Stephen Pollard

The Queen’s speech can’t repeal the Law of Unintended Consequences

When will our legislators realise that they can’t repeal the Law of Unintended Consequences?

Last week, the European Commission voted to ban three pesticides which are said to harm bees. Everyone loves bees, so perhaps we should all be rejoicing? Well, I’m afraid my reaction was not joy, but to think: here we go again, this is bound to mean more dead bees. It’s inevitable: whether it’s a ban, an order or a reform, it doesn’t matter. When governments act they almost always forget the golden rule of public policy: the Law of Unintended -Consequences.

And guess what? Just a few days after the vote, scientists are pointing out that the ban will mean farmers using older chemicals that are even more harmful to bees. For good measure, the alternative pesticides are more expensive to use and not as good at protecting crops.

Most of the time, governments do not set out to do harm. Politicians and bureaucrats think that, with the stroke of a pen or the passing of a bill, they can change the world for the better. But the Law of Unintended Consequences means that the opposite usually happens.

Take ‘no win, no fee’ arrangements for lawyers. Introduced to make the legal system accessible to those who couldn’t afford to pay a lawyer upfront, it did just that, but in a way no one in government expected. More than a thousand people a day now hire a ‘no win, no fee’ lawyer and claim compensation for whiplash from a car accident. Since everyone else does — pushing up insurance premiums by 80 per cent in the past five years — the rational response to a crash is indeed to make a claim. That’s certainly opening up the legal system to everyone.

The most obvious recent example of the Law of Unintended Consequences is the 50p tax rate. Introduced by Gordon Brown in 2010 to cheers from those keen to see ‘the rich’ pay more tax, its effect was to send nearly two thirds of the nation’s highest earners — that is, biggest taxpayers — out of the country or deeper into the arms of the tax avoidance industry. In 2009–10, more than 16,000 people declared more than £1 million in income. After the 50p rate was -introduced, the number fell to 6,000. You can, of course, learn from the Law and act accordingly. Since the announcement that the top rate would be cut to 45p, the number of people declaring an annual income of more than £1 million has risen to 10,000.

As for tax avoidance itself, how do you think it arises? The tax code has so many one-off tax breaks, introduced with the well-intentioned aim of pushing investment towards one underperforming area or another, that accountants can easily construct mechanisms to avoid tax liability, which often serve to undermine the intention of the original tax breaks.

Welfare policy is another manifestation of the Law. The welfare state was meant to look after those too poor or ill to look after themselves. Who would not support that? But the Law of Unintended Consequences means that it has given rise to a dependency culture which at one point had more than six million people on out-of-work benefit, many of them with parents and grandparents who had never done a day’s paid work. And because of the structure of the benefits system, many were effectively trapped on welfare. If you think the Universal Credit will not itself have unintended consequences, you haven’t been paying attention.

But perhaps the starkest impact of the Law of Unintended Consequences was the abolition of grammar and direct grant schools. Many of those behind the comprehensive revolution had noble aims. They believed that too much working-class talent was being squandered. But their prescription turned a flawed system into a catastrophe, destroying opportunities for the children they sought to help and wasting far more talent than the system they ripped up. The system of direct grant schools — self-governing but state-funded in return for taking scholarship pupils from state primary schools — opened up many public schools to ability rather than wealth. When it was abolished by the 1974-79 Labour government on the altar of equal opportunity, all that happened was that the schools were closed to pupils whose parents could not afford the fees, widening the divide that the reform was supposed to close.

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This week’s Queen’s speech was full of well-intentioned bills. It was also full of unintended consequences.

Stephen Pollard is editor of the Jewish Chronicle.


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