Key Takeaways:
Governments across developed economies are failing to deliver basic services despite record spending, and artificial intelligence offers the only realistic path to reform.
UK public sector productivity fell 4.1% since 2019 while the tax take hit postwar highs, according to Office for National Statistics data cited in a Wall Street Journal opinion piece by Tom Tugendhat, a Conservative member of Parliament and Hudson Institute distinguished fellow. Taxpayers are receiving less for more money as public payrolls swell and private sector growth stagnates.
"Without it, government can't deliver and people will look for an alternative to the democracies that have failed," Tugendhat wrote, referring to AI. "How AI is used matters. Pointed at the elite, AI concentrates power; pointed at the citizen, AI gives it back."
The US provides a stark illustration of bureaucratic failure. Congress allocated $42 billion in 2021 to wire rural America for broadband. Four and a half years later, the first two towers — one in Nebraska and one in Louisiana — went live. A multibillion-dollar program for electric-vehicle chargers, also started in 2021, resulted in only a few hundred installations. California's high-speed rail project, approved by voters in 2008, has no trains in service and only one remote segment under construction.
Ukraine offers a counterexample. The Ministry of Digital Transformation built Diia, an app recently enhanced with an AI assistant, that lets citizens pay taxes, obtain passports, and claim veterans' benefits from a smartphone. The app consolidates more than 120 government services into a single digital interface, bypassing the physical bureaucracy that slows delivery in peacetime economies.
The Delivery Gap Is a Trust Crisis
The political consequences are measurable. In 2024, for the first time in more than a century, governing parties in every developed country lost vote share. The White House changed hands, as did 10 Downing Street. President Emmanuel Macron's coalition took losses in France, Germany's governing coalition collapsed, and Prime Minister Narendra Modi's support eroded in India. The common complaint across electorates: governments do not deliver.
Tugendhat draws a parallel to the Crimean War of 1854, when British troops froze to death on the heights above Balaclava while vital supplies sat idle in the harbor — not from lack of resources but from bureaucratic incompetence. The scandal brought down a government and forced civil service reform. Today's equivalent, he argues, is AI-driven automation of permit approvals, tax calculations, and benefits administration.
"A permit checked by AI against the building code might clear in an hour, expediting a potentially contentious application," Tugendhat wrote. "A machine can also tell a taxpayer what he owes and why, in plain English, in a minute, saving hours if not days."
The Economics of Government AI
The financial stakes are large. UK public sector productivity data from the ONS shows output grew 2.5% in 2023 while inputs grew 1.1%, producing a 1.4% productivity gain — but the cumulative shortfall since 2019 remains 4.1%. Healthcare, the largest service area at 38.6% of public spending, saw productivity rise 2.8% in 2023 but remains 7.7% below pre-pandemic levels.
Tugendhat argues that the traditional fix — more staff and more cash — is no longer affordable. AI deployment in government could automate routine compliance checks, tax processing, and permit approvals at a fraction of current costs. The technology exists; the barrier is institutional resistance and the absence of political will to mandate adoption.
"In the Crimean War, British supplies sat in the harbor while the army froze," Tugendhat wrote. "Democracy's answer was reform, not revolution. Today's tool is different, but the answer is equally urgent. It's time for the AI state."
This article is for informational purposes only and does not constitute investment advice.
