The Economic Case for Reimagining the State

Report by the Tony Blair Institute: “The new government will need to lean in to support the diffusion of AI-era tech across the economy by adopting a pro-innovation, pro-technology stance, as advocated by the Tony Blair Institute for Global Change in our paper Accelerating the Future: Industrial Strategy in the Era of AI.

AI-era tech can also transform public services, creating a smaller, lower-cost state that delivers better outcomes for citizens. New TBI analysis suggests:

  • Adoption of AI across the public-sector workforce could save around one-fifth of workforce time at a comparatively low cost. If the government chooses to bank these time savings and reduce the size of the workforce, this could result in annual net savings of £10 billion per year by the end of this Parliament and £34 billion per year by the end of the next – enough to pay for the entire defence budget.
  • AI-era tech also offers significant potential to improve the UK’s health services. We envisage a major expansion of the country’s preventative-health-care system, including: a digital health record for every citizen; improved access to health checks online, at home and on the high street; and a wider rollout of preventative treatments across the population. This programme could lead to the triple benefit of a healthier population, a healthier economy (with more people in work) and healthier public finances (since more workers mean more tax revenues). Even a narrow version of this programme – focused only on cardiovascular disease – could lead to 70,000 more people in work and generate net savings to the Exchequer worth £600 million by the end of this parliamentary term, and £1.2 billion by the end of the next. Much larger gains are possible – worth £6 billion per year by 2040 – if medical treatments continue to advance and the programme expands to cover a wider range of conditions, including obesity and cancer.
  • Introducing a digital ID could significantly improve the way that citizens interact with government, in terms of saving them time, easing access and creating a more personalised service. A digital ID could also generate a net gain of about £2 billion per year for the Exchequer by helping to reduce benefit fraud, improve the efficiency of tax-revenue collection and better target welfare payments in a crisis. Based on international experience, we think it is achievable for the government to implement a digital ID within three years and generate cumulative net savings of almost £4 billion during this Parliament, and nearly £10 billion during the next term.
  • AI could also lead to a 6 per cent boost in educational attainment by helping to improve the quality of teaching, save teacher time and improve the ability of students to absorb lesson content. These gains would take time to materialise but could eventually raise UK GDP by up to 6 per cent in the long run and create more than £30 billion in fiscal space per year.

The four public-sector use cases outlined above could create substantial fiscal savings for the new government worth £12 billion a year (0.4 per cent of GDP) by the end of this parliamentary term, £37 billion (1.3 per cent of GDP) by the end of the next, and more than £40 billion (1.5 per cent of GDP) by 2040…(More)”.