The Daily Twigg Vol. 1 No. 22 Feb. 23, 2012
Budget plan to sell liquor warehouses
is a venal pre-election slush fund ploy
By John Twigg
It is perhaps too easy and even cheap to criticize a government for being too political in a pre-election budget but it is more difficult and more important to prove a government has been venal and against the public interest too.
That is the case with the budget presented Tuesday by the B.C. Liberal Party government of Premier Christy Clark because it was easy to correctly predict as I did Tuesday morning that it would be crafted mainly to position the governing party as well as possible for the next budget shortly before the next provincial election in 2013, as well as to make this budget helpful to Liberal candidates in the two byelections that must soon be called too but which will not be critical to the government surviving or falling.
In fact the latest budget does try to help the Liberals do as well as possible in those byelections, such as by posturing as responsible hold-the-line stewards of the treasury in the face of hefty wage demands from public sector workers, and by passing out a few new goodies to key target groups such as families, seniors and homeowners, among other moves.
Really though, the government's focus in the budget was moreso on setting up the 2013 pre-election budget to be a major good-news effort, which they did mainly by lowballing revenue forecasts and freezing spending in the 2012 version.
But venal? As in self-serving, capable of being bought by underhanded means, or mercenary and even corrupt, as my old dictionary defines the word, and contrary to the public interest too?? Sadly yes it was and is that too.
Move to privatize in LDB was a big surprise
The main obvious example of that was the Clark government's surprising moves towards privatizing its two liquor distribution branch warehouses in east Vancouver and Kamloops, which it soon came out had already been lobbied for by the Progressive Strategies company owned by longtime political insider Patrick Kinsella, also co-manager of the Liberals' 2009 election campaign and a key backer of Clark's 2011 leadership campaign, amongst other such partisan affiliations all the way back to 1975 and the Social Credit leadership of 1986.
That story angle came out Tuesday evening thanks to independent journalist Bob Mackin writing it for the Business in Vancouver blog which soon became a hot topic on the Alex Tsakumis blog and by Wednesday was into the mainstream media and the Legislature's Question Period too.
Kinsella and two colleagues probably will make a lot of money if their lobbying client, Exel Logistics of Ohio, ends up winning the bidding process for the lucrative LDB warehouses system, just as his other clients previously won other gains such as Accenture getting B.C. Hydro's administration department in 2003 and in the highly controversial and in some aspects corrupt sale of BC Rail to Canadian National Railway (source of the notorious Basi-Virk trial, and an unusual case because Kinsella was found to have been working for two or three sides at once! [BCR, CNR and former premier Gordon Campbell]).
What Kinsella has done regarding the LDB warehouses is not necessarily illegal, and their lobbying for Exel was duly entered in the B.C. Lobbyist Registry, but it is still questionable in terms of him and his partners and clients possibly receiving an "inside track" as New Democratic Party MLAs alleged Wednesday in the Legislature's Question Period and as minister responsible Rich Coleman assiduously denied both inside and outside the House.
And that certainly is further questionable from the perspective of how the government announced the move: in a single cryptic paragraph at the end of a one-page discussion on the "release of surplus corporate assets" on page 51 of a 152-page background document on the Budget and Fiscal Plan for the three years from 2012-13 to 2014-15, and even that had a curious twist which vaulted it into a rare front-page column by the Vancouver Sun's Vaughn Palmer, arguably the leading pundit in the province.
"Additionally, government has recently announced its intention to sell its Liquor Distribution warehousing facilities and associated distribution services to the private sector," the document said, which as Palmer noted was wrong insofar as no such announcement had yet been made, apparently because the Clark government chickened out from doing so in the days after that budget book went to the printers.
But it probably was also wrong regarding another claim elsewhere on that page claiming that the properties and facilities being put up for sale are "assets where there was no strategic benefit for the province to be the owner".
No Strategic Benefit?? That sounds like a great new nickname for the B.C. Liberals: the No Strategic Benefits Party, and an improvement on the New Christy Minstrels Party, or the Crispy Crunch Party.
Elsewhere the budget fine print suggests the process of selling assets will cost only about $3 million but will gain about $700 million over three years and the liquor warehouses seem to be by far the largest asset mentioned (others are mainly vacant lots) and they must be considered some kind of a jewel because budget tables show they enable the LDB to earn profits of about $900 million a year.
To be clear, the government is not talking about selling its many retail outlets, at least not yet, and it is not talking about cutting liquor taxes either, and as Clark said this morning at a Burnaby Board of Trade breakfast meeting there is "nothing magical" about liquor distribution, but it is not a regular routine business either and it IS a major source of government revenues that a supposedly prudent regime would want to keep in-house and away from potential abuses that tend to crop up when private-sector profits are involved in such industries because they too often turn into profiteering, tax evasion and race-to-the-bottom working conditions.
Obviously the present liquor system in B.C. could be improved, such as by expanding customer choices and lowering prices (especially on beer!) and maybe by enabling grocery stores to sell dinner wines too (nothing over $10?), but surely we should want to avoid some of the more sleezy features of the American liquor systems.
So what we see here is a move to sell a profitable asset for a short-term gain of cash just in time for the next pre-election period but a longer-term pain for taxpayers who inevitably will pay higher prices for private-sector mark-ups and receive fewer cash dividends from what was once a monopoly public service - and another regressive move to make governments smaller and more impotent.
Though Clark, Coleman and Finance Minister Kevin Falcon have insisted the sale process will be fair and open, the BC Rail process proves there is good reason to think it might be otherwise, and the news that a Kinsella client is already lined up and ready to bid just makes that concern moreso.
No doubt a private-sector operator with experience in logistics could provide some efficiencies, with Exel being a subsidiary of global giant Deutsche Post DHL, but on the other hand why repair something that isn't broken and is very far from being financially broke? There are not many reasons beyond gaining pre-election spending money for the incumbent government, though to be fair there are some, such as the new entity being able to take advantage of federal tax writeoffs.
The government ministers also noted that the sale deal will include successorship rights for the approximately 400 members of the B.C. Government and Service Employees Union who are employed at the LDB warehouses in east Vancouver and Kamloops but that is no panacea either because it won't prevent the new employer from gradually eroding wages, benefits and working conditions, such as hiring more lower-paid part-time workers without health care and other benefits, plus it would be a step towards closing marginal or money-losing retail outlets in small communities.
In other words, privatizing the LDB warehouses would be a step towards more union-busting.
While expert commentators were quick to claim that efficiencies could be realized from moving to a private-sector model, the point they missed was that efficiencies could be found in reforming the public-sector model too - except that that would not generate a few hundred million dollars that the government of the day could throw around in its next pre-election budget.
There were other venal moves in the budget, notably the low-balling of revenue forecasts in order to suppress public-sector wages and build a pre-election slush fund, but we'll deal with those in a separate issue.
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