That's some fancy footwork there, but it does not stand up to scrutiny. In any other industry the provider of services would need to compensate the customer for the actual costs of anything they did wrong, for example, my roofer broke my TV aerial so he paid for it to be fixed rather than recommending an engineer to fix it at my cost.

The airlines have to be held to the same standard. If I have to overnight somewhere or get dinner due to IRROPS then compensation for the hotel and the restaurant are the airline's to bear, not mine. That's true whether you pay 30 quid or 3000 quid for your ticket. The LCC's knew that when they started their businesses with that model and went ahead anyway.

The few hundred quid that the passenger gets as part of the legislation is an attempt to simplify the process and actually take some of the costs of liability off the airline. Everyone gets the same, no negotiation, less overhead for the airline.

As for the airline paying even when it's not their fault - I don't get why you object to this. You can't strand passengers somewhere at great cost to them without compensating them. The compensation has to come from somewhere, and sure, it gets passed on in ticket prices eventually but managing risk is a part of doing ANY business.