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Steve Lafleur: Buck-a-ride gimmick is a bad deal for Ontario commuters

Commentary

The Ontario Liberal Party (OLP) has pledged to reduce public transit fares to a dollar per one-way fare, or $40 for a monthly pass until January of 2024.“The fare reduction would apply to every transit system in Ontario, including municipal transit, all GO Transit services, and Ontario Northland service – with the provincial government fully replacing transit systems’ lost revenue, ensuring no municipal government is impacted by this decision.” https://ontarioliberal.ca/ontario-liberals-will-slash-all-transit-fares-across-the-province-to-1/ The $1.8 billion pledge is paired with a pledge of $375 million in annual transit operating funding.“The current rate for an Adult TTC monthly pass is $156, while a one-way PRESTO ticket costs $3.25. Dubbed ‘Buck-a-Ride’, the plan is estimated to remove 400,000 cars from the road on a daily basis, and is expected to cost $710M in 2022-2023, and $1B in 2023-2024.” https://storeys.com/provincial-liberals-promise-buck-a-ride-for-all-transit/ While this might sound like a reasonable proposal in the abstract, it could conceivably make public transportation in the province worse rather than better. 

Broadly speaking, there are three separate flaws with this approach. First, Queen’s Park getting directly involved in funding the day-to-day operations of local public transit agencies could have unintended long-term consequences. Second, in the short term, the policy could make public transportation worse. Finally, the program will result in some pretty grotesque subsidies—not by error, but by design. 

Public transportation in Ontario is largely run by municipal governments, with the exception of GO Transit and Ontario Northlands. Typically municipal transit agencies operating costs are funded by a combination of user fees and municipal operating subsidies. In 2019, the average farebox recovery ratio for Canadian public transportation agencies was 51 percent, while it was 66 percent in Toronto. So, roughly speaking, half of public transportation operating costs during normal (non-pandemic) times are borne by riders, and most of the rest is borne by local taxpayers. While there is a case to be made that riders should pay a greater proportion of the cost of transportation—both for transit users and for drivers—at the very least, locals tend to pay the operating cost of their own public transit agencies (though capital projects are heavily funded by upper levels of government). 

The OLP proposal would fundamentally change the nature of local public transportation funding. Consider Toronto, where a one-way TTC fare costs $3.25. That doesn’t cover the full cost of the average ride (otherwise the farebox recovery ratio would be 100), but it covered 2/3rds of the cost pre-pandemic. This does mask some cross-subsidies in the system. For instance, someone taking a streetcar for three stops might cost the system less than someone travelling across the city. But in general, riders pay a good chunk of the cost. Now, if fares were capped at $1, the other $2.25 would be covered by the provincial government. That is a major uploading of public transportation costs. 

While it’s understandable that people facing increasing costs of living might like the idea of paying less to get around, making local public transportation more reliant on provincial funding would be a mistake. The more Queen’s Park pays, the more say Queen’s Park will have over local public transportation decision-making. Proponents of this approach should be careful what they wish for. If this temporary freeze became permanent and a future government decided that transfers to public transit agencies aren’t a top priority, times might get lean for public transportation—whether local voters like it or not. It’s not hard to envision a scenario where Toronto City Council determines they need to increase fares to maintain service levels but the province says no. That’s exactly what happened when the City wanted to implement road tolls to tame traffic congestion.Wynne rejects Toronto’s request for road tolls, and almost everyone comes out ahead There’s no reason why local governments shouldn’t be able to make these decisions for themselves. 

Another worry is that if the program has the intended effect of increasing ridership, it might make public transportation worse for existing riders. After all, more riders on the same number of buses would lead to more crowding. Ridership levels are well below pre-pandemic levels, and it’s possible that the additional operating support might offset that. But it really depends on where marginal riders come from, and how quickly transit agencies can adjust. 

For instance, many transit routes in Toronto are still running under capacity given how many white-collar workers are working from home. So if the policy leads more people to use the subway to get around (particularly outside of peak hours), it might not be a big deal. But if it leads to an expansion of transit demand in suburban areas that currently have fewer routes and less frequency, that could cause some short-term bottlenecks. Given that the TTC is aiming to return to 100 percent of pre-pandemic capacity soon, it doesn’t seem likely there will be all that much spare capacity in the GTA. It’s not like we’ve got a Depression-era surplus of workers hanging around looking for work or an excess supply of vehicles floating around. Quite the opposite. We’ve got a tight labour market and supply chain constraints to deal with. This could lead to congestion on some routes, worsening the experience for existing riders. 

Of course, it’s possible that the subsidy will simply fall short of its objectives. That was the case with the federal Public Transportation Tax Credit, which the Trudeau government decided to eliminate after a study estimated that it only increased transit use by between 0.25 and 1 percent.Nixing of transit tax credit in federal budget draws ire So it was effectively subsidizing existing riders, rather than increasing ridership. While this proposal would result in much larger subsidies, it isn’t clear that simply reducing the sticker price of public transportation is going to get people out of their cars if they don’t see service improvements. 

Perhaps the most glaring flaw in the proposal is right in the press release: “Under our plan, someone hopping on the GO train from Oakville to head in for a Blue Jays game will save nearly $20 on their round trip. And a commuter taking the GO from Whitby to Toronto would save more than $300 dollars a month.”

In other words, the further you commute, the more you get subsidized. There are certainly people of modest means in the suburbs who could use a hand up. But someone who owns a home in Whitby and uses GO transit to commute into Toronto for a well-paid bank job or someone in Oakville who can afford to regularly go to the Jays game might not be the first people who should be in line for subsidies. Better to have a subsidy explicitly targeted at low-income people who need a hand up, rather than people looking to save eighteen bucks getting to a Leafs’ game.  

This is a perfect example of why political parties shouldn’t try to govern by slogan. Buck-a-ride isn’t going to work out any better than buck-a-beer. Ontario doesn’t need any more buck-based policies. If a policy fits on a bumper sticker, it probably doesn’t work. This one is no different.

Blair Gibbs: Canada is being left behind. Joining AUKUS would change that

Commentary

 A consensus has quickly formed that the post-Cold War peace dividend is definitively at an end.  Russia’s invasion of Ukraine has reinvigorated NATO and triggered many Western countries to bolster their defences. Even the Trudeau government has promised a new defence review.Liberal budget is vague on greater defence spending amid Ukraine war, pending ‘review’ However, the war in Europe has not yet forced Canada to confront some hard choices it will need to make to remain a safe and secure society in the decades ahead.  

Canadian MPs seem to accept that a more unstable world with new competing powers might now necessitate a more “engaged” posture—to use the favourite liberal terminology—but in practice, engagement requires some choices.  Which clubs should Canada be part of? NATO and G7 aid commitments are not enough. Even if NATO expands to include Finland and Sweden in the next few years, these old alliances will likely be supplemented with new partnerships, particularly in the Asian and Pacific arenas.  

Before last year, these new alliances were not much more than theoretical, but now other defence opportunities present themselves and it is time that Canada’s politicians paid attention. The defence pact between Australia, the U.K. and the U.S.—AUKUS—first unveiled in 2021 is the most important so far.What is the Aukus alliance and what are its implications?

When suddenly announced in a three-way news conference with the heads of government in the U.K., U.S., and Australia in September last year, like most countries Canada was caught by surprise.Canada caught off guard by new security pact between U.S., Australia and Britain For Australia to exit the submarine deal they signed with France was a highly sensitive decision and for this reason alone, Canada (or other allies) could not have been given advanced notice of any kind.  

What makes it special is that AUKUS is a coalition of the willing between three countries that already collaborate extensively on national security intelligence. Canada meets all these conditions too, as a founding Five Eyes member, but Ottawa has yet to show any public interest in participating in AUKUS. So why should AUKUS be of interest to Canada?  

Initially, Trudeau suggested that AUKUS is not relevant to Canada because the country does not have, and does not want or need, a nuclear submarine capability. But this is a denial of what AUKUS already claims to be—an emerging defence technology and procurement partnership that extends into hypersonic engine technology and cyber. Publicly, the scope of the agreement has already widened since September, suggesting that there is a series of initiatives that will progressively deepen the collaboration between AUKUS members in the years ahead.Trilateral AUKUS defence pact expands to hypersonic missiles and electronic warfare

The AUKUS pact should really be seen as the forerunner of something more substantial—like the early Coal and Steel Community was for the European Community (EC) and the EU that came later. This is often how critical multi-lateral organizations start out. Important geopolitical alliances very rarely emerge fully formed. Speaking to former British defence advisors, they see some clear synergies between the areas of technology that all three nations already need to perfect and industrialize to outcompete the Chinese. These include space and satellites, 6G and 7G communications, and advanced computing and AI, which will have major defence policy implications. Canada should have an interest in all of these domains.  

And if the potential then expands beyond pure defence programmes, then it becomes even more important that Canada is a party to it, and Canada as a member would also have a lot more to offer. If the original defence partnership of AUKUS bears fruit this decade, then it will be natural and less controversial for Canberra, Washington and London to extend it into the mobility and trade domain, with clear opportunities for more university R&D collaborations, government exchange programmes, and probably free movement for scientists and engineers working on AUKUS programmes.  

Over time this could result in wider economic benefits too, for example in the type of advanced aeronautical engineering that could deliver ultra-high-speed passenger airplanes. Reaction Engines is an impressive example of a British start-up with a U.S. test site where the pursuit of hypersonic engines could end up revolutionizing civilian air travel, literally bringing Australia much closer to both key partners and integrating their economies more closely. A world where business travellers can get from London to New York in 45 minutes and to Sydney in 2.5 hours is utterly transformed and makes the geographic barriers to closer national alliances in multiple time zones much less relevant.

It is early days but AUKUS was always more than just a submarine procurement deal. It was a recognition that the world has become more dangerous and unstable and that like-minded countries should commit to spending more on defence and do so in a coordinated way, where they can level up their technologies to match China and exploit their other military advantages.  

And the backdrop to this new agreement presents a challenge to Canada on defence spending too. The governments of all three AUKUS countries—under whatever political party—are likely to increase defence expenditure consistently over the next decade or more. That is a direction of travel that was set before Ukraine, but it will now be cemented for the foreseeable future. 

However, this consensus is slow to emerge in Canada. In fact, Canadians have never prioritized defence spending at any time since the end of the last world war.Canada may increase its defence spending – but that doesn’t mean it’s serious about restoring our military As Kim Richard Nossal has argued, the peace dividend at the end of the Cold War led to major defence cuts that hollowed out the country’s state capacity to invest in and procure the right military equipment.Charlie Foxtrot: an essay on defence procurement in Canada For years Canada became just another unequal member of NATO—dependent on the nuclear umbrella provided by the U.S. and, until recently, matching Germany in its complacent lack of interest in paying for its own defence.  

Since the Russian assault on Ukraine, it now looks like the Trump doctrine of NATO allies paying their fair share of 2 percent of GDP on defence is likely to become reality among most European members. But even based on the latest budget, the boost needed for Canadians to start spending more than 1.5 percent of GDP on defence will take until 2025 to be delivered, so there is much further to go. And Western countries left underwater by excessive spending and Covid debt will need to follow through once the immediate Ukraine emergency has ended.  

Even despite this fiscal hurdle, a new alliance like “CAUKUS” could come to define the West’s security for the coming China challenge. But with chronic underinvestment in defence and security, would Canada even be a valuable partner in such a pact? The answer may be in the broader benefits that Canadian membership might offer AUKUS, beyond military spending itself.  

The incentive for AUKUS nations would be to use collaboration on defence technology and exchange to bring Canada to the table and then encourage Ottawa to step up where they can add the most strategic value. Two areas where Canada can and should offer advantages for a future CAUKUS pact are Artic defence and energy and mineral security.

For years many defence experts have arguedOn the Arctic Watch: Why we need to protect Canada’s sovereignty and security in the Far North: Jeff Collins for Inside Policy that the threat to Canada’s sovereignty in the Arctic should be taken much more seriously. Increased defence spending and permanent deployments in the Arctic region would signal that Canada is prepared to take a lead in guaranteeing the security of a critical region that will become easier to exploit militarily (and more valuable economically) as climate change transforms the sea lanes and the trade and mining potential.  

With rising global temperatures comes a shift in the strategic value of the Arctic and the manoeuvre space in the maritime domain. This is one area where climate change offers benefits to Canada that ought to be recognized and exploited, but it also exposes NATO’s largest territorial member to more geostrategic risk and confers more of an obligation to lead in the defence of this region.  

But Canada’s contribution to AUKUS could be more than just defensive. Shared defence procurement will need expertise from all countries and robust and reliable defence export agreements. Critical industries will need resilient energy supplies. Just for its own sake, Canada should be racing ahead and exploiting its rare metal resources and also leveraging energy exports, especially Liquified Natural Gas, to help Europe and countries like India that will otherwise continue to depend on Russian imports.  

Like Australia, Canada should see itself as a key supplier of the critical minerals and raw ingredients that the high-value tech sectors of the U.S. and Europe increasingly need to support their economic growth and diminish their supply chain dependency on China. Not to mention the fissile material and rare earth metals that are used in advanced defence technologies that AUKUS wants to develop.

Finally, Canada has much more to offer a partnership like AUKUS than a nation like New Zealand, or even arguably Japan. It is larger than Australia and with a landmass facing three major oceans and with more natural resources to exploit. The swift addition of Canada to create a CAUKUS pact that goes beyond defence into trade, R&D, and energy collaboration would make AUKUS a more coherent and meaningful partnership that has clear practical utility to all members.  

NATO will endure and Canada will continue to play a vital role there but it is never going to evolve politically into a deeper partnership because the alliance’s membership is too large and its member interests are too diverse. By contrast, AUKUS has real potential. It is the first example of a new trilateral partnership that could evolve into a serious trade, technology, and defence alliance that will help protect our economies and societies from the strategic threats to our way of life in this century posed by China and other autocratic states. Canadian politicians should want to participate in it, and it should come with some willingness to pay for the collective benefits.  

If Ottawa wants to get onboard with AUKUS, then key domestic decisions around increasing defence spending, or barring Chinese involvement in domestic telecoms (the “Huawei decision”) would need to be resolved soon so that Canada aligns its policy with the U.K., Australia and the U.S. Currently, this does not seem to be on the Liberal government’s agenda and the best explanation for this is because Canadian high politics under Trudeau has become far too narrow spectrum—devoting most of the ministerial bandwidth in Ottawa to carbon, human rights, domestic reconciliation, and welfare entitlements like childcare and dental coverage, to the exclusion of topics that only the federal government can lead on, like trade, defence, and how to combat hostile states and rising foreign competition.  

Ultimately Canadian voters would need to support the CAUKUS concept. It must be positioned as a venture that will support Canadian jobs, create new trade opportunities, and deliver a new security architecture that helps revive Canada’s depleted military. That is the prize, but first, they need to be sold the proposition. This would require some ambition and vision from Canada’s political class and a recognition of how much Canada needs to do to stay relevant in a more insecure world. And for now, that feels like too much to hope for.