Unintended consequences – financial controls gone mad!

Just been reading about the impact the announcement of the tightening up of IR35 tax regulations is having on government projects – before a single penny in extra tax has been collected, government initiatives are starting to haemorrhage contract staff. This will cost the government way more in failed projects and delays than than HMRC will collect in extra tax, I expect.

It reminds me of the Thatcher Government’s cunning plan to increase the number of Free House pubs by limiting the number of tied house a brewery could own.  All that happened was that breweries exchanged brewing facilities for tied houses, either focusing on brewing or on running tied houses, massively reducing choice instead of increasing it as intended.

This inability to foresee the consequences of policies is by no means limited to government – since yesterday I have twice discussed large corporates that have shed too many permanent staff, resulting in them having to recruit contract staff to fill the gaps at a higher cost. Then, of course, they want to cut those costs – ah, back to the Government!

Earlier today, I was discussing this with an old friend and we got onto sea defences, as we were beside the sea – once more, actions taken with good intentions had led to unforeseen (but not unforeseeable) consequences.

Douglas Adams, in his Dirk Gently novels, refers to “the interconnectedness of all things” – we need financial leaders who understand that, and really consider the possible outcomes of their plans BEFORE they implement them.

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