Ontario's 'alcohol deficit' to grow with expanded sales: expert

The number of retailers selling alcohol in Ontario will more than double after Sept. 5, a massive overnight expansion of availability that is proving contentious, not least due to disagreement over the policy's cost. 

Striking workers have closed Ontario's 680 LCBO outlets, saying they are worried about job security and the potential loss of public revenue from privatized sales.

Premier Doug Ford has acknowledged the expansion will cost the province up to $225 million paid to The Beer Store for revoking its exclusive rights to sell 12- and 24-packs of beer. 

But the Ontario Liberal Party has claimed that the policy could cost hundreds of millions of dollars more, with leader Bonnie Crombie calling it a "billion-dollar booze boondoggle."

The real cost to Ontario, experts tell CBC, depends on how you measure it.

The LCBO is one of the largest purchasers of alcohol in the world and its operations contribute about $2.5 billion to the Ontario government each year, a figure that does not include taxes. 

But Premier Ford says Ontarians need more "choice and convenience" than is currently offered and plans to expand liquor sales to 8,500 new retailers. So far, over 3,000 convenience stores — more than 40 percent of those in the province — have received approval to sell alcohol come September.

But Ford's government does not expect the LCBO's revenue to decline, saying it will remain an exclusive wholesaler and retain a monopoly on selling spirits. 

'Alberta model'

In moving from a government retail model to a privatized one, Alberta's experience offers a useful case study, says Anindya Sen, a professor of economics at the University of Waterloo.

"If you look at the Alberta system, which is completely private… does that generate less revenue for the province?" Sen asked. "When you make it in per capita terms, it's actually much higher than Ontario."

In 1993, Alberta became the first Canadian province to privatize liquor retailing by closing its 204 government stores. Within two years, the number of liquor outlets in the province had more than doubled.

Significantly, government revenues from alcohol sales increased. Today Alberta earns about $825 million annually as a liquor wholesaler. 

While this is less in real terms than what the LCBO generates, on a per capita basis it equates to about $183 annually compared to about $165 per person in Ontario.

"The reason is because [Alberta's] system is very straightforward. It basically has very low administrative costs," said Sen, who has previously advised the Ontario Convenience Store Association and Spirits Canada.

Beyond increased efficiency, privatization of Alberta's alcohol sales had more wide-ranging effects, a 2003 study by Douglas West at the University of Alberta found. These included an eventual drop in liquor prices and a substantial increase in product selection. While liquor stores hired more people, employee wages dropped.

'Alcohol deficit'

Since the 2000s though, the public costs associated with even moderate drinking have become better understood. 

Nowadays, public health professionals say any increase in alcohol availability will lead to an increased burden on the public purse. 

A major study called the Canadian Alcohol Policy Evaluation 3.0 published last year showed that alcohol cost Ontario over $7 billion in health-care, criminal justice and productivity costs. 

Alcohol generated a total of $4.2 billion for the province, resulting in an overall "alcohol deficit" of nearly $2 billion. 

"Even though selling alcohol is good business for alcohol producers and sellers, it's a rotten deal for taxpayers in Ontario," said Tim Naimi, the director of the University of Victoria's Canadian Institute for Substance Use Research, which produced the study.

The coming expansion of alcohol sales will also increase consumption in the province, and its associated harms, Naimi said. 

"There's literally hundreds and hundreds of studies [showing] that when you increase the availability, you increase consumption," he said. "All the harms tend to rise and fall with the level of consumption in the population."

The Ontario government acknowledges the risk for additional harms from increasing alcohol consumption, and has committed $10 million over five years "to support social responsibility and public health efforts to ensure alcohol continues to be sold and consumed safely." 

"Given that we know greater access to alcohol could lead to an increase in alcohol-related harms, OPH will continue to monitor the local impact, gather and report on available data, and contribute to reducing harms," a spokesperson for Ottawa Public Health said. 

But Naimi said the harms are already baked into the new policy.

"The new changes in Ontario will have a negative impact and we can guarantee that they will have a negative impact on public health," he said. "How much that is will remain to be seen."