Good morning.
Thank you very much for giving us the opportunity to speak here today. It's a great privilege. It shows that the government is willing to listen to the people from the small areas.
Today I want to talk about cost recovery. Prior to talking to that, I'll mention that the federal government challenged Oceanex in court recently.
On November 30, 2016, Canadian historian Raymond Blake appeared on behalf of the Government of Canada and the Minister of Transport in a federal court in Newfoundland and Labrador to a challenge of Marine Atlantic's right to a federal subsidy.
In an affidavit, Dr. Blake stated that it was understood in the negotiations which led to the Terms of Union between Newfoundland and Canada in 1948 by both the Newfoundland delegation, appointed by the Government of Newfoundland, and the Government of Canada, that under terms 31, 32, and 33, the Government of Canada had a responsibility not only to operate and maintain the Gulf ferry and provide an efficient service, but also to cover all costs associated with operating the ferry service. Both sides also believed that when Canada took over the Newfoundland railway, including steamship services, it would result in lower transportation costs to and within Newfoundland, which would then lead to a lower cost of living in Newfoundland. There was no expectation that the ferry from Port aux Basques to North Sydney would operate on a cost-recovery model. It was understood that Ottawa would cover all deficits incurred by the ferry and that, moreover, the Gulf ferry service would, like the union of Newfoundland with Canada more generally, provide great benefits to the people of Newfoundland. It was a subsidized ferry for the benefit of Newfoundland and Labrador.
To put things in context for the members of the standing committee, the Crown corporation Marine Atlantic was created in 1986. The company uses two vessels primarily, but has a fleet of four to accommodate the busy summer travel season. It employs about 1,300 people and provides around 1,700 sailings annually for over 300,000 passengers and 90,000 commercial vehicles. Marine Atlantic is the only vehicle passenger service into Newfoundland and Labrador, with 25% of the passengers being non-resident. In 2003, the Canadian Industrial Relations Board ruled that constitutionally obligated service was essential and its operations critical to the health and safety of Newfoundlanders and Labradorians.
To reinforce the words of Dr. Raymond Blake, there was no expectation that the ferry from Port aux Basques to North Sydney would operate on a cost-recovery model. Cost recovery has a chokehold on Marine Atlantic. Cost recovery forces tariffs up or equates to service cuts to Newfoundland's constitutionally provided extension of the Trans-Canada Highway.
Cost recovery was introduced by the Government of Canada in 2007 at 60% of operations cost. Fast-forward to 2019 and it is now at 65% of operations cost. However, hidden within that is a cost recovery of 100% on many services, such as a seasonal run to Argentia, on-board vessel concessions, drop trailers, etc. Cost recovery, we believe, has to end.
In 2015, the federal Liberal leader, now Prime Minister Trudeau, voiced alarm over the previous federal government's cuts to Newfoundland's essential service and committed to work to ensure that Marine Atlantic remains affordable to Newfoundlanders and Labradorians. Prime Minister Trudeau highlighted cuts and cost recovery, stating that such measures had forced fares to rise by 11% in the three years leading up to 2015.
Since the Prime Minister's pre-election stand in 2015, fares have risen another 10%, not factoring in the additional burden of security fees and fuel surcharges. Sadly, since cost recovery was introduced in 2007, fares have increased by an alarming rate. Oddly enough, 2019 marks the 70th anniversary of Newfoundland's entry into Confederation with Canada. Was this the vision for those negotiating the Terms of Union in 1949? I think not.
The same year, 2007, when the cost recovery was imposed on Marine Atlantic, then Newfoundland member of Parliament, now senator, the Honourable Norm Doyle stood in the House of Commons and pleaded for a better deal for the people, stating it was a very costly service.