Posts Tagged ‘bedroom tax’

What does Hoy No Circula in Mexico and Cane Toads in Australia have in common? The law of unintended consequences. This says that the actions of people – and especially of government – often have effects that are unanticipated or not intended. Unintended consequences are usually seen as being negative such as when an intended solution perversely makes a problem worse, or when although the solution produces the desired result, there are also detrimental side effects. However they can have a positive, unexpected benefit, and because of this they are often seen as the result of luck or serendipity.

murphy's law, train wreck, montparnasse, paris, france

An extreme case of Murphy’s Law. In 1895, an express train overran a buffer stop in Montparnasse Station in Paris, France due to a faulty brake. It careened across the station concourse, crashed through a thick wall, shot across a terrace and plummeted onto the Place de Rennes below.

Unfortunately although the law of unintended consequences should be seen as a warning to tread carefully when it comes to intervening in complex issues, politicians and popular opinion often don’t seem to learn this. The adage that ‘anything that can go wrong, will go wrong’, known as Murphy’s law, should remind us against believing that we can fully control events.

What are the causes of harmful unintended consequences? They have been categorised: perverse incentives, human stupidity, self-deception, incorrect analysis of a problem, immediacy of interest (ie. someone wants the intended consequence of an action so much that they purposefully choose to ignore any unintended effects), failure to account for human nature, and the world’s inherent complexity.

Economics

The French economic journalist Frédéric Bastiat understood the fact of unintended consequences when he wrote in 1850:

“There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”

But even with foresight, economics seems beset with unintended consequences. Raise taxes, and more will find ways to avoid it. Guarantee bail outs and banks will take more risks (this is called a moral hazard). Reduce taxes for fuel-efficient cars and there will be slide in tax revenue as more cars will be made that use less fuel. Is this why it is said that if you ask five economists the same question you will get five different answers?

Examples of unintended consequences are found in every sphere of human endeavour. Here are some of them. 

Social Behaviour

In 1830, Wellington’s government passed the Beerhouse Act, which abolished the beer tax and allowed any ratepayer to sell beer on payment of an annual fee of two guineas (£2.05). The idea was to encourage the drinking of beer, and stimulate the depressed and potentially subversive agricultural sector, at the expense of spirits, most commonly associated with excessive consumption in the disreputable ‘gin palaces’. However beer house numbers exploded with more than 33,000 vendors having paid their two guineas by 1832. Sometimes called ‘Tom and Jerry’ shops or ‘tiddlywinks’, they sprang up in alleyways and cellars and were impossible to police. Many beerhouses became the haunt of criminals, prostitutes and some even became brothels. It was only with the Wine and Beer House Act of 1869 that the law was changed to bring licensing back under the control of the local justices.

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Food bank, operated by charities, for people affected by cuts in welfare benefitsLord Freud, Parliamentary Under Secretary of State for Work and Pensions speaking in the House of Lords on 2 July 2013 rejected a suggestion that the government’s austerity policies had led to an increase in food banks, and said that the increase was ‘supply led’.

‘If you put more food banks in, that is the supply. Clearly, food from the food banks is a free good and by definition with a free good there’s almost infinite demand.’

Tim Thornton, the Bishop of Truro, responded in the Lords saying that ‘the anecdotal experience that I have and the stories that I hear make it clear that there are some real benefit issues, which is why many people are driven to go – they do not choose to go; they have to go – to food banks.’ And Justin Welby, the Archbishop of Canterbury, questioned the minister’s claim on the BBC Radio 4 Today programme, saying that 35% of referrals to church-run food banks came from social services departments, who had assessed users as in need of emergency food aid. The Trussell Trust said that more than 350,000 people turned to food banks for help last year, almost triple the number who received food aid in the previous year.

Lord Freud, who owns an eight-bed mansion in Kent and a four-bed house in London, was responsible for introducing the ‘bedroom tax’ in April 2013, whereby tenants receiving housing benefit, who are deemed to have a ‘spare bedroom’, have their benefit reduced. Since the tax was introduced, large numbers of council tenants have gone into arrears with their rent. Some councils are trying to help residents by re-classifying spare bedrooms as having another use. But Lord Freud is not having it. He has warned councils who re-classify such bedrooms that they risk having their housing benefit budget cut.

Petition asking Iain Duncan Smith, Department of Work & Pensions, to live on £53 a week

Signatories of the petition outside the Department of Work & Pensions. The petition was hosted by Change.org.

Earlier in April 2013, Iain Duncan Smith, Secretary of State for Work & Pensions, was defending on the Radio 4 Today programme, the array of welfare reforms being introduced as part of the government’s deficit reduction plans. Mr Duncan Smith was asked by market stall-holder David Bennett whether he could survive on £53 a week. This was the amount Mr Bennett was left with to live on after the new round of reductions to his housing benefit and council tax assistance, and which is roughly equivalent to the lowest rate of job seeker’s allowance given to adults under 25. Mr Duncan Smith replied ‘If I had to I would’. This prompted an online petition signed by 460,000 people asking him to prove that he could live on £53 a week by doing it for a year. The Secretary of State dismissed the petition as ‘a complete stunt which distracts attention from the welfare reforms which are much more important. … I have been unemployed twice in my life so I have already done this. I know what it is like to live on the breadline.’

Duncan Smith is a millionaire, he earns £134,565 a year as a cabinet minister, and he lives rent-free in a £2 million mansion on an extensive estate in Buckinghamshire owned by his father-in-law, which has at least four spare bedrooms, a swimming pool and tennis courts.

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