A new report from the Tony Blair Institute for Global Change argues that artificial intelligence must become central to a fundamental overhaul of public services, warning that the UK’s existing delivery model is no longer capable of meeting rising demand, fiscal pressure and public expectations.
The January 2026 report, “Public-Service Reform in the Age of AI,” says public services across health, education, welfare and justice are trapped in a labour-intensive, reactive operating model designed for the mid-20th century, leading to long backlogs, declining productivity and falling public trust .
Despite record spending, the report notes that service outcomes have deteriorated over the past decade. Inputs to UK public services rose by nearly 25% between 2019 and 2024, while output increased only 14%. NHS productivity, in particular, remains below pre-pandemic levels, even as waiting lists and missed targets have grown .
According to the authors, previous waves of reform under post-war governments, Margaret Thatcher and Tony Blair each relied on a coherent theory of change, whether through universal access, market discipline or performance management. Today, the report argues, no such unifying framework exists, leaving governments reliant on piecemeal fixes that fail to address structural weaknesses .
The institute proposes what it calls a “Reimagined State,” built around AI-enabled public services that are always on, personalised by default and preventative rather than reactive. By embedding AI directly into service delivery, the report says governments could expand capacity without proportionally expanding labour, while improving outcomes and long-term fiscal sustainability .
Central to the proposal are three layers of digital infrastructure: a universal digital ID to securely link citizens to their data and entitlements; modular public-service platforms that allow services to be delivered through shared digital systems; and a real-time intelligence layer that converts service interactions into early-warning signals for frontline staff and policymakers .
The report argues that AI-driven personalization would allow services to adapt to individual needs at scale, replacing one-size-fits-all provision. Predictive analytics could also help shift public spending upstream by identifying risks earlier and preventing crises before they escalate, reducing long-term costs across healthcare, welfare and justice systems .
The authors emphasise that reform is not about automating existing bureaucracy or adding isolated digital tools. Instead, they argue for replacing the underlying operating logic of public services to match the capabilities of modern data and AI systems.
Without such reform, the report warns, public services will continue to fall behind citizen expectations shaped by digital private-sector experiences, further eroding trust in government. With it, the institute argues, the UK could pioneer a new model of governance built around mass customization, continuous learning and stronger accountability in the age of AI .
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