Selling the Family Silver

As reported on the front page of yesterday’s Globe and Mail, the McGuinty government’s “deficit reduction” strategy involves not only cutting taxes, but also divesting revenue-generating assets.

Today’s Globe comment page features three sassy letters on the contemplated privatization. But the editorial strikes a seemingly pragmatic tone, arguing that the Ontario government should sell “if the price is right.”

However, the numbers in yesterday’s front-page story suggest that the price is not right. The Globe reported that the Liquor Control Board of Ontario (LCBO) could be sold for $10 billion.

This past summer, the Ontario government was writing 30-year bonds at an interest rate of 4.6%. (Of course, shorter-term government bonds entail even lower interest rates.)

So, reducing Ontario’s current borrowing by $10 billion would reduce future interest charges by $0.5 billion per year (at most). By comparison, The Globe reported that the LCBO’s profit was $1.4 billion last year.

Why should the government give up $3 of annual revenue to save $1 of annual interest costs?

7 comments

  • it makes absolutely no sense at all, kind of reminds me of the “Common Sense Revolution” that didn’t work either. Where would the protection come for taxpayers in the future. I am very happy to have a chance to go on the record and say NO, don’t do it, What a foolish idea. ya ya I know all about people saying governments should not be in the business of making money, but I don’t know anybody that is willing to say they are wanting to pay more taxes to maintain the services we have. Profit of 1.4 billion being spent on Health Care or infrastructure would go a long way, remember these are profits after paying salaries for workers, and big bonuses for others. Call your MPP and ask them why they think it would be a good idea??

  • There is no common sense in selling the LCBO for 10 billion dollars!! Not only is the price not right, the moral is wrong!! Were is the social responsiblity from the goverment to keep the LCBO Public, protecting the communities. And yes maintaining the profit of 1.4 billion dollars a year that goes to the goverment to for other fundamental resourses for Ontario.. So what would your MPP say is a good reasoning??

  • But if it’s all about maximizing government revenue, we should have a socialist economy where all businesses are run by the government. That way, any profits from any business could go to government revenue.

    Why should the government give up $3 of annual revenue to save $1 of annual interest costs? Two reasons. First, the private sector can probably run the booze business more efficiently than a large government monopoly. That means more savings for consumers when they go to buy booze. Second, the $3 of revenue is not being lost. It’s being transferred from the government to liquor store owners and employees, and the liquor customers who have a little extra money in their pocket from savings through increased efficiency.

  • In an article some years ago, I called this Selling the House to Pay the Mortgage.

    The amount received from privatization is recorded as current revenue, and rightly so as the recurring income disappears.
    The trade union movement should be able to mobilize against this action. For one thing the LCBO has great purchasing power and is able to get lower prices than any single outlet would get. At one time it was the largest single purchaser of spirits and wine in the world.

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  • Selling the LCBO is definitely not the way to go this would be a short solution for the people of Ontario,once it is sold were does the revenue come in?Also looking at social responsibility due you think that the private sector ie:Walmart would challenge individual not a chance all what they are looking for is dollars, would they care if the individuals are not of age or that they may be under the influence. I believe that the LCBO are doing a damn good job in challenging these individuals.On another note due you think that the big conglomerates as mentioned before Walmart would have a diversified portfolio as the LCBO and VINTAGES please take a long hard look at what we have right now!!! The LCBO works don’t Privatize that would not be the smart move.Once it is gone there is no turning back look at Alberta there regretting it.

  • SELL THE L.C.B.O. really ??????????? A brain anyone??????????

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