It may sound like a fire sale, but Ontario's review of Crown corporations would be prudent in any fiscal climate. If there are keen buyers and continuing revenue streams, and if protections for the public are maintained, then privatization of some assets could be sound policy.
The province has hired two banks with experience in privatization to look at its assets. The largest are the energy-providing Hydro One Inc. and Ontario Power Generation, and the sin-purveying Liquor Control Board of Ontario and Ontario Lottery and Gaming Corp; together, they bring in more than $4-billion a year.
To some, they are among the prides of the province. They are putative cash cows. But should they remain in public hands?
As governments assess which services they should and should not provide, they need to decide when owning a company is in the public interest. A sale may make sense if it can satisfy four conditions: It should give the government an immediate upfront cash benefit; it should allow the public to continue to share in the profit the company makes; it should preserve the priority of the public good; and it should not harm vital public-policy interests.
The case of the LCBO seems simple. It is a government monopoly, retained out of inertia, for fear of public rebuke and for the sake of cash flow.
It may be possible to wring more money out of it, without any losses. A 2005 review of Ontario's liquor system estimated that auctioning off individual licences to LCBO stores and wholesale operations could yield $200-million more a year. A sale could go ahead and the government could retain control of the number of liquor stores permitted, while a separate agency, the Alcohol and Gaming Commission of Ontario, would continue to regulate service to minors. Other benefits could result. In Alberta, privatization led to the introduction of new and niche products; selling the LCBO might open market access to Ontario's craft brewers and small winemakers.
The OLG is a more complicated matter. The province's addiction to gaming revenues helps it feed gambling addiction. OLG is beset with management difficulties and a history of retailers with a suspicious record of personal winnings. Any sale should seek to maintain revenues while working harder to prevent social harms. Every lottery corporation in Canada remains publicly owned, which testifies to the difficulty of privatizing this line of business.
Ultimately, banks will advise how many dollars could be on the table, the public will debate and the government and legislature will decide which companies to sell, if any. A $24.7-billion deficit is making this matter more urgent, but even in tough times, the public could well stand to profit.