The Law of Unintended Consequences

13th January 2016
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Quite a lot of my time recently has been spent working with local authorities who are trying to get to grips with the double challenge of austerity and problematical demographics.

The net effect of those challenges is that local government will have to reduce the number of what are called “discretionary services” that it provides to ensure that it can maintain its “statutory services”. Among discretionary services are such things as libraries, parks and leisure facilities. The statutory services are principally, those required to support adults and children with difficulties. 

It could be seen, in a challenging financial environment, that things such as libraries and parks are “nice to have”. However, the unintended consequence is that the town/city or county concerned loses facilities that contribute greatly to the quality of life of the area. Quality of life is one of the principal reasons nominated by businesses and individuals looking to move into an area. Thus, there is a great risk that if leisure and cultural facilities are reduced or do not exist at all, businesses will not be encouraged to invest and recruitment will become more difficult.

What then flows from this is that the inflow of business rates and the council tax received from new homes slows down or certainly does not increase at the rate necessary to recover from the current financial challenges. A spiral of decline potentially results. So, I would suggest, underpinning essential public finances is certainly not “nice to have”.

I think the same points can be made about business. Post 2007, many businesses could be seen cutting costs and often reducing staff. Certainly, as with the public sector, there was excess that could be trimmed but the challenge was not to trim so deeply that the cuts went into the muscle of the business.

Businesses that were managed properly undoubtedly turned out as lean and effective operations. However, we are being told from every quarter that we are now faced with a skills shortage. I would suggest that this is hardly surprising when up until 2013 businesses were reluctant to commit to training where the economic outlook was uncertain. The dividend of this is that there are now, in many areas, too few skilled people in the market place.

An unintended consequence for business is that individuals who survive cuts become, by nature, more conservative and cautious in their approach. The tendency is to ensure personal survival ahead of those around them. This creates some very unhealthy habits where teams are not operating properly and the greater good is being suborned to individual agendas.

Just like local government, business needs all of the pieces of the jigsaw in place to operate properly. In a more benign business climate it is crucial that all those pieces relearn to work together as effectively as possible.

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