As Mr. Keyes has pointed out, that is producing some difference in actual subsidy and expenditures, which I call a surplus, but he didn't like calling it a surplus. Because that money has been voted on, it's going back into capital. It's not inconceivable that there may be a shortfall in a particular year, so then what do you do? Do you come back to Parliament and say you want the subsidy increased in the supplementary estimates? No. So VIA is really trying to operate within the $171 million.

    Mr. Roger Gallaway: Mr. Keyes referred to the example of the fiscal year ending 2002, when the operating subsidy had a surplus and they didn't use $16 million of it. You said Treasury Board had given permission to transfer that to capital.

    Is it unfair to characterize this fiscal year coming...or to conclude that in fact $9 million out of that operating subsidy wouldn't even be missed, knowing that in the most recent fiscal year they ended up with a surplus in their operating subsidy?

    Hon. David Collenette: Let's assume there is a $9 million difference between actual operating expenditures and the operational money voted in the budget, and the $9 million isn't there. Based on what VIA's been doing with the differential, that would come out of capital. That's the whole point I made earlier.

    Mr. Roger Gallaway: That being the case, since we are seeing frightening declines in travel in the tourism industry, what contingency plans does VIA have in this appropriation for a decline in ridership?

    Hon. David Collenette: Given what's happened in the last couple years, especially since 9/11--I think last year there was a 3% system increase, including 10% in the Quebec-Windsor corridor--if the current problems with tourism, which have also affected VIA Rail, continue, then any amount....

    How much was invested last year into capital from the operating budget?

    Ms. Helena Borges: It was about $15 million.

    Hon. David Collenette: It's not inconceivable then that VIA will be closer to the target of $171 million. So the contingency is right there in knowing that VIA cannot go beyond the $171 million voted by Parliament for its operations. It can say, but if it's running a good business it better make sure it's not going over.

    Mr. Roger Gallaway: Because we've talked about passenger volumes, when VIA officials were here a week or two ago they said that 70% of their total passenger volume was in the corridor, and revenues from the corridor were about 85%.

    You've referred to historical documents from 1998 here today, Minister. I'd refer you to a document tabled before this committee in 1992, where somebody by the name of Ron Lawless said passenger volume in the corridor was 70%, and the total revenue from the corridor was 85%. That was 11 years ago. Why has there been no change in that time period?

º  (1655)  

    Hon. David Collenette: I'd have to look at all the statements. I'm not familiar with Mr. Lawless' statement, but back in 1990 the subsidy was $410 million, and the number of passengers being carried was roughly what it is today. But it's remarkable that we're carrying--and we'll get the exact comparison--the same number of passengers, or perhaps a little more, with over 50% of the system abandoned. In 1990 there were 3.58 million passengers and now there are 3.981 million.

    So there's been a remarkable improvement, if you look at what is being asked of VIA, with 50% less capacity or obligation, hauling more people than they did 10 years ago, for $300 million less in public subsidy.

    The Chair: This is the last question, Mr. Gallaway.

    Mr. Roger Gallaway: Thank you, Mr. Chair.

    VIA officials indicated that the growth was 30%, or some number such as that, in VIA 1 traffic, primarily in the corridor. There's also an indication that most of those people are business travellers who are writing off their cost of travel. They're travelling on business, and they or their employers are writing it off as travel.

    When you talk about subsidy, are we not subsidizing twice in that case? We're subsidizing the ticket and we're subsidizing their business expenses through the Income Tax Act.

    Hon. David Collenette: I suppose that is the case. There's no question there is an overall subsidy, but my understanding is that the cost recovery on the corridor is 92%. Now that's pretty good. So while you're technically correct, it's not far from 100% recovery in the corridor. When we talk about the 64.5% cost recovery in the system, we're talking about lines going up to Churchill, northern Ontario, Senneterre in Quebec, or the Atlantic.

    Just to round this out very quickly, in the Quebec-Windsor corridor last year the traffic went up 3%, with 2% in coach, and 10% in VIA 1. Mr. Gallaway is right that on the eastern transcontinental, the coach went down by 4% but the sleeping car went up by 9%. You get better yields, as I understand it, on sleeping cars rather than coaches, so that's not bad. On the western transcontinental--I think Mr. Gouk was maybe referring to this--on the sleeping cars it was down 6%, and the total western transcontinental was down 3%. That was because western Canada has really been hit hard since 9/11, largely through lack of tourists from Japan and Europe.

    On the regional and remote lines, coaches have actually gone up by 7% and sleeping cars have gone down by 8%, for a total increase of 6% on regional and remote lines. So I think it's not a bad story to tell, so far.

    The Chair: Thank you, Mr. Collenette. Thank you, Mr. Gallaway.

    Now we'll go back to five-minute rounds with Mr. Gouk, and then Ms. Picard. Then we have Mr. Bagnell, Mr. Dromisky, Mr. Volpe, and Mr. Jackson.

    Mr. Jim Gouk: Thank you, Mr. Chair.

    At the end of my last intervention, Mr. Keyes correctly pointed out that I was past my time. I'd just like to clarify what we were saying. The minister said there would be a cost difference between what the Rocky Mountaineer charges and what VIA would charge if they were operating on the same route. If the Rocky Mountaineer had the operational subsidy VIA Rail gets, they could pay everybody $1,700 to ride on the train for free. So let's not talking about price differentials when we're shovelling in $500,000 a day of taxpayers' money.

    The minister just said one thing I find extremely interesting. Throughout his presentation earlier and in his response to me he said that VIA Rail wasn't in competition with the tourism sector; they were providing a passenger service, not a tourism service. Then he turned around and said, “Our ridership might be down because of the tourism industry. There are fewer tourists coming in, and therefore fewer people riding on our trains”.

    We can't have it both ways. Is VIA Rail providing a tourist service or a passenger service? If it's a passenger service, why does a lack of tourists suggest they're in for a recession?

»  (1700)  

    Hon. David Collenette: I think a few minutes ago I used the word “experience”. I'm not sure it was in answer to Mr. Gouk's question or Mr. Keyes' question. There is no doubt that the majority of the passengers who travel on the western transcontinental, and by implication any reinstatement of VIA between Calgary and Vancouver, would go for the experience. The number of people who would choose to go from Toronto or Montreal to Vancouver by train as simply a conveyance would be small. Most people would fly. There's no question of that.

    But I have to emphasize that any projected VIA service on that line--and it's not going to happen right now, but this is something they've been planning for--would not be the same type of service. Therefore, we believe it would not materially interfere with the revenues of the Rocky Mountaineer.

    The one problem we have is that because of September 2001, but particularly because of SARS, traffic is down quite a bit, and I anticipate it will be down on the western transcontinental. Just in terms of international traffic alone coming into the country, Toronto is down by 27% on international flights, and Vancouver is down by 50% on international traffic, largely because of the cratering of the Asian market. So that will obviously affect tourism in British Columbia, and will probably also affect the Rocky Mountaineer.

    But it's a bit academic anyway because the service is not going to be given this year.

    Mr. Jim Gouk: Okay. Nonetheless, I still take it that the minister has acknowledged that VIA provides primarily a tourism service, therefore when they compete against private sector tourism it's wholly inappropriate.

    Hon. David Collenette: I disagree with the way that was phrased, Mr. Chair.

    Mr. Jim Gouk: As Mr. Keyes pointed out quite correctly, VIA gets an operational subsidy of $170 million a year. Last year they spent $154 million, therefore the money was spent on the capital side. You can shuffle the deck any way you want, but the bottom line is they moved $16 million out of operational into capital. You can't say something that doesn't make a profit moved their profit over because they don't make a damn profit, nor are they ever likely to make one.

    Unless you're telling us they came to Treasury Board and asked if they could move $16 million over--and maybe you can clarify that for me--they moved that money illegally. Now they want to do it again, and they want us to give them some more money to do it with as well.

    Hon. David Collenette: Mr. Gouk is being very inventive in his language. The fact is that Parliament has approved the $171 million annual operating subsidy. Because of increased traffic--and I've talked about a 3% system increase--and increased productivity through new equipment, the new GE locomotives, the new Renaissance cars, and the track improvements that have been made, they have actually generated more revenue than anticipated. They have increased their cost recovery ratio, which I think everyone should be happy about.

    So I guess the argument--this is really what we're coming to here--is whether that differential should go back into the treasury as part of general revenues, or be plowed back into additional capital expenditures to make the system even more efficient and raise the cost recovery ratio even higher. In fact, as has been pointed on the corridor, the cost recovery is 92%.

»  (1705)  

    Mr. Jim Gouk: Just on a point of order for clarification, the question was whether Treasury Board approved moving that money. Yes or no.

    Hon. David Collenette: Absolutely. Everything VIA does has Treasury Board approval.

    Mr. Jim Gouk: Oh, everything they do--carte blanche.

    The Acting Chair (Mr. Joseph Volpe (Eglinton—Lawrence, Lib.)): Now we're beginning to be argumentative. I'm going to proceed to Madame Picard.

    Hon. David Collenette: Certainly not on my part, Mr. Chairman.

    The Acting Chair (Mr. Joseph Volpe): Absolutely not, Mr. Minister.

[Translation]

    Ms. Pauline Picard (Drummond, BQ): Thank you, Mr. Chairman.

    Mr. Minister, I have two questions to put to you.

    In an answer you gave my colleague earlier, concerning the Quebec City-Windsor corridor, you mentioned that studies are presently being carried out by your department looking into the possibility of developing something along the North Shore of the river, with perhaps a stop in Trois-Rivières.

    I come from the South Shore, from a region situated between Quebec City and Montreal. You are aware that it is along the corridor on the South Shore that the economic activity is concentrated.

    I would like you to give me the assurance that, whatever development is carried out on the North Shore, there will be no changes on the South Shore and that you will continue to serve the South Shore.

    Hon. David Collenette: I must assure my colleague that there will continue to be train service along the South Shore of the St. Lawrence, not only with the Transatlantic but also with the two or three trains that presently go back and forth between Quebec City and Montreal.

    But the rapid train will go through the North Shore.

    Ms. Pauline Picard: That is for the rapid train.

    My second question relates to the high speed train. I know that numerous studies have been done. When I arrived here in 1993, there had already been studies, at the time the Conservatives were in power, on the famous high speed train.

    Is the high speed train still part of your projects? Is it something we can hope for for the future? If the answer is yes, on what shore would you see the high speed train established?

    Hon. David Collenette: VIA Fast will be on the North Shore because it is the most direct route as well as the shortest between Montreal and Quebec City.

    When the track was built a century ago, the plan involved a very narrow track, and it will be more efficient to have a high speed train on the North Shore. Furthermore, as I said earlier, we are going to be retaining the service that goes through the eastern townships, in your riding, for example, and that runs to Quebec City.

    Ms. Pauline Picard: Thank you very much.

[English]

    The Chair: Thank you, Ms. Picard.

    I ask the indulgence of the members. Next is Mr. Bagnell, and I have four members. Two have indicated to me they must leave in short order--Mr. Bagnell and Mr. Volpe. Would Mr. Dromisky and Mr. Jackson allow those two...?

    Mr. Stan Dromisky (Thunder Bay—Atikokan, Lib.): Sure, as long as I get a chance to speak.

    The Chair: Stan, you'll get a chance to speak.

    Mr. Stan Dromisky: Okay, very good.

    The Chair: Mr. Bagnell, five minutes.

    Mr. Larry Bagnell (Yukon, Lib.): Thank you, Mr. Chair.

    I'm a big supporter of railways. I think they bring millions of dollars of tourism revenue into Canada. I think we've been playing catch-up for decades with Europe and Japan, which is why I supported the increase of $9 million. But I also support my colleagues, who felt they did not get enough detail at the previous meeting, in voting against it.

    We wouldn't have made contracts for the $9 million yet without Parliament having approved it, would we?

    Hon. David Collenette: No. VIA obviously operates within its budget, and enters into contracts based on its capital spending and planned spending. It has a business plan, which is accepted by Treasury Board, and the spending is voted on every year by Parliament.

    It's not inconceivable that VIA might have to make a choice and say, “Okay, we'll have to cut back on a certain area, then renegotiate a contract”. I don't know. I mean, $9 million out of a large capital budget is significant, but it's not the end of the world.

»  (1710)  

    Mr. Larry Bagnell: That leads into my next question perfectly. To me, $9 million is not a large amount of money, especially if you say $30 million is for passenger train station upgrades, and $70 million is for another 33 cars.

    In previous committees I've asked for a maximum of only $6 million for what could be the most exciting rail project since Confederation, which is to join the Alaska railway with the B.C. railway so millions of American tourists, whose dream is to go to Alaska, could use it.

    In the estimates we're going to vote on Thursday, is there any possibility of having any of that $6 million for this exciting project, or might there be in the future in some other mechanism a way to join Congress' request to have an international joint commission and study this possibility?

    Hon. David Collenette: Mr. Bagnell knows that I'm a great supporter of this idea. I think it's very visionary and something we should look at as a government. The Americans are leading the charge. The former senator, who's now Governor of Alaska, has been leading this particular effort. Right now, the matter is before cabinet and the various departments. The Minister of Foreign Affairs has the lead, in a sense, because it is something that involves the U.S. He knows I believe we should proceed--certainly to do the feasibility studies to see whether or not this is an appropriate solution. But there's nothing in these estimates that could be spent on this.

    Mr. Larry Bagnell: In your discussions with VIA Rail before the meeting, were there any suggestions of what might be cut if we don't approve this $9 million?

    Hon. David Collenette: No. I haven't talked to VIA about how they would deal with the $9 million shortfall. I believe, for the reasons I gave earlier, it would be very unwise and unjustified to do it. VIA as an institution has done well, has become better managed over the last number of years, is offering a better quality of service for Canadians, and is indeed moving more and more toward cost recovery.

    I mean, 64.5% cost recovery for a passenger rail service that involves serving remote regions, including Hudson's Bay, is truly remarkable on the world standard. It's not that we would want to do this--as a Canadian I would object--but if you took away those remote services and some of the other services where we lose money, you would make a profit on the Quebec-Windsor corridor.

    What we are about as Canadians is sharing, and we're in effect sharing the profitable business of the busy routes--92% in the corridor--with providing service elsewhere in the country. I think that is laudable, and that's why I hope you will understand my logic.

    The Chair: Thank you, Mr. Bagnell.

    Mr. Volpe.

    Mr. Joseph Volpe (Eglinton—Lawrence, Lib.): Thank you, Mr. Chairman.

    Mr. Minister, I'm glad you ended with that particular theme of sharing, because that's one of the issues that came up.

    As part of the discussion, I wanted to ask a different question. When we were in camera I asked you, but we continued with VIA. It's fine to share in times of largesse, but it's a little bit more difficult to digest the concept of sharing in times like this.

    For example, you indicated there has been a 27% decline in transportation going through Pearson. There's probably an equally difficult time being experienced by people who operate the bus companies. Yet we're spending more money on VIA, whose ridership has to come from someplace. Your officials indicated to us, and you confirmed, they're coming essentially from that group in the corridor. It's those people who had the option of not going on planes or buses where they wouldn't be subsidized. Now that they're going with VIA, they are subsidized. That was a major concern.

    As for justifying some of the numbers, my colleagues here have asked you where the money is allocated and how it's being used. Quite frankly, I'm not convinced that the money is being used and used well.

    I'm especially struck by some phrases, like the one on page 3 of your presentation at the bottom:

Similarly, government funding per passenger mile has been reduced from 45.6¢ in 1990 to 15.8¢ in 2002. I think you would all agree that this performance is remarkable....

Well it is, but you're part of the cabinet that reduced subsidies to VIA of $146 million from 1990 to 1994-95, so a lot of that is forced efficiencies, if I can be polite.

    The arguments at the time--I think in cabinet you helped to make those arguments--were that VIA had a culture of inefficiency, and in some of the items illustrated by other colleagues, it was competing with the private sector, or not being very judicious in its corporate plan. That's what the problem has been.

    So I'd like to be a little more specific, because we're going to be using figures and we've used figures. But I looked at this and said, “You know what, I'm not as concerned as my colleagues about whether money gets allocated to operating expenditures or to capital”. I didn't show the same concern, because last year they wanted $250 million and they got $257.1 million. Presumably, from your answers, they used that money the best way they saw fit. On a per-passenger basis, I think it worked out to $64.30. Every time one of those people bought a ticket, that's how much the taxpayers had to fork out for them to ride that train. The vast majority, according to your answers and your officials' answers, were people who were in business class going from Quebec to Windsor.

    Mr. Minister, you and I come from a part of the country that's often referred to as the economic engine of the nation. In any seven-day period, every week of the year, more vehicles travel from Pearson to the zoo on the 401 than there are passengers serviced by VIA Rail. So $257 million would go a long way toward improving that highway system, for economic reasons. It would do wonders for environmental impacts. But you know, there isn't any.

    I defended VIA Rail last week when some members wanted to reduce the subsidies to zero. If it's such a viable business with such great plans, it doesn't need our money. Why should it be in competition with those other instruments, at a time when they're suffering?

»  (1715)  

    Finally--and then you can comment--you and your officials all pointed to the marvellous increase in 2002 over 2001. Well again, coming from where I do, I'm not surprised. Everybody's paranoid about flying right after September 11, 2001, so why wouldn't they take the car, bus, or train? I'll be interested to see what will happen when that paranoia dies down. Will we have to come up with more money for VIA, whose efficiencies are not proven at all?

    Hon. David Collenette: First of all, this government made a 10-year commitment of $170 million a year indexed to inflation. A future government may want to change that down the road, but that is the existing government policy.

    Second, on the corridor and the competitive aspects, you're right that VIA competes with bus and air. Bus travel is up in the corridor, therefore I assume it's profitable. For those who argue that VIA Rail gets subsidies and somehow buses don't, that just doesn't twig with me. The fact is that the infrastructure on which buses run, Highway 401, for example, is funded by the public. People say, “Well yes, you pay gas taxes....” and there is this ongoing argument, which I don't think we should get into here. But I can get some interesting stats for the committee for future discussion. We believe, in effect, that the bus industry is subsidized by the public highway network. The degree of that and its comparison with VIA would be interesting to discuss.

    There's no question that air has to make it on its own. One of the things the committee was talking about, not only with CATSA, was the whole issue of whether it was fair for full cost recovery to be on the backs of the airline passengers. I think the committee is justified in posing that question, especially today.

    Separate from that, I'm in the process of trying to convince my colleagues that consideration should be given to some kind of short-term relief for the air industry. It is going through a terrible time, particularly in our own community, but it's not just in Toronto. The major airports in Montreal, Vancouver, and the rest of the country are seeing a decline in passengers.

    On your issue about the program review decisions and cutting the subsidy radically, you're absolutely right it forced efficiencies on VIA, and VIA has delivered. I think people should be proud of what they did.

»  (1720)  

    Mr. Joseph Volpe: They cut more and they deliver more.

    Hon. David Collenette: After a certain point, I don't believe you can get the efficiencies. They've probably cut as close to the bone as they can, because after that you have to pare back service. They really have done a remarkable job. The fact is that if you're offering the service VIA is offering from Halifax to Vancouver, plus the subsidy on Vancouver Island and all the remotes in between, you cannot have full cost recovery. If you want full cost recovery, then you have to look at those areas where it will make money.

    One of the issues we're studying right now in the VIA Fast proposal is that at a certain time--I believe in 2015--the savings and profits from VIA Fast will really obviate the need for a subsidy. In other words, you won't have the subsidy that members of the committee are objecting to, but you have to make the capital investments in the meantime.

    The Chair: Thank you, Mr. Volpe.

    Mr. Dromisky.

    Mr. Stan Dromisky: Thank you very much, Mr. Chairman.

    The Chair: I told you, Stan.

    Mr. Stan Dromisky: You kept your promise, Joe.

    You're probably all wondering why I'm here. I'm not a member of the committee, but when I read the article in the paper--

    The Chair: You're very welcome.

    Mr. Stan Dromisky: Thanks, Joe.

    When I read the article in the paper pertaining to the recommendations of this committee, I did more and more thinking about it and was quite concerned. I thought, “I have to go to the committee and speak because we can't leave things to chance”. There was nothing in the papers indicating, as the minister has stated, exactly where the cuts might be made, or where any changes might take place in operating or infrastructure, or anything of that nature. So here I am.

    I asked the whip this morning when your next committee meeting was and I was told it was this afternoon. I said I wanted to speak and asked if there was a vacancy. I was told to get the approval of the chairman, so here I am.

    The Chair: You have two minutes left.

    Mr. Stan Dromisky: The national highway systems all over the world, whether they are totally privatized, partially privatized, or completely owned by the public, are subsidized. We know that. There's only one country in the world, France, if I remember correctly from three years ago, that makes a profit on their national railway passenger service, but it's because of their fancy bookkeeping. Their books show they're making some kind of profit.

    I think this committee should do everything in its power to encourage the development and growth of the railway passenger system in this country. From coast to coast to coast, there are huge areas of this country that are being completely ignored by that type of service. We cannot rely upon buses, cars, and airplanes because there are over 700 airports in this country and most of them don't have passenger service. There are highways in this country that are in terrible condition. You know that, Joe, you're always screaming for big improvements.

    We have to get a safe system into operation. The passenger train service is excellent, and it could be far better than it is right now. It's time for governments of the future to push and head toward the 21st century, and not deal with railway passenger service as we did in the early stages of the last century. Things have changed dramatically.

    I went to operations of Bombardier in Turkey and China, at my own expense. It didn't cost the taxpayers a cent. Bombardier could go down the tube here, as far as Thunder Bay is concerned, because beautifully made, top-quality goods are being manufactured in other parts of the world in Bombardier plants.

    I'm concerned about the people in my riding, Joe. That's your riding too. I don't know what VIA will do if they don't get this money. But I can't take the chance of being part of a system or process of a government that is just going to sit back and not do whatever it possibly can to make sure the projects VIA has already planned and contracted are maintained. Otherwise, those 50 or 60 cars that are sitting at Keefer Terminal will turn to rust. Hundreds of people will be unemployed in the Bombardier plant in my riding, but more than half of them live in your riding. That's not a threat; that's a realistic situation.

    I'm hoping this committee will have the foresight, intelligence, and vision to push railway development in this country as it has never been pushed before.

    Thank you very much for this opportunity to speak.

»  (1725)  

    The Chair: There is no question for the minister?

    Mr. Stan Dromisky: Absolutely none, because all of the questions I had on my paper...look, they're all in here. Through the questioning of the other members--

    Mr. Joseph Volpe: What part of that statement is not covered by RICO legislation down south of the border?

    Mr. Stan Dromisky: Thank you very much.

    Hon. David Collenette: Mr. Chairman, can I comment on this, particularly?

    The Chair: There's not a single word you could add to that presentation.

    Hon. David Collenette: I know this committee is one of the most democratic on Parliament Hill, and always wants to give members the right to speak.

    Just briefly, here's the nub on this. I have to find $70 million to finish those cars in Thunder Bay. I have to beg Treasury Board to roll out the $55 million that's still left in the $401 million and re-profile it for this particular project. I'm short $15 million. If the committee's wishes are agreed to by the House and we cut out $9 million, that means I will have to find $15 million. If not, then I only have to find $6 million. Where am I going to find $6 million? With a bit of luck, traffic is going to come back and there will be the ability to roll over a bit from the operational differential in efficiencies in the next year.

    I agree with Mr. Dromisky that it's vitally important for the workers at Bombardier--not just in Thunder Bay, but Bombardier is having a rough time--and VIA that we finish these cars. I beseech honourable members to.... The House will decide, but I hope you will agree with my logic in having the $9 million reinstated. One example is for these cars, but just generally on a matter of principle, the fact is we need to support VIA and the great efficient job it's been doing. I'd be the first to say, if it were an inefficient operation, you'd be right in taking a slap at it. But I think they're doing their job and they're doing it well.

    The Chair: Mr. Jackson.

    Mr. Ovid Jackson: Mr. Chair, most the questions I was going to ask were answered, so I'll give you my time.

    The Chair: I have Mrs. Desjarlais, Mr. Keyes, and Mr. Gallaway to end it up. I can't take any more speakers.

    Mrs. Bev Desjarlais: I have to make a comment, in light of Mr. Volpe's comments about just taking that money and sort of fixing the problems with the traffic on Highway 401. This hasn't really come up much today, but in reality, in any decent public policy position of any nation in this world at this time in history, to not have a strong rail passenger system as we go into the future, from an environmental perspective, seems absolutely unconscionable.

    The cost savings or the costs may be there, as a result of subsidizing VIA to some degree. But from the environmental perspective, have you ever looked at what the difference would be?

    Hon. David Collenette: From the environmental point of view, I could probably get you some information on that. But there's no question we feel we have to do something about congestion in the Quebec-Windsor corridor. That's why we just recently announced--and the Ontario government has matched about $435 million--$1.2 billion with the three levels of government to improve CN and CP rail capacity in the Greater Toronto Area. But it goes beyond that in southern Ontario to improve the GO Transit network, which will obviate the need to build more expressways.

    We're fooling ourselves if we think we can build more and more 401s. The 401 cuts right through the middle of my riding. You can't expand it; you can only tunnel under it or build over it, and the cost to do that would just be crazy. So we have to find some other means, in the congested parts of the country in southern Ontario, to get people off the roads. One way is to improve passenger rail transportation. VIA Rail in southern Ontario, and to a lesser extent in Montreal, provides a commuter service for the outer regions where GO Transit doesn't operate.

    Mr. Keyes knows we want to not only open a new VIA station in Hamilton, but also have another daily frequency to Niagara Falls to encourage tourists and others to use rail rather than drive.

»  (1730)  

    Mrs. Bev Desjarlais: Will you permit me just one comment, Mr. Chair?

    The Chair: I can't refuse that.

    Mrs. Bev Desjarlais: Thank you.

    A few years back I had the pleasure of travelling VIA Rail across the country from Vancouver to Halifax. It was an extremely great experience, it really was. Our caucus did it as a caucus retreat. I know you'd have a hard time fitting all of your people on the train to do that, but it was a great experience.

    It was also a real eye-opener to see that not just business people were travelling VIA Rail. It's a rail experience, but there are a lot of students; a lot of people who can't afford anything else; those who don't like flying; and those who can't get on airplanes because of the size of airplanes--or buses. So there is a real need for passenger rail, not just one mode of transportation.

    The Chair: There is no question there either. Thank you.

    I guess we'll go to Mr. Keyes and Mr. Gallaway. That will be the end of the session.

    Mr. Stan Keyes: Thank you, Mr. Chairman.

    Without a doubt, a lot of us agree with Mr. Dromisky. We are all in favour of passenger rail. We're all in favour of watching VIA become successful. We're all in favour of the idea of transporting people across this vast country on the train. That's not what's at issue here--not VIA nor its existence. What's at issue here for me is what I see as creative bookkeeping by VIA Rail.

    For example, last year they saved $16 million of the $171 million on the operating side. What about the year before that or the year before that? Were there also savings in those years? You don't have to give me an exact number. Did they get $171 million in each of the two previous years?

    Hon. David Collenette: I think you'll find that a few years ago they had to go into what we call the asset renewal fund.

    Mr. Stan Keyes: I'm just talking about the last two or three years. I'm not talking about 10 years ago.

    Hon. David Collenette: In 2002 they got $153.7 million; in 2001 it was $163.3 million; in 2000 it was $170.3 million; and in 1999 it was $170 million.

    Mr. Stan Keyes: Okay, that's good enough. For three years running they never had to spend their operating subsidy.

    Hon. David Collenette: It was the last two years--2001 and 2002.

    Mr. Stan Keyes: All right. They have saved money on their operating expenses. For that reason we're saying if they don't need $171 million they should ask for what they need. If it's demonstrated year after year that you're saving money on that $171 million and savings are increasing year after year, then ask for what you need. But they seem to be saying, “We'll keep it at $171 million, Minister, and what we can't get through the front door on capital we'll get through the back door on operational savings. Do you see what I mean?

    That's all the Auditor General is looking at too, I'm sure. She's saying, “Why are you guys giving them so much bloody money if they're not reaching that target and the money's coming through...?” It's almost like a supplementary supplementary estimate because they're getting this money through the back door. Treasury Board's saying, “Take the extra $16 million you saved and move it over to capital, because otherwise you're going to have to ask for more capital. God knows we can't have you doing that because that'll cause all kinds of problems, so just shift it over. We'll do that through Treasury Board”.

»  (1735)  

    Hon. David Collenette: Mr. Chairman, I understand Mr. Keyes' point that 1999 was the first year of the 10 years of $170 million and they spent $170 million; in 2000 it was $170.3; and it was $163.3 in 2001, which was off by about $7 million. It was greater in 2002 for the extraordinary reasons I gave you earlier. A lot of people switched because they didn't want to fly, and traffic increased. There were also the new efficiencies from the capital investments. The new locomotives had fewer breakdowns, so there was less deferred maintenance, and all the rest.

    Mr. Keyes is making a fundamentally sound intellectual argument that in any year that VIA is under its $170 million operating budget, return the balance to the fiscal framework. That's really what he's saying.

    Mr. Stan Keyes: Release a budget that reflects what your needs are. Don't give us a budget that says, “We'd really like $200 million. If we don't reach it, we'll give it back”.

    Hon. David Collenette: Out of the four years, they hit the operational requirements two years and were under for two years, so let's see what happens next year. Today it could be up to $170 million again, or it could be $168 million. VIA is not operating to basically pull the wool over the accountant's eyes. It's operating a complex business. It cannot judge what its traffic is going to be. It didn't know about SARS, and I'd be surprised if it's going to be down to $153 million this year, given what's happening in southern Ontario with the decline in ridership.

    I accept Mr. Keyes's intellectual argument as valid, except the government believes that since there is a surplus, it should go into capital. That's a legitimate point of difference. But the government's position is that money should go into capital, therefore this year's budget should go through as envisaged. Next year we should take a look to see if what he's asserting is correct; whether this is a long-term trend of VIA getting too much in the annual operating budget, or whether these were two one-offs.

    The Chair: You have one last question.

    Mr. Stan Keyes: Thank you, Mr. Chairman.

    What are “excluded costs”? You have this business of VIA Rail saying they recovered 92% of their costs in the corridor, except for excluded costs.

    Ms. Helena Borges: They're the contribution to the corporate costs. This is specifically to the operation of service. The excluded costs are the contribution to the management of the operation--all of the central costs.

    Hon. David Collenette: In other words, that's your corporate overhead, as opposed to your operational expenditures to discharge the service.

    Mr. Stan Keyes: All right. So if you fold in your excluded costs, which are part of the cost of doing business, what kind of return did they get?

    Hon. David Collenette: We'll have to figure out the percentage and get that to you.

    Mr. Stan Keyes: It certainly would not be 92%.

    Ms. Helena Borges: It would be a little bit less, because it's averaged over the--

    Mr. Stan Keyes: Just a little bit less?

    Hon. David Collenette: Yes. But if you want it, we'll get you that cost.

    Mr. Stan Keyes: Okay.

    The Chair: The undertaking there is to have the excluded costs--

    Hon. David Collenette: It's to have them factored in to see what the real subsidy is...cost recovery is on the corridor route.

    Mr. Stan Keyes: If Mr. Collenette needs to find $6 million, or $9 million, or $15 million for the rail cars, why wasn't that worked into the capital budget from VIA in the first place?

    Hon. David Collenette: There have been cost overruns at Bombardier because of additional unforeseen costs to adapt the cars for those with disabilities. Second, because of the placement of the washrooms in the crumple zones at the ends of the cars, there's the need to reinforce even more than was anticipated by the engineers. So that's why we have to spend more, otherwise we would have expected the 139 cars to be completed for the allotted amount.

»  (1740)  

    Mr. Stan Keyes: Unforeseen costs.

    The Chair: Mr. Galloway.

    Mr. Roger Gallaway: Thank you, Mr. Chairman.

    I'll try to make this brief. I haven't been this overcome, as a result of Mr. Dromisky's testimony, since I saw Jimmy Swaggart take a dive on TV one Sunday.

    Some hon. members: Oh, oh.

    The Chair: You're in no way implying that Mr. Dromisky's speech was a set-up, are you?

    Some hon. members: Oh, oh.

    Hon. David Collenette: We now know what Mr. Gallaway does on Sunday morning.

    Some hon. members: Oh, oh.

    The Chair: You wouldn't suspect that for a moment now, Roger, would you?

    Okay, Roger, I'm going to start your time from now.

    Mr. Roger Gallaway: Thank you very much.

    Following what Mr. Keyes has been talking about, we get into this landmine of avoidable costs, recoverable costs, and attributable costs. There are any number of terms flying around out there. As I understand it, you can table with this committee a comparison that indeed the recoverable costs.... I think in the CTA review submission made by VIA it said in the corridor they were 98.7%, and overall they were 85%. Can you table documents that will show that VIA is claiming all of the generally accepted accounting principles in arriving at these conclusions?

    Hon. David Collenette: Sure, we can get those for you. No problem.

    Mr. Roger Gallaway: That's it, thank you.

    The Chair: Is that an undertaking?

    Hon. David Collenette: Absolutely. Just in case Mr. Gallaway thinks VIA is pulling the wool over someone's eyes, this is audited by the AG and Ernst & Young. So they're accounted for by professionals. Of course, the role of this committee is really to not just look at the numbers, but look at the policy thrust behind those numbers, which we've done this afternoon.

    The Chair: Thank you, Minister.

    There are three meetings left. We assume the House is closing a week from Friday--or it could be this Friday.

    Mrs. Bev Desjarlais: Does that mean we're not going to get anything more done on Bill C-26?

    The Chair: I'm coming to that.

    We have a list of witnesses for Wednesday. We've been discussing the crisis in the airline industry over a period of time, and it concerns us as it concerns you. We're wondering, if we have some hearings next week, if it might not be a bad idea that before we leave for the summer we have an idea of where we're headed. We've made some recommendations, but we don't know what the standings of those recommendations are--their progress, or whether they'll be implemented. But this committee is truly concerned about where we're heading in the airline industry.

    When I opened the newspaper last Friday morning, it was traumatic to find out that with all of the problems all of the airlines are trying to cope with, the NAV CAN people were taking a strike vote--the air traffic controllers. All of us would feel uncomfortable if we left this House without having something more definitive on where we're headed, what we can do, and what we're expected to do in the interim.

    The other thing that's causing us great concern is the airport in Toronto, which is due to open. We don't have anybody who can afford to move in right now. I wonder if you will be kind enough to come back and address the committee on that situation.

    I think the committee has done a very good job of trying to address those issues on that particular crisis. If we are sitting next week, will you consent to come back so we can discuss the airline issues in Canada?

    Hon. David Collenette: Certainly, Mr. Chairman. I can probably save you yet another excruciating session with me by--

    The Chair: Don't get us wrong; we enjoy it when you're here. We're not sure you enjoy it.

    Hon. David Collenette: I'll just say, in less than two minutes, you've put forward a very good report. The various options you've put forward are being considered in cabinet discussions. On the air security charge, some might say it is a very radical option, but it's still an option. We know what's been done in the U.S.

    There will obviously be a formal report to the committee within the statutory 120 days; you'll get that. It's not inconceivable that over the summer things will be done to re-address some of your concerns. Take, for example, the whole issue of airport grants. That is really concerning me right now.

    There is the other problem of Air Canada, which is subject to the court restructuring process. We have to let that go forward and see what Air Canada's business plan will be. If anything is likely to be done, it may be on the airport rent front. That's basically all I can really say at this time, so we'll go from there.

    Thank you.

»  (1745)  

    The Chair: Another cause of concern is the huge number of people being laid off. They're uncertain about their futures. We know that's going to happen. We've discussed that, but we've hesitated to make any recommendations on that, Mrs. Desjarlais, mainly because we didn't want to get in the way of the company and the unions negotiating some form of settlement, or what was going to happen.

    Now we feel it's important that we sit for a day or so to try to give the people who are employed in the airline industry some degree of security that HRDC and whatever is available will be there to assist them--retraining for the younger people, and the older worker adjustment program we've discussed.

    Mrs. Bev Desjarlais: If the minister had the Minister of HRDC's tape in his pocket, he could just turn it on and give the same answer.

    The Chair: Well no, we've asked the minister....

    Hon. David Collenette: There is a bit of problem right now, and I recognize that. I don't want to offend Mr. Gallaway's sensibilities about the supremacy of Parliament here, but we do have a judicially sanctioned process in Parliament to deal with the restructuring of Air Canada. We have to be careful in whatever discussions the committee has, especially with ministers, because ministers are somewhat constrained. I've tried not to say anything about this because it's not for the government to get in the middle of this restructuring process that's been organized by the courts.

    When the committee comes back in September, with a bit of luck the restructuring may be over. Then we hopefully will have responded, in all or in part, to the recommendations of the committee and may be able to have a more useful discussion, free of constraint. We're in a very awkward position right now on the air front.

    The Chair: I think the answer to that question was no.

    Thank you.

    The meeting is adjourned.