Detox Ontario The same tired arguments are heard every time someone suggests privatizing the LCBO. Thankfully, all four are easy to debunk Mark Milke Financial Post
Wednesday, January 14, 2004 To balance the budget, Ontario Premier Dalton McGuinty is considering privatizing the Liquor Control Board of Ontario, a market giant with
45% of Ontario's alcohol sales. He can expect the following disinformation campaign from the usual suspects.- Claim #1: "Ontario has the second lowest prices in the country after New Brunswick." The LCBO made this claim vis-a-vis Alberta in a March,
2002, letter to the National Post based on a 2001 study. At the time, I (and colleagues at the Canadian Taxpayers Federation where I worked) requested this report on at least three occasions; the LCBO refused to release it and as of this week still won't release its latest full survey of cross-country prices. The LCBO spokesperson informed me that such studies are not "publicly published documents." So, a government Crown makes an empirical claim but is unwilling to allow consumers -- the people who own and patronize the chain -- to fact-check the study's data and assumptions themselves. That's revealing.Regardless, much of the price in booze is tax. Once it's taken out of the equation, I bet many stores in Alberta undercut LCBO stores on many products. From the bare-bones comparison the LCBO gave me, I can report (based on personal buying experience) that some items the LCBO claims are a better buy in Ontario are in fact cheaper in Alberta. Ironically, one of the best price competitors in Alberta is Ontario-owned Loblaws, which operates retail liquor stores in Alberta (under a different name) but cannot yet do so in its home province.
- Claim #2: "Ontario has better product selection than private sector Alberta."
Wrong again. Alberta has 18,800 listings in total (11,300 active with another 7,500 available on short notice) compared to Ontario with
13,600 in total (6,600 active with another 7,000 quickly available). Also, here's a critical difference for entrepreneurs: In Alberta, an enterprising business can import any product, stock it in the wholesale warehouse, pay a monthly fee and then hawk it to the province's 1,000 private stores. In Ontario, importers must apply to the LCBO. If LCBO buyers agree to stock it, great; if not, those who want to crack Ontario's retail market are out of luck.A related Ontario claim is that LCBO stores, including in smaller cities, stock many more products on average than a private Alberta store. This argument is not exactly helpful to the advocates of government-owned stores; it's hardly the responsibility of government to ensure a similarly wide variety of spirits, beer and wine in every store in every hamlet. Sensibly, a private liquor store in an Italian neighbourhood in Edmonton will have a vastly different and specialized selection of wine compared to a beer depot in a blue-collar suburb. In the private sector, over-stocking is not a virtue; it is money that sits on the shelf and is costly for the owner, or in the case of government stores, to taxpayers.
- Claim #3: "Crime has increased at liquor stores in Alberta."
Calgary police statistics are clear on this point: The chances of seeing a crime, or being a victim of one at a liquor store, was greater before privatization than since. While the number of crimes at liquor stores has risen since privatization -- hardly surprising given that there eight times the number of stores in Calgary now compared to pre-privatization -- in every year except 1999, the rate of crime (i.e., the number of offences per store) -- has dropped.
- Claim #4: "Privatize the LCBO and the Ontario government will lose $975-million transferred to it annually from LCBO profits."
This is perhaps the most alluring argument given for governments to keep their state-owned booze outlets. It is repeated by government unions that staff the liquor stores and by left-wing politicians who want the state to keep ownership of whatever; it is also nonsense.
In Alberta, the government received $402-million from government liquor stores in the year before privatization; this year, the government will reap $545-million. Since privatization 10 years ago, private liquor stores have paid almost $4.6-billion in liquor mark-up taxes to the Alberta treasury. That money didn't flow to government because private stores felt charitable towards the provincial treasury. The government continued to impose its liquor mark-ups on beer wine and spirits; the only difference is that it no longer operates retail stores.
When German Chancellor Otto von Bismarck came up with the idea of the welfare state in the late 19th century, it was for sensible items such as old-age pensions and welfare for the poor. Now, defenders of the government-must-run-everything-it-currently-does school argue government should stay in the business of selling Miller's and Merlot. The Ontario premier should indeed consider exiting the booze business.