With the trade war between Canada and the United States ratcheting up by the hour, Canadian governments are about to be awash in red ink.
Provincial governments in particular will face a world of financial hurt, with the feds taking in any tariff revenue and provinces preparing to spend billions to help impacted industries and workers.
Ontario will likely be hit the hardest of any province, with job losses, a recession and big deficits likely on the horizon.
Ontario Premier Doug Ford’s government needs to be doing everything it can to secure the province’s financial position.
That’s why it’s crucial to make reforms to the way Ontario approaches the sale of alcohol. If the Ford government were to do away with Liquor Control Board of Ontario retail stores, while still maintaining the LCBO as the province’s wholesaler, Ontario taxpayers could save billions.
Consider these facts.
First, Ontario is losing out on over $100 million a year by not allowing private retailers to sell spirits. It makes zero sense for the provincial government to be perfectly comfortable with private retailers selling beer and wine but not spirits.
Second, Ontario wastes $1 million per new LCBO store built when compared to simply allowing a private retailer to fill the void. It’s clear that there’s an appetite out there in the private sector to build new locations where they could sell beer, wine, and spirits at no cost to taxpayers. Why are Ontario taxpayers paying to build new stores when private industry is willing to do so for free?
Third, Ontario could save over $500 million a year if the province stopped operating LCBO locations and allowed the private sector to sell all forms of alcohol, as is the case in Alberta. That’s not to mention the huge windfall the province would get from selling present LCBO locations to private retailers.
In this case, the province could still have the LCBO as the province’s wholesaler, responsible for providing alcohol to private stores in the same way that it provides beer and wine to grocery stores right now and all forms of alcohol to
restaurants.
It’s through its role as the province’s wholesaler that the LCBO makes its money, not through running retail locations.
Importantly, keeping the LCBO as the province’s wholesaler means Ford would still have the ability to take American alcohol off the shelves in Ontario should the present trade dispute linger on.
That bargaining chip, which Ford and other premiers have used in the early days of Canada’s present trade conflict with the United States, would still be fully available to the provincial government.
LCBO retail locations were created nearly a century ago to deal with the sale of alcohol after more than a decade of prohibition. Government-run liquor stores were designed for the 1920s, not the 2020s. The rationale for the LCBO retail operations in the 1920s was morality. What’s the reason for its existence today, other than limiting consumer choice and allowing for more government control?
Ford said repeatedly during the provincial election campaign that just wrapped up that he was prepared to spend tens of billions of dollars to deal with the threat of American tariffs. Now, that tariff threat has very much become a reality.
When Finance Minister Peter Bethlenfalvy releases his next budget this spring, it will presumably include all kinds of new spending, which Ford ran on during this year’s provincial election campaign.
But the government was already in a deficit position before the trade conflict and the province is clearly short on cash.
Instead of running massive deficits and passing tens of billions of dollars of additional debt onto future generations, Ford and Bethlenfalvy should be looking for ways to find efficiencies and get the province in a better fiscal position.
In that context, generating savings by ending the LCBO monopoly — while still keeping it as the province’s wholesaler — makes all kinds of sense. After all, it was Ford who introduced more consumer choice for Ontarians by allowing beer and wine to be sold in grocery stores and corner stores. Why shouldn’t he be the very same premier to take the next logical step, both for the sake of consumer choice and for the province’s bottom line?
Jay Goldberg is the Canadian affairs manager at the Consumer Choice Center