Trail Times Tuesday, January 7, 2014 www.trailtimes.ca A9
Why Canadian travel costs so much
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or those returning to $400 weekly) to the cab comhome after the holidays, pany, plus fuel, for the privilhere’s a question you ege of driving a taxi. In other might have pondered: words, cut out the middlemen Why does it cost so much to and drivers could make more travel? Answer: government even as fares are reduced for policy. the public. Consider two examples, As for quality and safety, starting first with taxi fares. a competitive taxicab market Across Canada, cities limit the need not sacrifice security. number of taxi licences avail- Drivers and their vehicles could able. This, we are told, allows still be licenced and regulated drivers to make a decent living by cities with requirements that and consumers address the drivto know the cabs er’s character they step into are (i.e., no criminal safe. record), safety of Nonsense. An the vehicle and open market in so on. taxicabs, where R e f o r m anyone or any would be usecompany who ful. On taxis, the wants a licence Organisation Mark can get one (subfor Economic ject to reasonable Co-operation safety requirea n d ments of course), Development Troy Media would not only (OECD) surreduce fares, but wouldn’t veyed 17 countries back in automatically mean drivers 2007. It found that those which make less. Those who choose to had “removed or loosened drive solo, or formed co-ops, or supply restrictions on taxis” started a smaller cab company, ended up with strongly posimight well make more money tive results: “Reduced waiting even while passenger fares were times, increased consumer reduced. satisfaction and, in many cases, This, in fact, was the model falling prices being observed.” in existence a few years back That’s one example of how when I was in Washington, D.C. governments artificially inflate One driver who picked me up travel costs. Here’s another: owned his own cab. He did not airline fares. work for a taxi company nor did Back in 2012, I compared he take dispatch calls; he made European countries, Canada his living solely from picking and the United States on kilopassengers up off the street. metre-for-kilometre flights He preferred this to working costs. I compared five return for some company because his domestic flights of roughly income was greater and he similar kilometres with a total could also set his own hours. of 5,400 kilometres flown (and When cities limit the num- within the same jurisdiction, ber of taxi licences, the price i.e., just in Canada, or in the of such licences increases to United States, or in a select levels that only a select few can European country). afford. In turn, a high price for The five European tickets a taxi licence means drivers are cost just $689.68 with taxes and forced to pay substantial rents fees at 36 per cent of the total to the licence owners. fare price; the U.S. total was The last time I talked to a $841.10 with taxes and fees at cab driver about his costs, driv- 16 per cent; the Canadian five ers paid several hundred dollars fares cost $1,815.14, including per week (one fellow paid close taxes and fees at 28 per cent.
Milke
When I performed the same calculations on cross-border return flights of similar individual distances (Canada-U.S. flights versus cross-border flights in the European Union), the five-fare bill for the 10,000 total kilometres flown was $1,277.94 in Europe. That included 43 per cent in taxes and fees. In North America, the five return fares with 9,660 kilometres flown would set back a passenger $2,266.13 with taxes/fees at 22 per cent of the total. Given that taxes and fees are higher in Europe, there must be another factor to help explain the lower European fares: competition. Europe’s pro-consumer ticket prices exist because European airlines and even airports have fiercely competed for passengers ever since the European Union air travel market was opened up to full competition in 1997. Any carrier from any member country can pick up and drop off passengers anywhere, regardless of the airline’s home country. That policy, known as “cabotage” or open skies, is in distinct contrast to North America where both U.S. and Canadian governments still prohibit “foreign-owned” airlines from offering wholly domestic flights in our markets. Because neither the United States nor Canada allows “foreign” carriers to pick up and drop off customers in their respective countries (they can do only one or the other), competition is less than it would be if the European approach was in play. That results in higher airline fares. If governments embraced competition more robustly, consumers would have nothing to lose but their overpriced taxi fares and high-priced airline tickets. Mark Milke is a Senior Fellow at the Fraser Institute @milke.mark
Budget surplus could be bigger: Flaherty THE CANADIAN PRESS OTTAWA - The federal budget surplus could be bigger than predicted in 2015, Finance Minister Jim Flaherty said in an interview aired Sunday. The assessment falls in line with projections from the parliamentary budget office that came a month ago. A Dec. 5 report from the PBO estimated the government could achieve a surplus of $4.6 billion by 2015, nearly $1 billion more than the estimate included in the November economic update. In an interview with CTV’s Question Period, Flaherty said Canada could have a bigger surplus than projected if both the domestic and U.S. economies continue to gain strength.
“We could have a larger surplus than we anticipate, but we will have a surplus,” said Flaherty. The Harper Conservatives are relying on balancing the books to help propel the party through a federal election campaign that’s scheduled for the fall of 2015. The PBO report, however, prefaced its surplus projections on expectations that the government would maintain EI premiums at current levels, that there would be no delays in selling off some public assets and that spending restraints would continue. And that is exactly what the government expects to do, said Flaherty. The government has fro-
zen basic EI premium rates at $1.88 for every $100 earned until 2016. As well, it has announced the sell off of some assets, including the Ridley Terminals and Dominion Coal Blocks in British Columbia and the government’s remaining stock of General Motors shares. “We’re controlling our own departmental spending,” the minister said, adding that his government will not reduce transfers to the provinces or cut programs or benefits. Flaherty also backed away from recent concerns over the levels of personal debt held by Canadians, telling CTV that moves to shore up mortgage rules have kept housing debt loads in check.
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