The Future of Britain in an Era of the Three Revolutions
This speech was delivered by Tony Blair, former Prime Minister of Great Britain and Northern Ireland and Executive Chairman of the Tony Blair Institute for Global Change, on 20 January 2022, at the Institute for Global Health Innovation, Imperial College, London.
There is a gaping hole in the governing of Britain where new ideas should be.
We are living through three revolutionary changes simultaneously and are ill-prepared for any of them. Each of them would require major changes to the way we work as a nation. All of them together pose a challenge which is unprecedented in recent history.
The changes are: Brexit; the technology revolution; and a climate ambition which foresees a unique transition to being carbon neutral in the power sector in just over a decade and the whole country in 25 years.
Covid-19 has in some senses masked the scale of the challenge because it has been its own extraordinary crisis.
But as it recedes or at least becomes managed, the following will become starkly plain: by end 2022 we will have the highest tax burden and the largest spending by the state since the post-war period; our debt will be higher than at any time in the last half-century; and our sustainable growth rates in the next years will be around 1.7 per cent, nowhere near those of the first part of this century, and woefully insufficient to pay for the services we expect.
For the average household, taxes will rise by around £370 per year; energy prices by £600; they will be asked to swap gas boilers for heat pumps and their conventional fuel cars for electric vehicles; the costs for basic foodstuffs are going up; and general inflation will cause rises in interest rates.
Business will see the biggest uplift in corporation tax since the 1970s whilst investment is 12 per cent below pre-Brexit amounts.
Our productivity levels – the real test of an economy’s strength and the key to real wage rises – are stagnating.
We retain significant strengths. Our universities. Our leading-edge technology – particularly in areas like the life sciences which, post-Covid, are a huge asset. And now in climate technologies like renewables. The City of London as a global financial centre; creative industries; our language; our culture; historic and present connectivity to so much of the world.
There is no cause for pessimism. But there is an urgent need for realism in the face of the three revolutions.
Without a radical shift in policy, we face a steady, inexorable compound decline, similar to the 1960s and 1970s. It could be several years before we realise this, but with our present course, we are relegating ourselves to a league which is poorer, less prosperous and less powerful.
I hesitate when I hear the government slogan “Levelling Up”. Other than a desire to give opportunity to those without it, which is obviously hard to disagree with, the slogan risks misdirecting the framing of the country’s problem. We face a national challenge – all the country, not simply the areas "left behind”.
Brexit is a word most of the country want to forget. Understandably. It was a deeply divisive period. And it is indeed done. The debate about its wisdom is over. But it was a decision of consequence. And that we can't ignore, no matter how much we want to.
According to the government’s forecast, on current policy, we will suffer long term a 4 per cent drop in GDP. The preparations as a result of exiting the single market have cost the government directly over £4 billion, and probably much more for the private sector. Brexit uncertainty is one of the top three issues for 40 per cent of British business. Leave aside Northern Ireland, we don't yet have deals on the City and financial services or any part of the service sector; non-tariff barriers on industrial goods are biting; and we are shut out of the room where Europe is taking decisions across a range of issues which affect us.
We can alter our political and legal relationship with Europe, but we cannot change our interests or our geography. The government doesn’t have a post-Brexit regulatory strategy and it is letting passive divergence from EU rule exacerbate costs for businesses for no purpose, deepening an already substantial economic hit from Brexit itself. We need to decide what our new trade relationship with Europe should be, where we can easily align with European regulation and where, practically, we want to depart from it, and have a coherent idea of where we intend to deepen our European cooperation for the future, in areas like defence, energy, and the environment. Above all, we need to make our economy highly competitive, attract world-class talent, and make our independence from the EU a platform for economic growth.
But it needs a plan, into which hard work and thought has gone. Policy detail. Strategic analysis. At present, there isn't one.
The technology revolution is the most important and most impactful of the three, but talk to many policymakers about tech – and to be fair this is not a purely British phenomenon – and they're much more comfortable talking about regulating Facebook than setting out the opportunities of edtech to change the way we teach and learn; or how the NHS should be completely re-thought in how it is structured and paid for.
Yet over the coming decade this revolution will disrupt virtually every part of our lives including our working lives. Advances in AI will be dramatic. Whole sectors of the economy, both services and manufacturing, will feel the impact. As many as 9 million jobs could be automated, though of course new jobs will also be created. It’s a revolution in the labour market. Here the government does have a plan of sorts. But measure the government’s plan against the scale of the change and it is immediately apparent how short it falls from what is necessary.
Net zero by 2050 is the right commitment with interim stretching targets in power, transport and construction for 2035. But just think of what these correct but vastly ambitious climate commitments mean.
In a little over ten years we will have to: double electricity supply; replace the present heating systems in 10 million homes; turn 20 million fossil-fuel cars into scrap and buy new EVs; and boost renewables by 4x the present rate. And all whilst losing the revenue which comes from fuel duty, which will amount to an annual shortfall of £20 billion by 2035.
There is absolutely no way this can be done without, amongst other things, major changes in planning laws; investment in new nuclear capacity; using gas as a transitional fuel; reform of electricity markets; and a credible strategy for switching our homes to low-carbon heating.
Show me the plan to do this.
The point is these triple revolutions necessitate a vast re-ordering of government, its priorities, its policies, its personnel and how it is structured.
It requires a level of coherence, so that, for example, what we do on taxation does not cut across what we do to stay competitive; what we want to do on local devolution doesn't run counter to what we must do on planning law.
And it needs our political debate to change radically.
The paradox of 21st-century politics is that at the very time when 20th-century ideology of left versus right has never been less relevant, our main political parties became bedevilled by it.
The Conservative Party deserted their traditional role as high priests of pragmatic change and turned Thatcherism into a cult.
The Labour Party went through the catastrophe of the Corbyn era, from which under Keir Starmer’s determined leadership, it is thankfully emerging with renewed vigour, a talented front bench – as Rachel Reeves’ speech today underlines – and a healthy desire to erase the memory of four successive defeats. It could provide the plan the country needs. As Keir himself acknowledges, this is the challenge for 2022.
However, for years, policy, for both parties, in the sense of a relentless search for the right answer – which as I discovered in government is ultimately all that matters – was abandoned.
Politics became all about politics. Not about ideas. I understand completely the rage against what happened in Downing Street during lockdown and how the country feels. Maybe Boris Johnson goes and maybe he doesn't. But the real problem is the absence of a government plan for Britain’s future.
The NHS will soon eat up over 40 per cent of day-to-day spending on public services. At least when we pulled health spending up to the European average in the early years of the century, we accompanied it with far-reaching reforms which took NHS satisfaction levels to the highest they had ever been. But today, though the staff continue to perform miracles, the service, especially post-Covid, is too often unacceptably poor.
There are those within the NHS leading the way on reform, using technology to transform the service, thinking imaginatively about the future. We need to empower them. Through advances in medical science, the use of data, making systems properly interoperable, and artificial intelligence, we can transform the patient experience and reduce cost. Lord Darzi has estimated that the NHS could save £12.5 billion a year by use of AI in eliminating routine and administrative tasks alone.
But all of this requires organising, together with major workforce reform.
The point is we can't go on as we are, even in an area as politically delicate as the NHS.
You could make this case across the whole of public policy.
We need to apply technology to areas like crime and immigration, where the only sensible way of preventing illegal immigration is a system of digital biometric ID. To shift tax from labour and capital, especially post Brexit, and find other sources of revenue, so that our tax system is not colliding with our competitiveness. And to re-think pensions for the next generation where, apart from the burgeoning cost, the circumstances of retirement will be completely different from those of today. Fuel duty will probably have to replaced, by some form of road pricing.
This list is not exhaustive!
But not a single thing we need to do, to turn our fortunes around, will come without political pain. Our politics show few signs of preparedness to tolerate that pain.
Just remember the Thatcher economic reforms caused huge public discontent: at times the Tories were third in the polls; the country was bitterly divided. Likewise, under New Labour, the changes to public services, to law and order, the redistribution of wealth, reforms like the minimum wage were all heavily contested; and that was when the economy was strong.
Meeting the challenge of the three revolutions is infinitely more difficult than any of that and at a time when the economy is still recovering from Covid.
It means reorganising fundamentally the way government works; bringing in the brightest and the best innovators from outside government; a mobilisation of talent and resource we are nowhere near achieving.
And I don't think it can be done unless politicians work across traditional party lines to create a plan that is sustainable over at least a decade, because reforms as far-reaching and difficult as these require consistency of policy over time even through a change of government.
My Institute will set out, in a series of papers and seminars with a global as well as national perspective, at least the principles of this new policy agenda.
The Britain Project is a group working across party lines though headed by a Lib Dem, Monica Harding, and it will organise a conference in May.
We want this conference to be an opportunity for people to come together and set out a broad direction for the future of Britain.
Those participating should leave politics and ideology at the door. Our task is practical: understanding how the world is changing and what that means for what works to make our country stronger, fairer, and more prosperous.
The choices will be hard. Old ways, old interests, old thinking don't go gently.
But neither should a country – especially one with such a proud history as ours – slip gently into a lower league without a strenuous effort to prevent it. Yet without a radical change in the governing of the country, this is where we're headed.
This is the debate Britain needs.