Friday, July 20, 2007

The premier and that gift to private liquor stores

It's nice to know the government was worried about how it would look, taking some $25 million a year out of taxpayers' pockets and handing it to private liquor store owners.
But it would be better still to know why the Liberals decided to make such a generous gift to a handful of businesses, one that will keep on giving.
I wrote about the gift back in January. The government had quietly decided to cut the wholesale prices it charged private liquor stores. It reduced prices by about five per cent, across the board.
Great news for the companies. If you can get a supplier to cut your costs, then your profits jump.
The biggest company quickly wrote investors and said the government's decision would mean a 10-per-cent jump in pre-tax profits.
Not so good for taxpayers. The price cut reduces the amount of money coming into the Liquor Distribution Branch. The branch's profits flow back to the government, to pay for health care or reduce the debt. The money was significant - up to $31 million a year.
But why would the government cut prices? It doesn't have any competition - the Liquor Distribution Branch is the only legal supplier.
And the branch has already cut prices for the stores twice since the Liberals opened the door for expanded private liquor sales.
There is no financial crisis in the liquor business. In fact, stores are still opening and the industry leaders have big plans.
It's still a mystery why the government gave the gift.
But thanks to Sean Holman at www.publiceyeonline.com, the how of the deal is becoming clearer. (The site is mandatory reading for anyone interested in politics and policy in B.C.)
Holman filed freedom of information requests to find out what happened.
It turns out Solicitor General John Les announced the gift to private liquor stores at the B.C. Hospitality Industry Conference Exposition. There was never a news release or public notification.
Les noted the government had already "taken a number of steps" to help private liquor stores.
And then he announced that government was prepared to give up more revenue to help the private liquor stores. "This increase in the discount will help to further ensure your long-term viability in the marketplace," Les told the cheering liquor store owners.
Why the government is willing to pony up your money to ensure the success of these businesses remains unclear.
But don't blame Les for the giveaway. He was watching out for your money, or at least that's how the industry saw it. The head of their association complained in late 2005 that Les had "no appetite" for meeting the industry's demands for bigger profits.
Perhaps what matters is who the industry complained to.
Holman reports the criticism of Les came in a "Dear Gordon" letter to the premier. Former solicitor general Rich Coleman had promised the price break, they said, but Les wasn't going along.
And a year later, the industry had its $25 million price break.
The industry's letter to the premier was interesting. Alliance of Beverage Licensees president David Crown said Coleman had promised to help the private liquor.
And Crown said the companies were waiting too long "to gain the market share that was promised us."
Whoa. Who promised the investors in private liquor stores a guaranteed share of the market? Why, and when?
Those questions still aren't answered.
The owners' association urged members to tell anyone who asked that the deal would mean lower consumer prices.
But the Liquor Barn group of stores had already told its investors that the change would bring a big boost in profits. And people who shop in private liquor stores don't report any big round of discounting.
The bottom line is that the government handed up to $30 million a year in revenue it had been receiving to a group of companies. That's money that could have paid for additional surgeries, or been returned to taxpayers.
Instead, it's boosting profits for a few private businesses.
Footnote: The break for private liquor stores will hit the government's Liquor Distribution Branch's bottom-line this year. The Crown corporation - despite a booming economy - is forecasting a drop in profits for the 2007-8 fiscal year.

3 comments:

Anonymous said...

The answer to your question is fairly obvious: the cut in wholesale prices is an attempt to make up for breaking a promise to fully privatize liquor stores. It'd be more admirable if the government simply followed through with their promise and got out of the retail business altogether. There's got to be a more compelling reason for the government to operate liquor stores than providing high paying jobs for a small number of people, and I don't think that such a reason exists.

Anonymous said...

What are friends for ? How much money did those booze sales folks hand over to the present government? How much more will they hand over prior to the next election. Money talks. Too bad our liquor stores are looking a bit shabby. No money left and besides those places are staffed by those awful union people. Many of wom won't vote for Gordo and the gang dl

Anonymous said...

I think it really is about not supporting decent wages for a large number of people and huge profits for a small number of friends and relatives.