The Ontario Liberals have called in another blue ribbon panel to tell them how to make more money from provincial assets such as the Liquor Control Board of Ontario (LCBO), Ontario Power Generation and other crown corporations. The panel will be chaired by Ed Clark, president of TD Bank and made up of former finance ministers and other luminaries. They will be paid nothing and are likely to produce nothing.
Ontario Finance Minister Charles Sousa has made it clear from the get go that he is not interested in selling any of the assets. This leaves the panel with little in the way of options as it is not likely to suggest across the board price increases. Any in depth analysis of modifying the pricing strategies and potential profitability of the various provincial cash cows will likely take more time than Charles has left in office. The likelihood of a June provincial election looms large—and without some new thinking, Charles could be toast.
The basic problem with this exercise by the panel is that the individual crown corporations have to be analyzed in a different way. The first question for each is why does it exist and why should it be government owned? If that analysis had been done properly on the Bruce Nuclear operation and Highway 407, those assets might never have been sold.
But any finance minister can tell you that financial need trumps analysis. Your boundaries are what you can get away with. That then begs another question: in as much as times change, what is available for a different approach today? While low cost electricity is still an objective of provincial policy, why is it necessary for the government to be involved in the distribution of liquor? Any provincial government objective for control of liquor disappeared more than 50 years ago.
Selling the LCBO is not only an idea whose time has come but the government can make more from taxes on privatized liquor sales than it makes today from the entire operation. And when you break down the LCBO into its separate components, it is worth more to the investors than it is to the government. The centralized procurement and distribution system that exists is better than any private company could invent and is worth almost as much as all the stores and licenses to be sold.
In the same sense, the privately owned Brewers’ Warehousing is an excellent distribution and recycling operation but letting convenience and grocery stores sell beer will be more profitable for the province. Convenience stores and grocery stores will sell far more small packages of beer. This will make more money for the brewers and for the province.
If Charles Sousa was a marketing man instead of a banker, he would have figured this out for himself. First, fire the panel.
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Copyright 2014 © Peter Lowry
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