10 July 2023

Inter-regional passenger rail - a dearth of serious analysis

I LOVE travelling by train, I caught long-distance passenger trains as a child. My father took me on the Northerner in a sleeper to Auckland and back on the Silverfern, I rode the Southerner from Christchurch to Dunedin, I rode the Picton-Christchurch Express and the Christchurch-Greymouth Expresses, and my first long-distance trip by myself was on the Wellington-Gisborne express.  I took the last Bay Express from Napier to Wellington.  I rode the Indian Pacific on my honeymoon, I've ridden Amtrak, I rode umpteen trains in the UK when I lived there, including the sleeper from Paddington to Penzance, I was a frequent traveller on Eurostar. I rode by rail from Pyongyang to London, on five different trains across China, Russia, Belarus, Poland, Germany and France. 

So nobody can accuse me of not liking trains. I had a model railway as a kid, and yes I have a transport nerd's knowledge of a lot of trains, and I wished the Silverstar had returned to service and I even wrote to the Minister of Railways at the time pleading the case (who was Richard Prebble!).

I would be thrilled if there could be more, viable, long-distance passenger rail services in New Zealand, but I am not thrilled by the idea that they are, somehow, special and deserve to get taxpayer subsidy over air and coach services, let alone private motoring. 

The Transport and Infrastructure Committee of Parliament has wasted time and taxpayers' money investigating whether taxpayers should pour money into subsidising long-distance passenger rail services (called inter-regional by the Committee), and has produced a report that largely consists of "reckons" by activists with a complete paucity of evidence and analysis as to the costs and benefits of doing so.

The fact that the Committee has produced such a poor quality report reflects both on the understanding of the majority of its Members (from Labour and the Greens), and the staff supporting the Committee, who seemed to be incapable of undertaking some fairly basic research or analysis (or perhaps were directed not to bother too much).  You would think they could at least have gotten some information from this book.

It made six recommendations, of which my favourite (for the wrong reasons) is "We recommend that funding arrangements for future inter-regional passenger rail services reflect the level of national benefit of such services to New Zealand". At best that would be nil, at worst it means the Committee thinks subsidies should equal benefit, so each dollar of taxpayers' money spent should return a dollar, which displays the level of economic ignorance of the Committee.

It's worth a read, as it exemplifies the standards of critical analysis that are deemed acceptable by many MPs today, and it shows how far there is a dearth of economic and policy analytical depth today.  Noting this Committee was supported by the Ministry of Transport, the Infrastructure Commission and an economist. 

Take the introduction which mentions how lots of people used to catch trains then:

"However, as private car and air travel became more popular and accessible, many passenger rail services were cancelled. The national railway network then experienced decades of underinvestment."

Hang on, so WHY did private car and air travel become more popular?  The first because of flexibility, you didn't need to wait hours or a whole day till it was time to travel, and it didn't necessary go from where you live to where you wanted to go.  Plus trains were simply slower. Air travel is obvious, it is fast and it became a lot cheaper over time, as did car ownership.  Modes that were faster, more convenient and more flexible and ultimately cheaper saw people abandon passenger rail.

However. the "decades of underinvestment" claim is quite something. For a start, there was underinvestment from the 1920s onwards, NZ Railways didn't bother reintroducing dining cars after World War 1, and the last remaining one operating in 1930.  There was no on-board catering (beyond tea and coffee) until 1970, so the "underinvestment" was par for the course by the Railways, as it treated its peak passenger demand like many monopolies do, it took them for granted.

To claim there was underinvestment as demand tailed off implies there should have been more "investment" poured into passenger rail, in the 1960s, 70s, 80s, but why, and for what ends?  In reality the major problem was that the NZ Railways Department operated as a heavily-unionised government department with monopolies on much of the market to move people and goods. It was simply a lazy, non-customer focused organisation, it was focused on political and industrial relations imperatives.  Business travellers moved to airlines and leisure travellers to cars, and it wasn't until the Lange Labour Government stop subsidising long-distance passenger rail that it became much more responsive to passenger demand and was business oriented.  That Government gave the Railways Corporation its final subsidies as a lump sum to upgrade services and make them viable, which it did at the time. It's just that over the subsequent 20 years demand changed, airline competition saw fares drop substantially in real terms and the removal of protectionism for local car assembly saw new and used car prices drop as well. People's mobility improved and demand for long-distance rail travel eroded. The routes with growing overseas tourism demand thrived, like the Tranz-Alpine and Coastal-Pacific services between Christchurch and Greymouth and Picton respectively are scenic trips, and are viable in their own right. The Auckland-Wellington Northern Explorer has hung on marginally, but the largely locally used Southerner and Bay Express had insufficient patronage. Rotorua's Geyserland Express suffered because the cost of the service had to bear the full cost of the track as freight traffic was not viable from Rotorua to Waikato/Auckland, and the Kaimai Express to Tauranga had insufficient patronage on a regular basis (also not a route significant in scenery or as an overseas tourism destination).

However, the Committee didn't get told that. 

In the Background (p6), another enormous error is published:

"Over time, and particularly in the early 2000s, focus shifted away from passenger rail services towards providing rail freight services."

This is complete nonsense, railways in New Zealand have been focused on freight for literally decades. In the 1970s the Railways Department noted that the proportion of its business that is passenger traffic was less than 20%.  Unlike railways in Europe and Japan, passenger traffic has not been the focus for railways in New Zealand perhaps since the 1920s.  It is the same in Australia and the United States.

The report summarises Te Huia without really shedding any light on whether it actually contributes to what the report says is the point of the inquiry, which is whether there are any net benefits in expanding inter-regional passenger rail.  There is NO data on how many Te Huia passengers previously drove a car to take the same trip compared to how many are new trips (and whether it enabled people to take jobs they didn't have before, or if they are simply leisure trips). There is no data on the effects on competing, unsubsidised bus services, in other words the analysis is just how many passengers ride it, how happy they are and how taxpayers/ratepayers are paying more than 85% of the costs of RUNNING the train, let alone the capital costs of purchasing and refurbishing the rolling stock and upgrading the stations.  Where's the economic analysis?

It summarises the Capital Connection service (Palmerston North-Wellington) without noting it was set up and operated on a fully commercial basis for many years, without subsidy.  There is no data on daily patronage (just annual) and none on farebox recovery, but there is this odd insertion of a generic definition in the report:

"The Capital Connection service uses older rolling stock that is nearing the end of its life. Rolling stock refers to railway vehicles, such as locomotives, carriages, wagons, or other vehicles used on a railway."

The authors forgot to write a definitions section, and also forgot to mention how much money was spent to acquire rolling stock for Te Huia and build a new station (and upgrade another) (it was $49 million).

The report continues with a completely odd section about historical services, which it could have largely left, or it could have focused on those that operated until 2001.  However it is just full of mistakes (p7-8).  Without nitpicking...  Auckland-Tauranga and Auckland-Rotorua were reinstatements of services that were cancelled in 1967, because of poor patronage. The Waikato Connection seems odd to include as it was a trial of less than a year, especially since Te Huia is essentially the same route. The Northerner did start in 1975, but was a successor of the first Main Trunk overnight service started in 1908.  Why mention that and not the Silverstar? 

However there was no Endeavor (sic) between Gisborne and Napier, Gisborne hasn't had passenger rail service since Cyclone Bola in 1988, and the Endeavour ceased operating in 1981 and never returned to Hawke's Bay (it was used as a substitute train from Wellington to Auckland, and the rolling stock later refurbished (with higher density seating) returned to use as a pool for several unnamed services).  It is also odd to talk of the "New Plymouth express" starting in 1955, when it finished in 1955 and was replaced by a railcar service, until 1977.  There are umpteen books about this, and it wouldn't have taken long for the Committee to get an actual rail enthusiast or two to confirm all of this.  

I could point out minor errors in the descriptions of the roles of agencies, such as "The NLTF is made up of revenue from fuel excise duty, road user charges and road tolls, vehicle and driver registration and licensing".  No, driver licensing fees do NOT go into the National Land Transport Fund.  Seriously, how hard is it for the Ministry of Transport to not fact-check such basic stuff?

The bulk of the report is a summary of what submitters said with little analysis as to its merits. For example, on p13:

"Submitters highlighted that inter-regional passenger rail would also benefit users of other transport modes. For example, if more travellers used inter-regional passenger rail there would be fewer cars on the road. This would reduce congestion, thereby shortening journey times and reducing costs for road users. Some submitters suggested that investing in rail and alternative transport modes would reduce wear on roads and save on expensive road upgrades."

This assumes the extra demand comes from car drivers, it assumes that congestion arises from inter-regional car driving (which outside peak holiday times is simply not true) and the marginal cost of car use on road wear is so tiny (most road wear is caused by heavy vehicle axle loads and the effects of sunlight, rain and temperature changes), so it simply wouldn't reduce road wear in any meaningful way.  

This utter nonsense is repeated lower on the page:

"Passenger rail could also enable more efficient use of existing transport infrastructure. This is because a reduction of vehicles on the roads would be likely to improve the longevity of road infrastructure, reducing maintenance costs and the volume of emissions-intensive resources needed to support maintenance and renewal programmes for roads."

No it wouldn't, this is just ridiculous. Fewer cars has next to no impact on the maintenance of state highways, and to talk about "emissions-intensive resources" to maintain roads, without noting that railways need resources to be maintained as well, and are a duplicate network to roads is completely lunatic thinking, and it's shocking that such claims are giving the credibility to be in a summary.

Further nonsense appears below:

"Submitters noted that passenger rail could improve New Zealand’s resilience to the effects of climate change, natural hazards, and other events. For example, if natural hazards or extreme weather events prevented access to roads or air travel, rail could provide an alternative method for moving people and goods."

Those submitters are morons. Unless you happen to live near a railway station (walking distance) the idea you will get there or that consumer goods would get to you by rail if a road is closed is largely fanciful. Most parts of the rail network are much more vulnerable to closure than the road network, and there has never been any case of a natural disaster which left the railway intact to perform access functions that the road could not (in fact very much the opposite). 

The absurd claims continue, until on pg 14 there is this:

"Some submitters also suggested that inter-regional passenger rail would offer an alternative to domestic air travel, thereby reducing aviation emissions"

Yes if you have a lot of time to spare.

Claims on emissions don't include key caveats, such as patronage or whether or not a car driver is driving an electric car.  

"While a diesel train is generally a lower-emissions form of transport than petrol car or air travel, an electric train can produce around three times less emissions than diesel train"

Besides the pointless reverse mathematic of "three times less", this is entirely dependent on how many people travel on the train compared to the car or aircraft.  Before many services were stopped in 2001 and 2002, the average patronage of those services was much less than a busload.  There is absolutely no analysis about what levels of patronage or modal shift would make sense from an emissions point of view (and of course the fact the Emissions Trading Scheme caps emissions from domestic transport is blanked out, officials and politicians so often just pretend that cutting emissions has no cost, or that they aren't replaced by emissions from others, unless the cap is reduced).

The Committee's response is rather entertaining...

"We think that inter-regional public transport could bring demonstrable public value to New Zealand."

..."While it is evident that there are wide societal benefits associated with passenger rail, it is difficult to measure or quantify these benefits."

Here's a clue, the people who benefit from passenger rail can quantify the benefit according to ... whether they are willing to pay the costs of providing the service!  It isn't "evident" because there was literally no evidence published from submitters in this report, just "reckons".  No evidence whatsoever!

The report isn't without some glimmers of sense though.. on pg.16:

"Increasing inter-regional passenger rail will likely require a high level of investment in the national rail network. On the other hand, historical trends suggest that inter-regional passenger rail services are unlikely to result in a high commercial return without services experiencing patronage growth. Careful assessment will be needed of whether inter-regional passenger rail services are the public transport option that best benefits the public."

Maybe if they had a high commercial return you wouldn't get involved? The last sentence is perhaps generously stating that there is unlikely to be any reason why inter-regional passenger rail services are the best option.

Then there is this claim, throwing the bus sector.. under the bus:

"We note that several commercial bus or coach services operate inter-regionally. While these options do not provide the same level of public benefit as passenger rail, particularly in terms of accessibility and environmental benefits, they remain a viable option for many people."

That's right, buses are MORE environmentally friendly than trains, and their accessibility is likely to be higher because they can stop just about anywhere.  Then the committee of politicians and bureaucrats make this empty claim:

"If passenger rail services are designed efficiently, accessibly, and in a manner that meets people’s needs, there is real potential for large-scale uptake."

In short, if you design a service that people want to use, they might use it.  However, what does any of this actually mean?  What demand IS there on the key routes submitters discuss? Couldn't the Committee have obtained data on intercity bus service demand and long distance car traffic, and if not, why not?  How many people drive between Auckland and Tauranga each day, surely you need to know this if there is likely to be some assessment of potential for a rail service?

Fortunately the Committee isn't completely mad as it decides to be focused on... more evaluation:

"At this stage, we think what will be most useful is identifying specific inter-regional services that should be investigated further. We need to better understand the costs and benefits of specific services before we can properly evaluate their potential."

No, you can't evaluate any of this.  You don't decide what routes Air New Zealand and other airlines fly, or routes Intercity operates, so you shouldn't be doing this.

Then Te Waihanga, the Infrastructure Commission, weighs in on pg.18, without thinking more widely about the point:

"Te Waihanga told us that KiwiRail’s commercial mandate means that investment decisions are often made based on the economic viability of services, rather than consideration of any wider societal costs and benefits. This means that, even if a rail service would be worthwhile from a public-value perspective, investment is still unlikely to occur."

Well it doesn't happen for air or bus services, or inter-regional freight services, so why is rail special? Indeed, regional councils ARE mandated with thinking about public transport subsidies and "public-value", so they actually can work together on this.  What matters more is that Kiwirail has a monopoly on managing access to the rail network, so no other business can readily obtain access to that network without Kiwirail approving it. This looks likely to be provide one option for enabling at least other commercial operators to have a chance at providing more services.

Te Waihanga can't identify the "public-value" of these services, but maybe it thinks this should be its job?

Ultimately the report seeks a growth in bureaucratic involvement in transport by saying"We recommend that the Government identify an agency to act as system lead for interregional public transport.".

Why? Because it can't identify whether inter-regional passenger rail is worthwhile, or specify how it might be. So it calls for a new role for government to "lead" not just rail, but bus and even ferry (maybe even airline) services.

This is absurd, because unless there is a clear case for this, it would set up an agency with responsibilities that it would, no doubt, decide, needed to be expanded. You can see a return to the days of 1970s when transport licensing was undertaken based on demand, with intercity bus services regulated (can't have them "undermining" inter-regional passenger rail), and the heavy hand of central planning seeking to respond to the demands of whoever the Minister of the day is.

The remainder of the report is the Committee's "reckons" as to routes worth further investigating.  Tauranga-Auckland is suggested with zero analysis of potential demand, Auckland-Wellington suggested whilst dismissing the fact there is already a service, it is geared towards tourists people who are willing to pay the costs of using the service.  The claim for Auckland-Wellington is that it should be "affordable" which is code for "paid for by someone else". The case for why one mode of travel between Auckland and Wellington should be subsidised when none of the others are is not made.  It then suggests Napier-Wellington. Why? Who knows, because literally nothing the report backs that route as an option over say Christchurch-Dunedin (it also falsely claims there is no station in Napier, when the old station remains very much intact). Likewise, extending the Capital Connection to Feilding is presented with zero evidence as to why.  This is literally just bureaucratic and political reckons based on nothing, although the report claims "The case studies we have identified in this chapter are what we consider “low-hanging fruit”."

However, this is based on virtually nothing, except the wild claims of rail enthusiasts. 

The only saving grace of this report is that the National and ACT members dissented, presumably they could see how ridiculous this all this. 

It's all quite simple.

Inter-regional passenger transport is, by and large, commercially viable or privately funded.

Air New Zealand, Jetstar, Air Chathams, Soundsair, Originair and other domestic airlines operate such services fully funded from users, paying airports to use the infrastructure and including the cost of the Emissions Trading Scheme in their fares. 

Intercity operates commercial coach services, again fully funded from users, paying road user charges and also paying for emissions through the ETS.

Private car owners and renters of cars pay for their own cars, paying for fuel including fuel tax and the ETS, again paying for the road.

Kiwirail runs commercially viable inter-regional rail services between Auckland and Wellington, Picton and Christchurch and Christchurch and Greymouth. If it sees business opportunity in starting new services it should do so. Likewise if any other business wants to start up such services on the rail network, Kiwirail should not get in its way.

However, there is no serious public policy reason to spend taxpayers' money to set up new passenger rail services. The state highways are generally not congested outside a handful of holiday periods, and will not be relieved by a few daily passenger rail services.  Almost all rail routes are significantly slower than the parallel state highways (and one train a day will not justify pouring hundreds of millions of dollar in speeding up rail lines).  The dream of an overnight sleeper train service between Wellington and Auckland may seem nice, but realistically most business travellers would rather fly, and the density of sleeping accommodation to be competitive would be akin to couchettes because more standard sleepers would just be too expensive compared with flying (and beyond Friday and Sunday nights, patronage is unlikely to be high).   However, of course, the advocates for this, don't want to pay the full cost of providing the service - even though the passengers on Airbus A320s pay for theirs.

There are merits in ensuring Kiwirail doesn't unreasonably block the entrepreneurship of other rail operators in establishing passenger (or indeed freight) services using the infrastructure taxpayers now own - but to spend much time or money investigating the merits of long-distance passenger rail is wasteful.  Meanwhile advocates might want to use existing services much more frequently and demonstrate they are willing to spend more time travelling than other modes, before they call to force everyone else to pay for new services.