The announcement that publicly funded bodies in the UK will be banned from boycotting Israeli settlement goods has been greeted as an out-and-out diplomatic victory by Jerusalem. It is, however, an unnecessary and heavy-handed move that will most likely backfire on those who are celebrating it most loudly.

The full details of the new regulations will be released tomorrow by Cabinet Office minister Matthew Hancock, during a visit to Israel. So we don’t know the specifics yet – or even whether the “severe penalties” threatened by ministers on bodies which continue to pursue a boycott will be enforceable at all. But what’s already clear is that this clumsy misuse of central government jurisdiction has allowed pro-Palestinian activists to position a minor dispute as an international issue of civil liberty and political freedom.

It’s important to note that these new rules for publicly funded organisations extend far beyond the boycotting of Israeli-settlement goods, although that is, inevitably, the issue that’s won the most attention. Public bodies will also lose the ability to refuse to buy goods and services from companies involved in the arms trade, fossil fuels or tobacco products.

The idea of limiting the powers of local authorities to set what are, in effect, their own foreign policies has been circulating for a number of years, partly based in genuine Tory outrage at political intimidation by its activist opponents among the British far left. These trouble-makers, they argue, should not be allowed to disrupt what government sees as national interests – whether that be positive relations with Saudi Arabia or the purchase of drone technology from Israel.

The occupation of Palestinian territory won’t end if some local council in England decides to not to serve orange juice from a West Bank settlement in its meetings. But though such boycotts may seem like pointlessly small acts, and the banning of them superfluous, local governments should be free to indulge in gesture politics. The Government needs to win its arguments over our foreign relationships politically, rather than through the direct intervention of central government.

The pro-Israel lobby’s feelings of vindication at this new legislation are quite misguided. When it comes to boycotting and sanctions, it’s not about the economy, stupid. The impact of a boycott lies in its cumulative effect on Israel’s global brand, not on its GDP. In fact, even if a vast, EU-wide ban on settlement goods was introduced, its effect on Israel’s economy would be negligible. The movement’s real effect is to consistently grind away at Israel’s image in the world, and Jerusalem takes this image extremely seriously.

The Israeli Foreign Ministry works hard to combat boycotts worldwide and its anti-boycott department will increase its staff five-fold this year, with a budget of 130m shekels (£23m) in 2016 alone.

And this position has broad sympathy from the Jewish diaspora. Many Jewish people feel that the boycott, divestment and sanctions movement is a form of modern anti-Semitism. There is more support over boycotting settlement goods, but there is huge suspicion over the motives of the movement and its distinction between sovereign Israel and occupied territory.

So it’s easy to see why some in pro-Israel circles are claiming this new law as a landmark victory in the fight for Israel. They’re wrong: just as there is no military solution to the occupation, there is no legislative one to boycotting.

The reason the movement so perturbs the Israeli government is because it’s highly effective. The reason it’s so hard for them to fight is because, however offensive some may find it, it’s entirely legitimate: it is non-violent and fully within the bounds of the law. Changing legislation in response to that will not make it the bigger issue it raises just go away.