Pay close attention to liquor privatization plans
On Saturday, the provincial government’s Request For Proposals (RFP) on potential privatization of the liquor distribution system will close.
This proposal, contained in the 2012-13 budget, is projected to save the government money. According to Rich Coleman, the cabinet minister in charge (is it fair to call him the liquor czar?), the government was faced with replacing an aging warehouse in East Vancouver, and this necessity is what led to the idea to put it out to the private sector to see what ideas business people might have.
Coleman did not talk about liquor in his speech to Greater Langley Chamber of Commerce last Tuesday, dwelling instead on B.C.’s energy bounty and the possibilities of massive provincial revenue if proposals for liquefied natural gas (LNG) plants go through.
He did answer a question about the government plan though, and the most important words I heard in his answer were these: “If there is no savings to consumers, we won’t do the deal.”
I suggest that all of us who buy liquor in one form or another remember those words. Beer, wine and hard liquor are already very expensive in B.C. — and this is largely due to government markup. The sale of liquor in B.C. brings in close to $900 million annually to the government in profit.
Few would argue with the markup. Liquor is a luxury and it is not unreasonable that taxes on it be higher than on necessities.
However, there is no way that liquor prices should go up even more so that a private operator can make a profit — particularly a private operator with a monopoly. That isn’t fair to consumers in any way.
If the government wants to privatize liquor distribution, why not go all the way? Why not have competing companies do the distribution of liquor? In most U.S. states, there are numerous distributors involved in the warehousing and wholesaling of liquor, and distributing it to retail outlets. It seems to work well at keeping the price down there— although alcohol taxes are significantly lower in the U.S., which accounts for much of the price difference.
The Alberta government is not involved in liquor retailing or warehousing. It is the wholesaler and contracts all warehousing and distribution, other than for most beer, to a private company. It simply takes a cut from all liquor sales in the province. My understanding is that its take has increased each year, and it has no overhead costs, as it once did when liquor was sold in government stores.
The provincial government has nickeled and dimed B.C. residents a lot in recent years — with MSP premium boosts, Hydro rate increases, ICBC rate increases, the HST and many other increases. There is little real competition in the retail liquor business — prices at private stores are usually higher than at government stores, and there are rarely any sales on anything. The best deals at public and private stores seem to be on clearout merchandise.
It would be massively unfair if the province cuts a deal with a distributor and the costs of liquor jump, so that operator can collect a nice profit.
Consumers need to pay close attention to this plan.