How to afford the state we want

State effectiveness and state capacity are not the same thing

“State Capacity Is the Issue of our Age” says the Economist, and they quoted this substack, so they must be right. Of course I’m delighted that more and more people are having the conversation about how to run a country, even if too many of them are ranged against me on the pro-lever side of the argument in which the answer is more power for ministers and obedience from everyone else.

But let’s quibble with our dear Economist: capacity and capability are not the same thing. If we get too excited about it, the debate about the effectiveness of state machinery¹ will distract us from the bigger capacity constraint - what we can afford.

Everyone knows it, but no-one running for office wants to say it: we want more from the state than we are willing to pay for in tax. Voters rationalise this (if forced to) with the belief that the state could be more efficient, and/or that someone other than them should be taxed. Both are inconveniently slightly-true: neither nonsense that can be dismissed, nor answers big enough to meet the challenge.

I worry that the sudden yearning in the zeitgeist for decisiveness has started to imply that if the government could just act, forcefully and visibly - all those bigger problems would go away.

Chris Dillow recently argued that the modern political archetype was the columnist: clever, sceptical, endlessly qualifying. I think he’s wrong. The figure we’re expected to crave is Major Richard Sharpe, or Uhtred of Bebbanburg: the warrior who takes charge and gets things done quickly, preferably while holding a sword.

Uhtred of Bebbanberg, hero of the Last Kingdom and pal of King Alfred, Image: Netflix

Decisively cancelling things can save money, of course, and this government’s dithering on various tax rises and spending cuts has not helped them. But we are kidding ourselves if we imagine that a heroic leadership model is the route to a lean and efficient state.

But Trump is spending $170bn on border and interior enforcement, and the cost of projecting military force into Venezuela, Iran, Greenland and beyond will only rise. Gunboats in the channel? Prison ships? Mass deportations? These things don’t come cheap - and neither do the big things that people with my political preferences want to see: new towns, R&D, transport infrastructure.

Yes: we spent unfathomable millions on a bridge to nowhere because process forced us to. But we also spent £100m on an unusable prison because of recklessness about process. State capacity is not a problem that bold leadership will magically resolve.

Increasing capacity

If we want a state that meets the public’s expectations, we need to either change expectations, or change the state. There’s a big deficit of ideas for structural changes that would do either of these things. Growth would make it easier but that’s a puzzle for another day. Techno-optimists suggest that AI will make public services radically cheaper. Maybe they will. But today I want to focus on reducing demand for the state.

The right tends to think the answer is just to stop things - often considering ‘demand’ to be generated not by need but by the availability of services. What they miss is that cuts in one place often pop up as costs in another - in the shape of more expensive crises. The left argues for prevention, without a real solution to the costs of double-running preventative services for the next generation’s problems alongside responsive services for our own.

What I’m excited by is the growing movement for a relational approach to redesigning the state.

This is not everything the government needs to get good at - these ideas are not going to build us a tram or protect the skies over Ukraine. But they are a way of thinking about the future of public services that could cut demands on the state, and build a stronger society. It’s an agenda that ought to unite left and right: collectivism and small platoons of self-reliant communities, more effective help for vulnerable people and lower costs to the taxpayer.

Relational public service design

What do I mean by relational? (If you want a whole paper, I wrote this a few years ago)

At heart, it’s the idea that public services don’t work only through rules, money and professionals, but through relationships - and that good state design should strengthen those relationships rather than flatten them. The collapsing of inter-personal relationships is a structural driver of increasing demand for state services: because need is higher and because the state becomes the default solution.

There are three sets of relationships that matter.

• The relationship between a professional and the person using a service. Much of the modern state is built around transactional encounters: standardised, repeatable, increasingly digitised. Relational services prioritise continuity and trust instead. You see the same person; they know your history; judgement replaces box-ticking. We already do this in places: midwifery, neighbourhood policing, lead social workers and where we do, outcomes are usually better, particularly when it comes to complex and high needs.

• The relationship between citizens themselves. People live in networks, not as atomised units. Those networks shape opportunity, behaviour and resilience, whether through family support, peer influence or who helps you find a job. Relational approaches take this seriously, designing services that engage with people as part of communities and social circles: fostering peer support, building connections, strengthening positive networks that offer non-state capacity for solving problems, instead of dismantling or ignoring them.

• The relationship between public services and the wider community. Public services depend on trust, legitimacy and cooperation. Where those relationships are strong, services can do more - through participation, volunteering, mutual support and shared responsibility. Services are better and cheaper when communities feel involved rather than managed, and participate instead of outsourcing to the government things they could do themselves.

Getting relational service delivery right will make services more humane and more effective. But the bigger prize lies beyond individual transactions. The real shift comes when the state uses its design power not just to deliver services, but to foster a society in which people are better able - and more willing - to support one another.

This is anti-heroic - not something Uhtred of Bebbanberg would ever be a part of.

How is that cheaper?

Let’s face it: if you’re a treasury-minded type, you probably think this all sounds a bit ‘woo-woo’ (I’m quoting Kirsty McNeill, a minister in the Scotland office who’s known to be a fan of relational service design but also an expert in knowing her enemies).

So let’s be precise about why this does make fiscal sense.

The first reason is prevention. Stronger relationships consistently shift problems earlier in their lifecycle, when they are cheaper to address. People disclose issues sooner to professionals they trust. They are more likely to follow advice from someone who knows them, rather than from an anonymous system. All of this reduces the likelihood that manageable problems escalate into acute, high-cost crises. Fewer A&E admissions, fewer safeguarding interventions, fewer emergency housing placements.

Then there is legitimacy. Services that are trusted are cheaper to run because they rely less on enforcement, dispute resolution and defensive bureaucracy. People are more likely to be willing to pay for services they know, connect with, and understand.

More fundamentally, but more controversially: relational approaches enable task transfer away from the formal state. Compare the expense and controversy of the asylum hotels system with volunteer-led efforts to mobilise housing for refugees from Ukraine, coordinated and back-stopped by the government instead of delivered by it.

Many things can be done, and are often done better, by families, peers, volunteers, community groups and people with lived experience, if the system is designed to support them rather than crowd them out. When the state strengthens relationships between citizens, and between services and communities, it increases society’s own capacity to absorb shocks.

Politicians often shy away from this territory. They’re worried that recognising voluntary activity will lead to calls to pay people for more of it. They’re worried it sounds like making excuses, shirking responsibility, or laying the ground for cuts. The “Big Society” casts a long shadow: in my view, intellectually correct about the importance of non-state capacity building, but poisoned by the context of enormous budget cuts.

But this is the only way we can afford the state we want: by designing it to need to do less.

A post-heroic state
And this brings me back to the question about levers. State capacity *is* the issue of our age, but the heroic mindset will not increase that capacity.

We can, and should, pursue an agenda in which ministers get better, faster operational control of the things that the government pays for directly. But if that is all we do, state capacity will continue to fall short of public and ministerial ambition.

The only way to really increase state capacity is to enhance it with new capabilities - to influence and inspire outside of the mechanisms of formal control.

Capacity is not just a fact of cash. It is also created by imagination: rethinking what the state does directly, what it enables others to do, and how it orchestrates effort beyond its own payroll. A government that sees its role only as operator and enforcer will constantly run into the limits of money, people and legitimacy. A government that also acts as convenor, catalyst and relational architect can unlock far more capacity than it could ever build internally, not by pulling levers, but by reshaping how society itself responds to shared problems.

Work with me?

I’m writing this substack because it helps me to think and to connect with people who are thinking, which in turn helps me think. It is not a marketing outlet for anything. Nevertheless, if you’re here, perhaps you’re interested in what I’m up to and if you’d like to get in touch, I’d be delighted.

Zinc Innovation Partners: My main job is leading this innovation business. We run incubators, accelerators and fellowships that turn science into real-world impact because we see far too much wasted potential - knowledge left in the lab, the studio or the journal article. We help universities commercialise their research; we help philanthropists find the next big innovation; we help charities mobilise scientific solutions to real-world problems. Get in touch if it sounds like we can be useful to you.

Kinship Works: If you’re interested in relational public services, I’m also supporting the brilliant James Plunkett’s new venture, Kinship Works. It’s a consultancy developing and implementing ideas that will build a relational state.

Door 10: I’m a non-exec director at this brilliant recruitment agency, run by my friend Adam Pritchard. He focuses on public affairs and communications roles, and I’m not sure anyone works harder than him.

I’m also chair of the policy committee at Family Business UK, and on the advisory board at the Future Governance Forum.

And of course, I’m to be found weekly on Times Radio’s How to Win an Election.

1. *Of course, it’s not really machinery, and if you want a better metaphor, you might like to think about the state as an octopus, as my friend and former colleague Nigel Ball argues here. Harvard Business Review has a nice article on octopus organisations.