Talk about a train to nowhere: VIA Rail plans to spend $25-million worth of stimulus money to purchase 12 luxury cars, complete with double beds, leather couches, showers and heated floors. But who exactly is this money stimulating?

The folks at Rocky Mountaineer Rail — which used to be operated by VIA and was privatized in 1990 — are justifiably upset because they already operate luxury rail tours. VIA plans to charge nearly half the cost of its private-sector competitor and, while competition is usually a good thing, its public subsidy gives the Crown corporation an unfair advantage.

Government usually justifies its use of Crown corporations to correct a perceived market failure; but the private sector is already offering the same service and anyone who can afford $5,000 for a cross-Canada train ride doesn't need to be the beneficiary of government handouts.

Even bureaucrats think this is a bad idea. Internal Transport Canada documents obtained by Ken Rubin, a self-described “public interest researcher,” show the agency is considering a number of options, including privatizing the Toronto-Vancouver line or the Jasper-Vancouver leg, and selling off its luxury assets. Although the government says it has no plans to follow through with any privatization, it should seriously consider these options.

Outside of the Golden Horseshoe and the Toronto-Montreal corridor, passenger rail in this country is uneconomic, regardless of who operates it. A quick web search reveals that a regular fare on a VIA Rail train travelling from Toronto to Vancouver will cost over $650 and take about 87 hours to complete. A flight will run you about $280 and get you to the other side of the country in just five hours. Even a bus ride will cost considerably less than the train.

Virtually no one from Alberta thinks of taking the train to the West Coast — it's a luxury reserved for tourists and rich people with a fear of flying. And yet, Canadian taxpayers are forced to subsidize affluent foreigners and wealthy Canadian sightseers. Last year, VIA received $527.2-million from the federal government; and even though the stimulus money has run dry, it will still be subsidized to the tune of $306.5-million in 2012.

Privatizing at least some sections of the VIA network would seem like a no-brainer for the federal Tories, who have committed to reducing the size of government and balancing the budget. But there was no mention of any privatization in the budget, and the government says it doesn't have any plans to follow Transport Canada's recommendations.

There may once have been a valid public-policy argument for allowing the government to operate trains. People also thought government needed to be involved in running airlines and telephone companies, as well. But we now know that the private sector can offer better service, at a lower price. Europe has been liberalizing its train system for years. The U.K privatized its rail network in the early 1990s and has witnessed a significant increase in service as a result.

Even if our government doesn't want to privatize VIA, it certainly should not be competing in the high-end market with one of its former divisions, which was privatized long ago. The best way to ensure it doesn't try to get back into this market would be to sell off The Canadian line, which runs from Toronto to Vancouver. VIA could then focus its efforts on servicing areas where trains are actually used to get from one place to another.

Photograph courtesy Canadian National Railway

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