New priorities for British Economic Policy
Updated: Sep 4
Confronting the Triple Crisis in 2013
In March 2013, the Institute for Public Policy Research published a comprehensive report authored by Tony Dolphin, with funding support from Stamp Out Poverty. The publication arrived five years after the collapse of Lehman Brothers, at a time when the United Kingdom was grappling with a severe triple crisis of economic stagnation, escalating public debt, and structural imbalance. With real Gross Domestic Product still mired below its pre-recession peak and unemployment hovering near 2.5 million, the report argued that the prevailing neoliberal economic paradigm had fundamentally failed. To reverse these trends, the author advocated for a shift toward collaborative capitalism, an approach where the state and private sector work in tandem to rebuild the nation's productive capacity rather than relying solely on deregulated markets.
Reforming Taxation and the Financial Transaction Tax
A central pillar of the proposed economic restructuring involved radical tax reform to eliminate the structural fiscal deficit without inflicting further damage on vital public services. The report highlighted the severe political and economic limitations of continuously increasing traditional revenue streams like income tax or Value Added Tax, suggesting instead that the government seriously examine wealth-based alternatives such as a land value tax.
More immediately, the report urged the United Kingdom to follow the lead of the eleven European Union nations that were actively preparing to implement a general Financial Transaction Tax. By expanding the existing British stamp duty on shares to encompass bonds and derivatives, the government could generate massive new revenues from the financial sector. Dolphin cited estimates showing that a broad-based transaction tax could yield up to twenty-eight billion euros for the United Kingdom, representing a net increase of twenty billion pounds annually even if the existing stamp duty were entirely replaced. The report dismissed the banking lobby's threats of capital flight, pointing out that well-designed stamp duties linked to the legal transfer of ownership are virtually impossible to evade by simply relocating trades offshore.
Capitalising a British Investment Bank
The report explicitly linked the revenue-raising potential of the Financial Transaction Tax to the urgent need for national infrastructure and business investment. For decades, the British economy had suffered from the commercial banking sector's reluctance to finance small and medium-sized enterprises or fund large-scale public works, a structural failure known as the Macmillan gap. To correct this persistent market failure, Dolphin proposed the creation of a fully state-owned, commercially operated British Investment Bank.
Capitalising this new institution to a level where it could achieve a genuine macroeconomic step-change would require an initial injection of up to forty billion pounds. The author argued that this massive sum could logically and ethically be sourced from the revenues generated by a Financial Transaction Tax. By taxing the very financial activities that had contributed to the 2008 economic crisis, the state could directly fund an institution dedicated to sustainable, long-term growth and infrastructure modernization.
Boosting Exports and Revitalising the Regions
Furthermore, the report stressed that a sustainable recovery demanded a radical rebalancing of the economy, moving away from a narrow reliance on financial services concentrated almost exclusively in London and the South East. Revitalising the rest of the country required the devolution of fiscal autonomy and skills policy to local enterprise partnerships. Simultaneously, the United Kingdom needed to implement an active industrial strategy to shift towards an export-led growth model. This meant identifying sectors of comparative advantage and specifically targeting dynamic, high-growth markets in Asia and Latin America, rather than relying solely on traditional, sluggish advanced economies.
Ultimately, this 2013 report provided a stark warning against returning to business as usual. Authored by Tony Dolphin for the Institute for Public Policy Research and supported by Stamp Out Poverty, the publication laid out a comprehensive blueprint for collaborative capitalism. We invite you to download and read the full original report to explore these foundational arguments for economic reform and the strategic deployment of a Financial Transaction Tax.
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