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Ontario will hike beer tax, sell majority of Hydro One to fund infrastructure

Last Updated Apr 16, 2015 at 10:10 pm EDT

Summary

Ontario will also allow beer to be sold in 450 grocery stores.


The government's revised agreement will raise $100 million a year "by applying a volumetric tax or markup" on all beer.


Government-appointed panel, headed by former TD Bank CEO Ed Clark, recommended the province sell up to 60% of Hydro One.


TORONTO – Ontario’s “biggest shakeup” to its liquor laws since it repealed prohibition in 1927 includes a new tax on beer and allowing it to be sold in hundreds of grocery stores, Premier Kathleen Wynne said Thursday.

“When it comes to the sale of beer in Ontario, I’m here to announce that the status quo is over and that the days of monopoly are done,” Wynne said as she released a report by a panel appointed to look at liquor sales and Crown assets.

The Liberal premier made it clear there were big changes coming at the 448 retail outlets operated by the foreign-owned Beer Store, which controls 80 per cent of beer sales in the province.

“The Beer Store has grown into a de facto monopoly, controlled by a very small number of companies,” said Wynne. “This system has stifled competition (and) kept craft and small brewers from growing.”

The new beer tax — $1 on a case of 24 — will be phased in over four years starting Nov. 1 at 25 cents a case, which is expected to raise $100 million annually by 2019.

The government’s revised agreement with the Beer Store includes a pledge by major brewers to cap prices on their most popular brands, which represent about 50 per cent of the market, until May 2017.

“One thing we do not want to see changed is our commitment to affordable prices,” said Wynne.

Ontario will also allow beer in six-packs or smaller packages to be sold in 450 grocery stores, and will start a pilot project to sell 12-packs of beer in Liquor Control Board stores, but the Beer Store will retain exclusive rights to sell cases of 24.

The agreement also makes it less expensive for small brewers to get their products on the Beer Store’s shelves, and will increase their shelf space from seven per cent to 20 per cent, which is expected to help create jobs as they grow sales and expand their work forces.

“The changes should lead to significant job creation,” said Cam Heaps of Steam Whistle Brewing, who is also chair of Ontario Craft Brewers. “We as a sector have doubled in the last 10 years, and I imagine it would double or triple again in the next five to 10 years.”

The new deal will also allow bars and restaurants that buy up to 250 of cases of beer to purchase it at the same price as consumers instead of 30-to-50 per cent above retail. Restaurants Canada called it “a good first step” for about 9,000 small licensees.

“Today’s announcement doesn’t help the bars and pubs that sell high volumes of beer and are currently being gouged on price,” said spokesman James Rilett.

The Progressive Conservatives said the beer tax was proof the Liberals’ intentions were not all about improving consumer access, calling it “a cash grab.”

Modernizing beer sales was recommended by a panel headed by former TD Bank CEO Ed Clark, which examined Crown assets such as the LCBO, Hydro One and Ontario Power Generation to find ways to squeeze out the maximum value to help fund the Liberals’ infrastructure plans.

Wynne said the government will sell 60 per cent of Hydro One, the giant transmission utility, but will not allow any one shareholder to buy more than 10 per cent while the province remains the controlling owner with 40 per cent.

Clark said the province could generate about $9 billion from the Hydro One sale, with $5 billion going to pay the utility’s debt and $4 billion to fund infrastructure projects. He predicted “a favourable impact” on electricity rates over time after the sale.

Wynne said she could not guarantee electricity rates would not go up as a result of the Hydro One sale, while NDP Leader Andrea Horwath scoffed at Clark’s suggestion they would go down.

“People are maybe going to have easier access to beer,” said Horwath, “but they’re not going to be able to keep their beer cold because they won’t be able to keep their fridge plugged in because they won’t be able to afford hydro.”

The Conservatives said they don’t trust the Liberals to put the money from the sale to hydro’d debt and new infrastructure, and fear they will use it to reduce the $10.9-billion budget shortfall.

A Hydro One distribution company, Hydro One Brampton, will be sold to three utilities, Enersource, PowerStream and Horizon Utilities, to create the province’s second-largest local distribution company.

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