Should the BC Government be in the retail alcohol business at all?

A recent Globe and Mail business editorial asks this question with the author suggesting several business-related reasons why alcohol sales should be completely privatized in BC. But the terms of reference for the current policy review clearly recognizes that alcohol needs to be handled differently than other products in the marketplace. Government liquor boards in Canada were created for two main purposes: (1) to maximize public revenue from the sale of alcohol and (2) to ensure that alcohol retailing is conducted in a way that minimizes alcohol-related harm and costs.

On the issue of maximizing public revenue, the experience of our neighboring province, Alberta, is telling. Alberta ended all government sales of alcohol in 1993 and almost immediately, the prices charged by private retailers started to rise. Because of the upward pressure on prices, the government had to reduce taxes on alcohol in an effort to fulfill its promise that retail prices would not go up under privatization. Ten years later, economists estimated that this process ended up costing the government of Alberta a whopping $500 million dollars in lost revenue over the preceding decade. Less revenue from alcohol means fewer resources to fund education, health care and other essential public services.

In regards to minimizing harm and costs, the case is equally clear. One of the most consistent effects of privatization is a large increase in retail outlets and hours of operation. While this is definitely more convenient for consumers, the story is not all good news. In Alberta, for example, the number of liquor outlets has quadrupled under privatization and now Alberta has one of the highest per capita drinking rates in Canada. In BC, partial privatization in 2002 doubled the number of outlets. Per capita consumption rose sharply following the change and then fell during the economic recession, and the rate of alcohol-related hospitalizations is up by 16%. The bottom line: increased availability leads to higher drinking rates  which lead to more harm and more alcohol-related costs for government creating a lose-lose arrangement when coupled with the effect of less revenue.

Secondly, pretty much everyone agrees that alcohol should not be sold to minors or to patrons who are already visibly intoxicated, and all jurisdictions in Canada have laws prohibiting such sales. Research consistently shows that private retailers do worse than government liquor stores when it comes to carding underage buyers and refusing sales to intoxicated patrons. For example, a recent “sting” operation conducted by the Liquor Licensing and Control Branch found that employees of private liquor stores in BC were four times more likely to sell alcohol to minors than employees of government liquor stores. Given these data, the Provincial Health Officer of BC went so far as to conclude that youth access to alcohol has increased with the expansion of private liquor stores in BC. In 2011, CARBC field researchers noted examples in private stores across BC of underage youth and highly intoxicated patrons purchasing alcohol. In one case, we observed an intoxicated driver stumble into a private store and successfully purchase liquor.

Finally, research consistently shows that risky and heavy drinkers tend to purchase cheaper alcohol. In an effort to keep alcohol from becoming too inexpensive, BC and most other provinces in Canada implement minimum social reference prices to help reduce risky consumption. Effective policies like minimum prices are relatively easy to implement in government stores because price is set on a uniform basis across the province and changes only infrequently. Pricing in non-government stores is much more variable with some private retailers actually pricing below government established minimum prices to compete in the marketplace. Cheap alcohol means more risky consumption, more harm and more costs for alcohol related problems.

Although the goal of making a profit from the sale of alcohol is the same whether it is sold in government or privately operated stores, evidence suggests that government outlets consistently do a better job of balancing public health and safety concerns with business interests.

Shouldn’t the government remain the leading retailer of alcohol in the province if it means more revenue and less costs?

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Author: Gerald Thomas

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Author: Alissa Greer

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2 thoughts on “Should the BC Government be in the retail alcohol business at all?

  1. Some general comments on your post.

    1. Private Store compliance has increased dramatically – there is no reason why it cannot attain the levels at Government Stores. Worth noting from the same MAP 2012/2013 report by LCB

    “We do not believe that the sale of liquor by a licensee to a minor is motivated by a
    desire for profit at the expense of public safety. Instead, LCLB must conclude that
    liquor sales to minors are the result of a lack of adequate training or supervision,
    and at times it appears to be simple ambivalence on the part of servers and retail
    clerks. Regardless, the non-compliance is correctable with diligence and more
    robust training and education. ”

    2. Looking at data you have sent me via twitter earlier in the week, I see a few patterns that appear relevant.

    a) From the maps: Harm seems to occur to a far greater extent in remoter (i.e. outside of Vancouver) areas. Certainly the areas where the greatest harms are most predominant are largely those more serviced by Government or RAS stores. Perhaps the incidence is not tied to access but to socio-environmental causes. Metro Vancouver with it’s large base of private stores appears to be a relatively minor source of harm. RAS stores in particular show much lower compliance rates than private liquor stores – and the presence of alcohol in a grocery store certainly does make access easier.

    b) Table 6 of the CCSA 2012 report shows that Ontario with it’s monopoly retail + RAS=type stores has a far higher deficit per capita than BC’s mixed model. In fact ON’s deficit is much nearer AB’s than any other Province.

    c) Table 7 of the link you sent me of Health Canada data shows that BC has pretty well the lowest rates on any Province for chronic and acute – regardless of private/govt system.

    3. Not commented on in your reports is the difference in type of alcohol consumed between BC and AB (the only ones I have compared). BC drinks less spirits and beer in total – despite having the greater population and more wine. Perhaps it is societal influences (ethnographic, demographic etc.) rather than access that causes these issues primarily

    Be interested in your comments.

  2. Thanks for your comments Paul. I will respond as best I can here:

    1. I agree with you wholeheartedly that private retailers could attain the compliance rates documented in government stores with greater enforcement, supervision and training for clerks and servers. My response would be that all of these will very likely require significant new expenditures and effort on behalf of the LCLB which will affect the government’s alcohol revenue/cost balance sheet. We all know how difficult, expensive, and time consuming it is to get people to shift their attitudes and behaviors, and I wonder where the resources are going to come from to bring these changes about? Do you see private operators organizing spontaneously to provide the enforcement, training and supervision needed? Further, how long will it take and how much more additional harm will occur in the process?

    On your second point: the profit motive may not be the primary reason that private retailers rates of compliance are lower, but my question is where does the ambivalence among clerks and servers described in the Liquor Distribution Branch report come from? I would suggest that it comes a least partially from the fact that public health and safety issues are for the most part less salient in private stores than within the LDB…an organization who’s very existence is based on the need to balance private an public interests with regards to alcohol. For this reason I believe that the costs of reaching high levels of compliance will almost assuredly be lower within a government controlled system but I’d be happy to hear your thoughts on this issue.

    2a. RAS stores are technically government stores but in practice, as you note, their compliance is even lower than the licensed retail stores. In our work we do not count agency stores as government stores…they are private operators who have been given the right to sell alcohol on behalf of the LDB in rural and remote areas. Given their poor track record on sales to minors and other issues, I think the points made in our blog apply even more to these types of outlets than to the licensed retail stores. Finally, related to point 1 above, the costs of bringing agency stores up to BC Liquor Store compliance rates could be very high given that the problems are more serious and these retailers will be more difficult to engage with given that they are located in rural and remote areas.

    As to your point about social influences…of course there are other social, economic and political influences at play here. The intent of these blogs is to comment on POLICY within the current governmental review, however, and access to alcohol is almost entirely determined in the policy realm. This does not mean that we should ignore the other influences, but it does mean that we should carefully consider the potential effects of policy changes that lead to a loosing of control and expanding access to alcohol. Existing evidence suggests that these changes will increase harm and costs and therefore we believe the province should consider these changes very carefully under the current review.

    2b. I believe (but have not verified) that there is a population size effect showing up in these cost data…if you look closely the biggest deficits are in the areas with the most population and the surpluses all exist in jurisdictions with very small populations. Further, as we have both observed, there are a multitude of influences on the levels and patterns of drinking and a proper analysis would require modeling to control for these other factors. Our point is that government has the most direct control over policy and controls on economic, physical and social access are among the most effective ways known of reducing harm and costs. Conversely, relaxing such controls have been shown to increase sales, harm and costs so any such changes should be considered carefully with current costs and revenue being one of the most important contextual factors to look at in this process.

    2c. Yes, BC seems to have a relatively healthier relationship with alcohol than some of the other provinces, but this does not mean that things could not be improved further. It is difficult to compare across jurisdictions however because of the multitude of factors involved of which policy is only one. The job of public health is to advocate for health whenever the opportunity arises and the current review is an excellent opportunity to do just this. The fact is that BC has some great policies in place…it scored second overall of all ten provinces in a recent comparison of 10 evidence-based policies conducted under a major research project led by the Centre for Addiction and Mental Health in Toronto (see:http://www.carbc.ca/Portals/0/PropertyAgent/558/Files/335/Bulletin%202013-08.pdf) . That said, when BC’s policies were compared to what is considered IDEAL, it only scored 53.4% which means there is still lots of room for improvement especially in the areas of pricing and government control systems. And these are areas where policy is the most significant factor.

    3. There is some evidence that beer and spirits are used in more risky ways than wine so this is good news for your constituents. However, wine is still a source of harm…for example it is more often the drink of choice of women who drink in risky ways. From a public health standpoint, we focus on the harmful ingredient in these products (ethanol) not so much the form that alcohol takes. In fact, fortified wines provide some of the cheapest alcohol per standard drink in BC which makes it a more hazardous product from a public health perspective.

    To end, I believe it is important to recognize that it is the interaction of the various social, economic, political and policy factors that determine the way our society relates to alcohol at a macro-level. The truth is that social norms, policies, economic imperatives, political processes all influence one another through a complex and interactive process, and so I think it is useful at times to step back collectively and ask bigger questions about where we are at with regards to alcohol, how did we get here, are we content with things the way they are, and, if not, how might we change them to improve matters? We get very few opportunities to do this with the current policy review being one of those rare chances to ask these bigger questions. Our blogs here are meant to stimulate debate and thoughtful consideration of these matters including these deeper questions that rarely if ever get asked.

    There will always be people like you who believe the status quo is fine and people like me who believe that our relationship with alcohol can be improved. The old adage: “what you see depends on where you sit” for sure applies here. To me this is less an issue of who’s right or who’s wrong and more one of creating opportunities to openly and meaningfully discuss these important topics. So I’m grateful for your responses and for the opportunity to provide my views in this public space.

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