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Monday, April 14, 2014

Out of ideas, Wynne government turns to outsiders for help

The Ontario government, morally bankrupt and intellectually impoverished, are asking an advisory council to “optimize the full value” of the provincially owned Liquor Control Board of Ontario (LCBO) and the utilities, Hydro One and Ontario Power Generation.

Finance Minister Charles Sousa said, “We are looking to maximize the value of our Crown corporations owned by the people of Ontario. … Continuing public ownership, however, remains a key priority.”

Sousa announced that Ed Clark, president and CEO of TD Bank Group, will lead the new advisory council and will be joined by former PC finance minister, Janet Ecker, former NDP minister, Frances Lankin, former president and CEO of the Canada Pension Plan Investment Board, David Denison and president and CEO of Cineplex Entertainment, Ellis Jacob.

What special knowledge or expertise would two former politicians and the head of a pension fund have to offer, I wonder, that is not available within the civil service or among the elected officials at Queen’s Park?

And Frances Lankin, really?

In 2010, Ms. Lankin was part of an “expert” panel to do a social assistance review—Commission for the Review of Social Assistance in Ontario. The government, however, chose not to accept the panel’s main recommendation—to merge Ontario Works and the Ontario Disability Support Program. This recommendation was generally considered central to the Commission’s final 2012 report’s 108 recommendations. So much for Ms. Lankin’s advice.

I guess, she’s back to try again

This latest “advisory council” seems to be pretty much a waste of time for all concerned—the sort of wheel-spinning we’ve seen throughout the McGuinty-Wynne administrations. This government has become notorious for seeking advice but ignoring key elements so that the exercise is made fruitless.

The right thing to do is end the province’s monopoly and privatize the LCBO, opening up the sale and distribution of beer and spirits to convenience stores, grocery stores, etc. Why? Because the LCBO is a consumer rip-off and a bloated rest-home for overpaid, underworked union members and government patronage appointees.

The easiest way for the Ontario government to squeeze more money out of the LCBO is to raise its prices. We don’t need ex-politicians to tell us how to do that. The LCBO is a monopoly so how hard would that be? The right thing, though, is to sell it off and start treating the residents of Ontario as adults, and stop treating us like dimwits who aren’t socially responsible enough to be trusted around alcohol.

Proof that alcohol can be sold successfully in privately-owned stores is provided abundantly by the existence of privately-owned The Beer Store’s hundreds of outlets and the more than 200 LCBO “agency stores” operated under an agreement with retailers in smaller communities. LCBO staff are not used in agency stores. There are also dozens of wine stores throughout the province, which are owned by Ontario wineries. My neighbourhood grocery store here in Burlington, in fact, has one such non-LCBO wine boutique within its store. Unfortunately, this small outlet only sells its own brands of wine.

Most arguments the Liberal government uses to support its monopoly on alcoholic beverages are weak and sometimes outright bogus. Now, though, with trade unions pretty much controlling Kathleen Wynne’s agenda—privatization, for example, is anathema to unions—they’d never give Wynne the OK to end this egregious policy.

Frankly, given the need for trade union approval, it’s highly unlikely anything worthwhile will come of this latest advisory council.

9 comments — This is a moderated blog and comments will appear when approved. Please don’t resubmit if your comment doesn’t appear immediately, and please do not post material that is obscene, harassing, defamatory, or otherwise objectionable.

  1. Well, it's quite simple - You pissed it all away to beg, borrow and steal votes. You had it all, you had it made, but you chose to look for more. Your'e at the end of the line with nowhere to go.
    Now that you have plundered the public purse, you seek help?
    As I see it, you should all be doing extensive jail time - period.

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  2. The key to an LCBO spinoff is to not follow the Alberta model of privatizing the retail side but keeping the distribution in government hands. By doing that the AB retailers were all forced to buy from the monopoly.... no cost savings whatsoever.

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    1. I'm not sure of that. The board, as they endlessly point out, are the world's biggest purchaser of product. Were they to be stripped of all duties except buying, distributing, and instructed clearly to bargain for the best possible terms, some savings to the consumer could be realized. This is something they do not do now, as the AG pointed out.The board could be freed from all other tasks, promotion, PR, customer surveys, food and drink advice, everything. Most of the retail price is composed of tax anyway, but a lower wholesale price could mean less ad valorem tax.This is why they don't bargain now for a lower buying price, it lowers tax revenue.
      This model would help defeat the familiar refrain that the board returns $1 B to the government.Keeping the wholesale margin would retain some of that.
      But the real reason is the buying, distributing network is already in place. A complete rethinking of their role would be required, but it could work.

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    2. You surprise and disappoint me, Martin. I don't want the Ontario government involved at all, except to control drinking age, etc., through legislation. Governments should not be involved in commerce, period.

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    3. OK I understand from a philosophical view, I don't either. But from a political viewpoint, there is amazing complacency with citizens with respect to the LCBO. This is evident in comments to any stories about private sales. The $1 B surplus is constantly trotted out as a reason why the board is a good thing. The board expends much energy in PR and public surveys as to what a fabulous job it is doing and how satisfied their customers are. A great many are satisfied, especially in small towns where queuing and inconvenience doesn't seem to bother many.
      Any government would have to be very disciplined to withstand opposition from the board and allies and public opinion. There isn't the slightest chance of a Liberal or NDP regime moving in this direction, Liberals won't even expand the private agency store program.
      So I am just suggesting an alternate model I could live with. My real concern is increased convenience in retail sales. I expect no changes anytime soon.

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    4. I agree government should get out of the booze business, but my understanding is that under federal legislation only provincial governments are allowed to import booze from out of province. Now they could use the consignment method as well as I am sure if the Ontario government asked to be exempted from the 1928 importation on intoxicating liquors they could do that. The main thing is no governments wants to give up the revenue from booze so any privatization would have to maintain or increase the revenue which the Alberta model did. My preference would be the government would keep the warehouse, but it would only act as a place for collecting the revenue sort of like customs does for most goods, I would not buy or sell the products, it would just collect its flat mark-up on all booze entering Ontario.

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  3. optimize..... does that mean getting the government out of it.

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  4. Wynne is certainly infatuated with advisory panels, but why she feels the need to hire more is a valid question. Could she not dust of the Drummond report, or is that too associated with the former premier, Dalton somebody?

    You are dead right about the LCBO problem. It is very telling how Wynne and Sousa affect no knowledge of the 230 liquor Agency stores. The announcement last month of the new consumer kiosks carefully avoided any private involvement. The OPSEU union head even complimented the initiative, while saying that the Agency stores represented a "problem" that should be addressed That is private sales that already exist should be rolled back.Rather opposite to what you and others are suggesting.
    The expansion of the Agency stores came to a halt under the last union contract, one suspects that LCBO and OPSEU agreed to this cozy arrangement. Who exactly represents consumers at these talks?

    Wynne can save us the expense of any advice; such is her reliance on union support, LCBO status quo will continue under her watch.

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  5. They should join the 21st century and privatize the LCBO and allow grocery stores to sell beer and wine. At the very least if privatizing is too much for the Liberals they can follow the example of BC which allows private liquor stores to compete along side or Quebec which lets grocery stores sell beer and wine. The whole social responsibility is bogus. If a minor wants booze, they will get an older friend of sibling to buy it for them no matter how its sold. No private operator wants to lose their licence so they have every incentive to be vigilant to not sell to minors. In fact in the US, many stores have a policy of asking everyone for ID no matter how old you look.

    OPG should be privatized too but so we get a truly competitive market it should not be sold off as one but rather each facility sold off independently as Harris originally envisioned. Even Dwight Duncan has said OPG should be privatized.

    For Hydro One, the government should sell a 49% stake while maintain 51% ownership. Much of this could be bought by various pension plans which would be a win-win for taxpayers. The reason I don't advocate full privatization is Hydro one unlike the LCBO or OPG is a natural monopoly. Finland, Austria, France, and New Zealand all sold minority states in their utilities while maintaining majority ownership and even here in Ontario and few local ones like Enersource in Mississauga or Grimsby Power in Grimsby have done this although due to tax rules they only sold a 10% stake as anything greater than that triggers a 33% transaction sales tax.

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