The Wynne government will introduce its 2015 Ontario budget on April 23. The budget will focus on plans for hydro asset sales and changes to Ontario’s alcohol retail system, Ontario Finance Minister Charles Sousa said Tuesday.
Ontario’s budget will be tabled just two days after the federal fiscal plan is tabled in Ottawa.
A panel chaired by Ed Clark, former CEO of TD Bank Group, is looking at the private Beer Store and public assets such as Hydro One and the Ontario Liquor Control Board. Its report will be released Thursday.
The Liberal government has been clear for months that change is coming to Ontario’s alcohol distribution system and, in particular the Beer Store, a foreign-owned, near-monopoly.
In an interim report released last fall, Clark rejected privatizing the LCBO and recommended the Beer Store give taxpayers a “fair share” of its profits or have the government auction off its virtual monopoly if the consortium won’t pay a so-called franchise fee.
A wide array of businesses – including independent brewers, restaurateurs and convenience stores – want the Beer Store’s cartel arrangement abolished.
The Beer Store has much to protect. Media reports suggest its owners make about $400-million more in the monopoly system than they would in an open market. Their arrangement gives them the exclusive right to retail 24- and 12-packs and to sell the most popular brands to bars and restaurants.
Very little competition is allowed, which means the Beer Store controls 80 per cent of sales in the province. Other brewers must pay the owners a hefty fee to get shelf space in their stores while the international owners of the Beer Store get prominent shelf space for much less.
This is because the Beer Store owners set the shelf price of their own brands such as Molson Golden and Labatt’s Blue in order to maximize their profits.
The province appears to have decided to auction off approximately 300 licenses to large supermarkets that would allow them to sell beer.
On the hydro front, Premier Kathleen Wynne has not ruled out selling shares in Hydro One or hiving off Hydro One’s Brampton distribution operations.
Insiders familiar with negotiations say that local utilities Enersource Corp., PowerStream Inc., and Horizon Utilities Corp. are in talks with the provincial government to merge with Hydro One Brampton creating a huge GTA hydro distribution company.
The budget political context
The government is struggling to eliminate a $10.9-billion deficit by 2017-18 but there do not appear to be any significant tax increases planned.
At the same time that it is tabling its budget, the government is also implementing a mandatory pension plan for the two-thirds of Ontarians who lack a workplace pension plan and a major cap and trade initiative with Quebec and California.
According to sources, there will be nothing in the upcoming budget to elaborate on Premier Kathleen Wynne’s announcement Monday that Ontario is joining Quebec and California in a cap-and-trade system. The details of how the scheme will work will be worked out over the next six months.
The government has put no figure on how much revenue will be raised from the new carbon trading regime and is not allocating any money from the scheme into the fiscal framework. It is expected to take officials about six months to design it but there are estimates it could raise between $1-billion and $2-billion a year, depending on the price of carbon credits, according to sources.
Separate pieces of legislation will be making their way through the provincial legislature to implement the government’s ambitious pension scheme but the plan faces massive opposition from the insurance industry, mutual funds and small business who see their interests threatened.