The phrase ‘moral hazard' describes the incentive to behave badly because someone is insulated from the consequences of his actions. It happens everywhere in the public sector.
Public sector employees have for years taken decisions in the comfortable knowledge that they will not suffer if they make mistakes.
If a doctor, a lawyer or an architect makes a serious mistake, and is sued, then he must take personal responsibility. Most professionals have insurance to cover themselves for such eventualities.
But when civil servants make serious mistakes they are immune to civil or criminal prosecution. Civil servants are virtually never punished for their misdeeds. If a policeman does something wrong, and is sued, it is the taxpayers who pay whatever damages and costs are awarded against him. If a BBC employee makes a serious mistake, it is licence fee payers who are left with the bill. This is patently unfair. And it is particularly nonsensical in that today a great many civil servants receive the carrot of large bonuses (in an attempt to emulate the attractions of private sector employment).
It is simply unfair that civil servants should enjoy the carrot but avoid the stick.
All public sector workers should be personally accountable (and legally liable) in exactly the way that doctors and other professionals are liable.
If a doctor screws up (under far more pressure than any other public servant) she will get into serious trouble. Why are hospital executives, policemen and others personally immune? Why should the taxpayer pay the fine?
In future all public employees should be personally responsible for any fines, damages and costs they incur through carelessness, dishonesty, bloody-mindedness, wickedness or plain, old-fashioned common or garden stupidity.
So, if a policeman is sued for damages, and loses, then he and he alone should be responsible for the bill. If he wants to limit his personal liability then he (like a doctor) should pay for personal liability insurance. It is absurd that taxpayers should pay the bill for crimes committed by public servants.
Similarly, when large companies are fined because executives or directors have done something wrong it is invariably the company, and therefore the shareholders, who pay, and the Government (through the fining agency) which benefits.
The culprits pay nothing while the truly innocent, the shareholders, are the ones who suffer. This is absurd. Directors and executives receive bonuses when things go well; they should suffer the pain when their incompetence or dishonesty leads to expensive problems. It should be managers and not shareholders who pay when a company is fined for breaking the law.
Taken from Bloodless Revolution by Vernon Coleman, available as a paperback and an eBook.