Tony Blair Institute urges ‘new theory’ of government reform

• TBI's first paper of 2026 argues that Britain's model of government can no longer deliver.
• As more money is spent for worse outcomes, ‘Public-Service Reform in the Age of AI' says government needs a unifying theory of reform not seen since the financial crisis.
• Call backed by New Labour stalwarts Lord Blunkett and Lord Reid in paper foreword: “in the absence of a shared theory of reform - rapid, visible, durable progress is absent, too.”
• Paper sets out a blueprint for ‘AI-era public service reform'.

Britain's model of government is no longer capable of delivering and needs a vision for reform, according to a major new paper from the Tony Blair Institute.

‘Public-Service Reform in the Age of AI', the Institute's first paper of 2026, argues that the challenges faced by Britain's public services, including health, education and policing, are not the result of temporary shocks or budget cuts, but of an outdated model that successive governments have failed to challenge.

The paper asserts that Britain has lacked a consistent, coherent agenda for public-service reform since New Labour's modernisation drive.

TBI observes that while previous waves of reform were driven by clear theories of change and strong political leadership, today's challenges are the predictable consequence of a system that has not been fundamentally updated since the early 2000s. While spending and staffing have grown, performance has not kept pace, leaving citizens waiting longer for worse services and governments paying more for less.

Simply adding more money or staff, it argues, will not fix the problem. Without changing the underlying design of the system, further investment will continue to be absorbed by rising costs rather than translated into better outcomes.

To tackle the challenge, TBI sets out a blueprint for ‘AI-era public-service reform'; tech-enabled, data-driven services that are personalised, preventative, and always on.

In a foreword to the paper, New Labour stalwarts Lord Blunkett and Lord Reid - who oversaw countless public reforms during the Blair era - backs the Institute's call for a new reform agenda.

They write:

“Progressive politics is at its strongest when it knows not only what it wants to change, but why and how; when it offers a coherent theory of change and reform… Today, that coherence has been lost. There is no lack of commitment to public services, but in the absence of a shared theory of reform, rapid, visible, durable progress is absent too. 

“Renewing progressive politics demands clarity and coherence. But the conversation must go beyond relitigating old debates. The world has changed. The tools available to government have changed, too. Where choice and competition once drove improvement, now data, digital technology and artificial intelligence offer the greatest potential for reform.  

“Used well and in the service of a common goal, they can enable a new model of public services, grounded in modern methods of public engagement and, where possible, citizens' participation in decision-making. This new model can be transformative for the state, delivering services that are personalised, not standardised, preventative, not reactive, and always on rather than bound by labour alone.”

The paper argues that just as earlier reforms were animated by a clear organising idea, from universality under Attlee through market discipline under Thatcher to choice and competition under Blair, Britain now needs a new, coherent theory of change for the AI era.

Drawing on rapid advances in artificial intelligence and digital infrastructure, the paper proposes replacing the legacy operating model altogether, rather than attempting to optimise or automate outdated workflows.

It includes a practical reform playbook focused on harnessing AI and digital infrastructure, building on previous TBI research showing that up to £40 billion a year could be saved through effective deployment of AI across public services. The playbook sets out how AI-era public-service reform, built on new digital platforms, real-time system intelligence and updated governance practices, could enable a ‘self-improving state'.

It warns that using AI merely to ‘speed up paperwork in the NHS' or ‘add a chatbot to Universal Credit' isn't enough. Instead, the Institute says that the real opportunity lies in redesigning services so they are no longer bottlenecked by labour, can adapt to individual needs by default, and intervene earlier to prevent problems escalating and provides practical ideas for how this can be accomplished.

The Institute makes digital ID core to this model of reform, having earlier this week asserted that the technology remained ‘essential' for working public services, with Executive Director for Policy and Politics Ryan Wain saying: ‘if digital ID makes everyday interactions with the state easier, faster and more personalised, people will choose it.'

For instance, in welfare, a social-support platform could be used to integrate benefits, housing and employment around citizens' digital ID. Rather than asking people to navigate multiple systems, eligibility would be assessed and triggered automatically – without anyone accessing your data – by life events, such as a birth, rent rise or job loss.

Predictive analytics could identify households most at risk, and offer support, while personalised pathways would connect claimants to skills training, personalised guidance or local services, automatically matched to individual circumstances.

By relieving workforce constraints, the paper argues, AI makes possible service models that were previously unaffordable or impractical. Government could deliver a personalised tutor for every child, proactive welfare triage for every household, and early intervention for every at-risk individual. In effect, services can scale in two directions at once; both expanding what professionals can do, raising quality, and making more possible without them, expanding access to crucial services.

Alexander Iosad, Director of Government Innovation Policy at TBI, said:

“The government faces a choice. It can continue managing decline within an outdated model, or seize the opportunity of the AI era to rebuild the architecture of the state itself. 

Please find embargoed copy of the paper here

“Without a new theory of reform, public trust will continue to erode, fiscal pressures will intensify and voters will get angrier. With one, Britain could once again pioneer a model of government fit for the 21st century.”