There is an alternative to neoliberalism – but if Labour keeps ignoring it, the Tories will adopt it first

Next week marks the 10th anniversary of the collapse of Lehman Brothers, the seminal moment of the financial crisis, prompting the question: what lessons have we learnt? The answer: not many, according to a well-timed report today which at last maps out a progressive alternative to neoliberalism.

The blueprint for a fairer, stronger economy comes from the Economic Justice Commission set up by the Institute for Public Policy Research (IPPR) think tank, which includes Justin Welby, the archbishop of Canterbury. His involvement has inevitably attracted headlines, but that’s a good thing: the UK needs to talk about this most fundamental issue.

We are lost in the weeds of the Brexit debate and the merits of a facilitated customs arrangement and common rule book. We risk missing the big picture since the crash, including what could become the weakest decade for average real earnings for 200 years, according to the commission.

This harvested votes for Donald Trump and Brexit. In the UK, unless we tackle the underlying causes, the commission rightly warns, we will face a “decade of disruption” whatever the UK-EU deal, if there is one.

I’ve read the 330-page report, an unusually well-written and coherent critique of the state we’re in and 73 recommendations to fix the “broken” economic model. It’s essential reading, not least for our politicians. Not starry-eyed dreamworld stuff, but real world proposals to help those in “the everyday economy,” such as a higher minimum wage and 20 per cent premium for the almost one million workers on zero hour contracts.

At its heart is a plan to tackle the UK’s scandalous “wealth gap”: the wealthiest 10 per cent of households own more than 900 times the wealth of the poorest 10 per cent, while the poorest 20 per cent pay 35 per cent of their gross income in tax – more than any other group. Most people in poverty are in working households.

The commission’s remedy is to tax income and wealth in the same way to raise £27bn a year. A “simpler and fairer” system would merge tax and national insurance and replace inheritance tax with a lifetime gifts tax levied on the recipient rather than the estate.

This would mean the top 25 per cent paying more tax, creating a much bigger group of losers than the top five per cent targeted in Labour’s manifesto last year. Politically difficult, of course, but sooner or later a government of any hue will have to tax wealth; it would be fairer than loading the costs of the demographic timebomb on to an already hard-pressed younger generation. (One in 10 adults, some 5.2 million people, own a second home, while four in 10 own no property at all).

The report should give Philip Hammond food for thought as he turns to his autumn budget. Although Theresa May has raised the prospect of higher taxes to fund the government’s £20bn-a-year boost for the NHS, the temptation for any chancellor is to muddle through and put off the evil day when some form of wealth tax is introduced.

The commission underlines the “fiscal gap” between public spending and tax revenues. Rising demand for pensions and cost-intensive health and social care will alone require a public spending increase worth 3.9 per cent of GDP by 2036.

Of course, some Tories hanker after the discredited old Thatcherite formula of cutting taxes to spur growth. But the commission argues convincingly that a new settlement, like Margaret Thatcher’s in 1979, is now needed. Relying on capitalism to create a rising tide that lifts all boats is not an option when the multinational tech giants rule. As Welby, a former oil executive, told the BBC today: “If you corner the market in data, you have probably more wealth advantages than if you corner the market in gold or oil.”

The left missed its moment after the financial crisis, allowing capitalism to survive its narrow squeak, and so should embrace the commission’s report. It goes with the grain of Labour’s thinking in areas such as industrial policy, a national investment bank, trade union power and the Bank of England’s remit. However, Labour should not assume it has a monopoly of wisdom on this agenda. Tory modernisers know they need to tackle the “wealth gap”, and even hit their party’s donors in their pockets, to change people’s perceptions of it as the “party of the rich”.

Of course, many politicians will fear that biting the bullet on taxing wealth would be unpopular. But would it? Polling for the IPPR found that 53 per cent of people believe the economy has become more unfair over the last decade, while just 10 per cent believe it has become fairer, with little difference between Remain and Leave voters.

Party politics may dictate that the commission’s ground-breaking blueprint is more likely to be cherry-picked than adopted in full. The reality, is that we cannot afford not to implement it.