2007 Legislative Session: Third Session, 38th Parliament
SELECT STANDING COMMITTEE ON FINANCE AND GOVERNMENT SERVICES
MINUTES AND HANSARD

MINUTES SELECT STANDING COMMITTEE ON FINANCE AND GOVERNMENT SERVICES Tuesday, November 6, 2007 9 a.m. Douglas Fir Committee Room Parliament Buildings, Victoria

The following electronic version is for informational purposes only.
The printed version remains the official version.

REPORT OF PROCEEDINGS
(Hansard)

SELECT STANDING COMMITTEE ON 
FINANCE AND GOVERNMENT SERVICES

TUESDAY, NOVEMBER 6, 2007

ISSN 1499-4178

Page 1621 ]

TUESDAY, NOVEMBER 6, 2007

          The committee met at 9:07 a.m.

           [B. Bennett in the chair.]

           B. Bennett (Chair): Good morning. Thank you, everyone, for coming this morning.

           Good morning, Dr. Kendall and Dr. Stockwell. Thank you very much for coming out this morning. We were given the opportunity to hear a submission from you two gentlemen, and we were past the date beyond which we could accept submissions formally. We thought that because the topic was important enough and Dr. Kendall was asking for this opportunity, we would give you that opportunity this morning.

           We do have a three-hour meeting scheduled for the committee. This is the last meeting of the committee. We have to go through all of our recommendations. There are, I think, close to 50 of them, so we've got quite a bit of work ahead of us.

           What we're going to do is keep you guys, if we can, to ten minutes for a presentation, and then we'll see five minutes or a little more for questions thereafter. Is that okay with you?

           T. Stockwell: Yes.

           B. Bennett (Chair): I'll turn it over to you two, then. Just proceed.

Presentations

           P. Kendall: Thank you very much, Mr. Chair and committee members. We're deeply appreciative of this opportunity to make this presentation, especially as you've made time in your schedule for us.

           I'm Dr. Perry Kendall, the provincial health officer. I'm very pleased to introduce Dr. Tim Stockwell, who is the director of the University of Victoria–based Centre for Addictions Research of B.C. and an internationally recognized expert on alcohol and alcohol-related policy.

           We have a modest proposal to lay before you, which we believe could help reduce burdens on the overburdened health and justice systems, improve community safety and be a source of revenue for much-needed prevention and treatment services.

           First, a little bit of background. After caffeine, alcohol is British Columbians' most popular legal drug of choice. It's consumed at least occasionally by 80 percent of residents over the age of 15. Used in moderation, it's enjoyed by many as a social lubricant. It's absolutely harmless to most people and brings cardiac benefits to some.

           Alcohol does have a darker side. It is a habit-forming depressant, a carcinogen and a teratogen. Regular consumption above a fairly modest level is associated with increased risk of injuries, several cancers, liver disease, fetal alcohol spectrum disorder and crimes of violence.

           An increase in access to alcohol in British Columbia and, indeed, in Canada as a whole over the past decade and a half has had some measurable impacts. The costs of alcohol misuse to British Columbia have risen from $900 million in 1992 to over $2 billion in 2002.

[0910]

           Absolute alcohol consumption per adult has increased in B.C. between 2001 and 2005. Dr. Stockwell tells me there's been a recent increase in stats last year as well.

           In parallel with this has been a substantial increase in the rates of hospital discharges for alcohol-related conditions. Most of the province's drinkers are between the ages of 19 and 39. Over 90 percent of the alcohol drunk by 15-to-24-year-old males is consumed in excess of safe drinking guidelines. That's 85 percent for women.

           Over a third of a million British Columbians have a high probability or have some indication of alcohol dependence, with 90 percent experiencing some problems in their lives as a result of their drinking patterns.

           I'm going to turn the floor over to Dr. Stockwell, who will outline an evidence-based policy option that could, if implemented, go some way to mitigate this potential growing problem.

           T. Stockwell: Good morning, everyone. There is a proposal being circulated which makes three specific proposals. In essence, what I am suggesting to you is that something can be learned from Australian alcohol policy. This might seem an unlikely proposition, but there are certain things that the Australians are doing on alcohol taxation — unlike the slide that's suggested here — which have actually been incredibly successful.

           Unlike Canada, the drinking levels in Australia have been going down. Alcohol-related road trauma has been going down. Alcohol-related liver cirrhosis has been going down in Australia. It's probably largely due to some of the taxation policies, which are among the most effective available.

           Alcohol is no ordinary commodity. It costs over $2 billion in external costs to the economy through health and lost productivity. There's a report from our centre, and we're tracking alcohol- or drug-related harm in the province. One of the handouts there shows a rising level of hospitalization caused by alcohol, and also mortality.

           A fundamental suggestion is that tax rates should take account of the health, social and economic costs of the product. This is no ordinary product. We know that even heavy use and particularly related harms at the population level are strongly influenced by price. The main thrust of my point today is that the way alcohol is priced through the liquor stores actually gives more incentives for people to choose higher-alcohol-content drinks than lower-alcohol-content drinks.

           One very specific proposal is to change the pricing structure to reflect alcohol content in the way that Australians have done through other mechanisms. You have a much more direct opportunity through the social reference prices or the minimum prices in the liquor stores to really directly affect public health and safety.

           A fundamental idea behind this is that the more people drink, the more harm they will experience.

[ Page 1622 ]

That's whether it's in the long term or the short term, for an individual or a whole population.

           I'll just quickly show you some graphs. This is about eight different kinds of cancer. Not many people realize that the amount of alcohol you consume on average predicts your risk of getting cancer. This is a study from the mouth going all through the stomach and out the other end, almost any part of the body that alcohol comes into contact with.

           The graph shows 25 grams a day is about two drinks a day on average; 50 is about four, and 100 is about eight drinks a day. With each of those cancers, the risk goes up the more you drink on average.

           If you look at accidental injuries or violent injuries…. There's obviously a lot of concern around violence around entertainment hot spots in Victoria and Vancouver, maybe leading up to the Olympics. The higher the intoxication level, the BAC, the higher the risk of people being involved in violent injuries. These are data from emergency departments — several thousands cases collected from a number of countries.

           Finally, looking at the United States, this graph shows positive relationships for all but two states of the 51 U.S. states between levels of sales and rates of alcohol-related crashes, with an average elasticity of 1.7, suggesting in essence that a 10-percent increase in sales leads to a 17-percent increase on average in alcohol-related road trauma.

           When you're deciding taxation levels on this commodity, you are making decisions that will affect the lives of all the people in the province and their health and safety. There are about 50 different types of illness and injury that alcohol can cause. Fetal alcohol syndrome, road trauma and liver cirrhosis are just the better known of those.

[0915]

           Our recommendations. Firstly, ensure prices in B.C. liquor stores do reflect alcohol content. A significant incentive would be created if there was a guarantee that there was at least a dollar-per-litre subsidy or lower price for drinks below 4 percent alcohol content.

           Another would be to index all provincial markups to the CPI and do that at least once a year. But the Australians do it four times a year.

           The other suggestion, perhaps the most radical of all, would be to create a harm-reduction levy — a nickel a drink, five cents a drink, that would fund addiction treatment and prevention programs. We read in the papers every day about the seriousness of this problem and the lack of resources to deal with it. This kind of policy has been implemented in Australia. The funds raised have been used towards these purposes. The public has supported them. They hate alcohol prices going up, but if they see the funds going towards a useful function like more treatment for people in great need or prevention of harm for children, that's usually supported.

           Okay. This is how the taxes in B.C. give consumers incentives. This shows strength of beer along the bottom — from 0.5 percent to 8 percent — and the amount of tax per standard drink, which is, I think, 13.6 grams of alcohol. It's the wrong direction. So the lower the alcohol content, the higher the tax; the higher the alcohol content, the lower the tax per unit of alcohol.

           Some specific data from the liquor administration branch for 2005-2006. I'm sorry you have to…. It's in the handouts. There are mean dollars per strength…. This shows different strength beers. It shows the market share. Most beers are 5 percent to 5.9 percent. Most of the brands are. If you look at the mean dollars, retail price per standard drink, it's highest for the lowest-strength beers; lowest for the highest-strength beers. Even when you look at average retail price — not for alcohol but just for liquid — the price of the less-than-4-percent, and there are very few of those, is actually higher than the 5-percent drinks. The incentives are all the wrong way around.

           Here's an example: low-alcohol beer in Australia. There are actually nearly 40 varieties of beer less than 4 percent. We could only find three in B.C. liquor stores. There's one made…. I think the only brewery in Canada is Spinnakers Brew Pub, locally, that makes a beer of less than 4 percent. It's probably the only Canadian beer made in that bracket.

           So 40 percent of the Australian beer market by value is now low-alcohol beer, because they have been provided tax incentives since the late 1980s. I think this is a fundamental reason. As an Australian, I've seen how popular it is. As I said, alcohol-related traumas have been going down.

           If you look at coolers, there's an even more crazy set of incentives. If you look at mean dollars per litre of drink in the right-hand column and strength in the left, the average price — this is looking at all the products sold in B.C. liquor stores — of a 5-percent cooler is nearly $3 higher than a 7 percent. The manufacturers are taking advantage of the 7-percent threshold for a lower tax rate and putting out all their products at 7 percent.

           I put to you that there is a ready remedy here to provide incentives. These are drinks favoured by young people. You could provide incentives to completely shift patterns of consumption towards healthier, less high-risk patterns.

           In summary, what would happen…. The five-cents-a-drink levy would raise an additional $88 million using 2005-2006 figures. It would certainly reduce alcohol-related death, injury and illness in British Columbia. It would encourage local industry to manufacture and promote lower alcohol-content drinks as the Australians have done, and it would be well accepted by the general public, according to opinion polls where these sort of measures have been introduced elsewhere.

           B. Bennett (Chair): Thank you very much — very interesting.

           Committee members, do you have any questions?

           B. Ralston (Deputy Chair): There are a couple of areas of sale that I'm not sure would be caught by this. One would be the self-brew operations. What would be the implications for…? How would this policy affect those operations?

[ Page 1623 ]

           Secondly, the private sale of liquor as opposed to government liquor stores. How would this tax be implemented there?

[0920]

           T. Stockwell: I'll respond to U-brew. There's a document we've circulated with recommendations for a national alcohol strategy that's from Health Canada and the Canadian Executive Council on Addictions. There are several recommendations in there which cover U-brew and U-vin, as well as these recommendations I've just given.

           In essence, they are suggesting that this is a tax loophole that should be blocked, that minimum pricing should apply equally to U-brew and U-vin operations. Again, this is no ordinary commodity. Some of the cheapest alcohol in Canada is sold from U-vin and U-brew operations. It's a fairly unique way of retailing alcohol internationally.

           The private…. I gather that in Alberta it's possible to have minimum reference prices for alcohol anyway, regardless of whether it's in a liquor store or in a private establishment. I think the liquor is sold on to the private stores from the B.C. suppliers, and they have to, essentially, sell it at a higher price anyway than the B.C. liquor stores. So if at source the prices were fixed, then to get a profit they would just have to add their profit onto whatever prices were there to begin with. You could fix the incentives for all liquor outlets in the province.

           D. Hayer: Thank you very much. Very good presentation.

           My question is: when you decrease the content of liquor in each beer can or a bottle, was there any research done to see if the people at the end are drinking, instead of three bottles of beer, maybe four or five? Does the number of beers they consume go up so that in the end they're getting the same amount of alcohol that they would have received by drinking less? Is there no correlation in that?

           T. Stockwell: There has been research on that. It's actually quite hard to get drunk on low-alcohol beer. There's so much liquid, and you fill up so quickly. There's also research showing that areas of Australia where there's been more takeup of low-alcohol beer, there's been lower rates of violence and hospital admissions, and lower health care costs.

           So something works. If some people compensate it's quite hard to do that, and the results are still good.

           R. Lee: My question is: are you suggesting we should have proportional tax in the function of the alcohol content?

           T. Stockwell: Absolutely. That's the ideal.

           R. Lee: Is it linear or exponential or something like that?

           T. Stockwell: There are a lot of factors. Once you accept that principle, in terms of how steep you make that slope, you'd have to be careful. You'd probably have to phase it in because it would be quite a radical change to the pricing structure. Obviously some local industries might be affected.

           It would be linear. One principle, I think, that helps in making these changes is to make sure there are no losers. You try and get revenue neutrality within the beer products, within the wine products and within the liquor-based products. Otherwise, if suddenly spirits are advantaged versus beer, all hell breaks loose because the industry lobbyists will be after you. If you can keep the revenue-neutrality principle, then there are no losers. You just have a gentle gradient of increased tax for alcohol content, and that would be ideal.

           Actually, it would be ideal to take away sales tax. Alberta has taken away sales tax on alcohol. What they don't do is tax on the alcohol content; they tax on the amount of liquid, which is crazy. You could take away the sales tax, tax on the amount of alcohol, and you'd have a perfect system to encourage and give incentives for people to drink lower-alcohol-content beverages.

           Incidentally, we're releasing a study next month which shows that people can't tell the difference between low-strength beer and mid-strength beer. We had a study of beer-drinking students. We gave them free beer and pizza, and we asked them how much they enjoyed themselves. We didn't tell them how much alcohol was in the drink, and they couldn't tell the difference. They enjoyed themselves just as much with the 3.8 percent as the 5.5 percent.

           I. Black: That's a fascinating concept that you just rolled out. It's got implications all over the place, which make it very cerebral for this early in the morning.

           T. Stockwell: Sorry about that.

           I. Black: That's all right.

           My question, though, is: what kind of feedback, if any, have you had? You mentioned the lobbyist groups. What kind of feedback have you had from the various people and various elements of the food and beverage industry and all the peripheral elements — the hotels, the bars, the liquor producers, the beer companies? As part of that question, how did the feedback go from them in Australia?

           T. Stockwell: This is a nice answer to that. The national alcohol strategy document was actually put together with five representatives of the liquor industry present. It was a lovely Canadian working group of about 35 people, representing all walks of life.

[0925]

           There were five industry people there, and it wouldn't have got through without their approval. The key to them agreeing to this change in shifting incentives was the revenue-neutrality within beverage types. The brewers were all right; they weren't going to lose money. The winemakers were okay. The restaurateurs and the innkeepers were happy. It's funny. You can

[ Page 1624 ]

actually make more profit on lower-alcohol-content drinks.

           R. Hawes: I agree with what others have said. That's a very interesting concept. I want to ask about the "nickel a drink." That was implemented in Australia?

           T. Stockwell: Yes, it was, and I've got….

           R. Hawes: What was the feedback from drinkers, etc.?

           T. Stockwell: Well, one of the bits of feedback…. There's the last slide, which I hadn't copied to all of you. We did an evaluation. I was head of the National Drug Research Institute for a number of years, and we were to estimate the number of deaths in four years when the "nickel a drink" thing came in. There were fewer road crashes and fewer hospitalizations. And this is a tiny population — about 200,000 people — and a savings of $124 million to the economy.

           The reaction was very strong. Almost 90 percent of people polled supported what was calling the Living with Alcohol program. It was the front that was funded by "nickel a drink." There were road safety campaigns. There were school-based education programs. There were more treatment facilities. So there was a very positive response to that.

           R. Hawes: In that, how do you define a drink?

           T. Stockwell: A standard drink in Australia was ten grams. It's the kind of notion that health promotion people come up to explain. If you're doing a survey and say, "Well, how many drinks do you have?" we say: "Well, one bottle of beer is a drink. A medium-sized glass of wine is a drink, and a shot of liquor is a drink." They have much the same amount of alcohol; 13.6 grams is, I think, about 16 millilitres of absolute alcohol.

           Sen. Michael Kirby adopted exactly this proposal in his report on mental health, Out of the Shadows at Last, and he proposed funding the whole Canadian mental health system with a revamp of it from a "nickel a drink." That was going to raise $500 million a year for the country.

           I don't think anyone's taken that up, but if you guys took a lead on this, you'd be leading Canada in responding to this problem.

           B. Bennett (Chair): I have one question, Dr. Stockwell. When you did this in Australia, was it rolled out nationally, all at one time, or did it go state by state?

           T. Stockwell: Well, that's why I wouldn't want to recommend you do absolutely everything that Australia does. The very sad story here is that having saved all these lives and had these benefits, there was a High Court ruling which prevented territories and states raising taxes — to take away the power you have that you're deciding what to do with. The territories could no longer take taxes on liquor, tobacco or petrol.

           The federal government stepped in and funded the program in the northern territory, and then gradually it whittled away. To this day they are lobbying them in the public health area to try and get the government to roll this out nationally. It may yet happen, but these things take a long time to be implemented.

           J. Kwan: In the documentation that you have provided us, there's a chart that informs us of the hospital discharges attributable to alcohol by the health authorities. Do you have a figure in terms of actual cost?

           T. Stockwell: Of actual economic costs?

           J. Kwan: The actual figure of the cost to the hospital system or the health care system with alcohol-related admissions.

           T. Stockwell: Do you have that?

           P. Kendall: Well, no, not with me. Not in this package, certainly. You could attribute it by saying there's an average cost of hospitalization of this. But I don't have that with me.

           T. Stockwell: The number of hospitalizations is 25,194, if I can remember, for the years 2005 and 2006. So they wouldn't be insignificant costs attached to each one of those.

           J. Kwan: Just to refresh my memory, Dr. Kendall, do you know what the average cost is per stay in the hospital?

           P. Kendall: We're looking at, at least, I would think, between $700 and $1,000 a day. Some of this would be intensive care for motor vehicle accidents. Some of it would be chronic care from, say, liver cirrhosis. Some of it would be psychiatric, from brain damage.

           B. Bennett (Chair): Dr. Stockwell, Dr. Kendall, thank you very much for coming in this morning. We appreciate it. It was very interesting.

[0930]

           Committee members, we'll just take a two- or three-minute break here and allow our witnesses to clear out their stuff.

           Can I have a motion to go in camera?

          The committee continued in camera from 9:32 a.m. to 12:24 p.m.

           [B. Bennett in the chair.]

           B. Bennett (Chair): Okay, we're now on the air.

           Committee members, can I have a motion to adopt the report as amended by today's discussion?

           Motion approved.

           B. Bennett (Chair): It's unanimous. Thank you very much. This has been a great experience.

[ Page 1625 ]

           I need a motion from someone to present the report to the House on or before the end of session.

           Interjections.

           B. Bennett (Chair): My understanding is that it can be deposited with the Clerk by November 15.

           The motion is to present it to the House before the close of session and deposit a copy of the report pursuant to the committee's terms of reference.

           Motion approved.

           B. Bennett (Chair): Motion for adjournment.

          The committee adjourned at 12:25 p.m.

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