The Ford government should change its liquor laws to help businesses survive

While all levels of government in Canada have, unpredictably, begun to take ever more coercive measures to contain the pandemic—resulting in an unprecedented shutdown of the economy—these government responses have been entirely predictable. The federal and provincial governments have collectively announced tens of billions in spending to stimulate the economy and to provide funding to keep businesses and households afloat.

It is clearly easier for governments during downturns to simply open the spending spigots rather than implement other, less sexy, measures to alleviate the harm that disasters or recessions have on the economy. Few politicians in Canadian history—conservative or progressive—have turned down the opportunity to claim political credit for either implementing new spending programmes or by sending cheques to Canadians. There will always be short-term political gain associated with such measures, ones which unfortunately result in long-term economic pain by increasing deficit spending and new debt.

Rare, however, is the government that during an economic crisis engages introspectively about the various ways the regulatory state hinders economic activity and prevents wealth creation. The pandemic (unfortunately) provides that opportunity.

Last week, the Ontario government declared a state of emergency. Bars and restaurants were ordered closed, except those which could sell food for either delivery or take-out. This had a predictably devastating impact on the food service industry, where thousands of cooks, servers, hosts, and bartenders became unemployed overnight. At the best of times, bars and restaurants operate on low margins, and unanticipated closures can spell the early demise of these businesses, affecting not only those who work in the industry but the very character of the communities and neighbourhoods in which these businesses are located.

As soon as this measure was announced, those bars and restaurants nimble enough switched to take-out and delivery. Some bars made a desperate online plea for donations so that their staff could pay rent, but others simply shut their doors.

Those bars that were forced to close did so with a full inventory of product, which they had no legal means to sell, because of the operation of one of many of Ontario’s neo-prohibitionist liquor laws—the ban on “off-sale” alcohol.

Many North American jurisdictions, and several Canadian provinces (at least in a limited sense) allow off-sales. These are bars and restaurants which are licenced to serve alcohol, but are also licenced to sell alcohol to go. The benefit of off-sales for consumers are obvious —most importantly, it eliminates an incentive for patrons to overconsume in public, or to chug extra drinks before last call. However, it also allows those who wish to consume alcohol at home an option to go to the local bar or restaurant to buy a bottle of wine or a few beers for dinner, instead of having to travel longer distances to find a licenced retailer. In Ontario—where all spirits and most wine are sold at a government monopoly store, and where three multinational non-Canadian breweries sell beer at their “The Beer Store”—finding a convenient location to buy alcohol in Canada’s largest province is harder than it should be.

During this trying time for small businesses, allowing bars and restaurants to sell off-sale would give them a fighting chance at survival until restrictions on businesses are relaxed, while everyone works together to fight the COVID-19 pandemic.

Ontario’s overly-complicated liquor licencing and control legislation—and the vested interests of privileged stakeholders such as The Beer Store, the monopoly Liquor Control Board of Ontario, and the unions representing their respective workers—have usually thwarted any meaningful reforms to increase consumer choice.

However, the current state of emergency presents a chance to throw a lifeline to bars and restaurants struggling to survive. Under Ontario’s emergency legislation currently in effect, cabinet can (temporarily) permit off-sales at bars and restaurants. It can do so with a simple order and a stroke of the pen, and, most importantly, can so at zero cost to the taxpayer.

One Toronto bar manager, whose bar was forced to lay off its staff this week, told me recently that off-sales would not only save jobs ?but create them?, including by employing delivery drivers, extra bar staff, e-commerce staff, and logistics personnel.

Another bar manager, more gloomily, told me that their reality was that “we’re sitting on thousands of dollars[‘] worth of stock that we absolutely have zero legal outlet to move...It’s hard for me to see this shutdown lasting for less than 1.5 months, and that’s a long time for anyone’s cash flow. I hope the business can survive long enough, so everyone can have a job to come back to.” While this manager expected receiving some government support, he altruistically hoped that the government was busier “making more test kits available, getting more hospital beds and more respirators for what’s coming down the road...” to address COVID-19.

The old adage tells us from crisis comes opportunity. Allowing off-sales would save many bar and restaurants from insolvency during these unprecedented times. While it is often easier and more politically expedient for government to cut a taxpayers’ cheque during a crisis, a simple cabinet order could let bars and restaurants do what they will always be able to do better than government – preserve local jobs and provide joy to their customers, while costing the already-overburdened taxpayer absolutely nothing. And it would allow the government to focus its spending more on hospitals and less on handouts.