Before Christmas we discussed John Rawls’s idea of the ‘veil of ignorance’. He argued that social rules should be seen from the several points of view held by the different categories potentially affected. Apart from other advantages, it can be a valuable way of identifying what would otherwise be unintended consequences. As it happens, there is a flurry of recent examples – enough to make us wonder if the Government is particularly bad at thinking things through.
The first example is the ‘bedroom tax’. The intentions were excellent: why should some people get subsidised housing for properties too large for their needs, while other, larger, families cannot get adequate housing? The unintended consequence was that, since enough smaller accommodation was often not available, many had no realistic opportunity to size down. In effect their income was reduced without the opportunity to evade the loss. Another consequence was that society as a whole, including natural Tory voters, saw this as an injustice.
A further example was the proposal to remove tax credits before higher minimum rates of pay had been achieved. We all remember the unintended consequences of that. Did Tory headquarters ever think of the effect of that before announcing a policy which had, in the end – and after a lots of worry for the potentially affected – to be withdrawn?
A strong hike in stamp duty for more expensive properties would bring greatly increased revenue – and, by definition, the buyers had more than enough money to meet the bill. But did the Government realise that this tax would reduce the value of high end properties, and thus reduce the revenue? Did they understand that stamp duty revenue is a result of value multiplied by the number of transactions? Of course the market has slowed, and the rate of transactions at that level have dampened down. I don’t know the figures, but I suspect they may collect less revenue than before the hike – and certainly less than they expected.
Bright idea? Several entrepreneurial people decided to build up capital for the future – particularly for retirement – through investing in buy to let properties. So let’s reduce tax relief on their mortgages interest – it’s a goldmine! Unfortunately that catches all the people who made their calculations on the normal basis of full tax relief on business expenses. But since mortgages are long term they are stuck. Their original equations no longer work. Two problems here: first, at the next opportunity rents will be increased so it will be the tenants who pay the difference; second, potential entrepreneurs will know that we have a government which is not above making what are in effect retrospective changes when they spot an opportunity to grab revenue.
The latest little adventure is to increase stamp duty levels for second properties. Of course, if you can afford a second property, you can afford to pay extra for it. But the fact that two people who cohabit can own two properties in their two different names without this extra charge, while a married couple cannot, will discourage marriage – and will bring all the extra costs which ultimately arise because of the instability of cohabitation. It’s not long since I wrote an open letter to David Cameron on the social benefits of encouraging marriage. Although it was forwarded to him by my MP, I have received no reply. Had he read it, and thought about it, he might have paused before allowing yet another unintended consequence of a decision which gains revenue today at the expense of unaccountable social costs tomorrow.
I am often asked my opinion about Jeremy Corbyn. And I always reply that there are few things more damaging than a government, whether leaning left or right, which does not have a strong and credible opposition. So whatever Corbyn’s merits or demerits may be, his presence and his position, is a disaster.