Welfare reform is a central part of the modernisation programme adopted by the Labour governments since 1997. Demographic pressures generated by expansive patterns of demand for pensions and healthcare for an ageing population, coupled with the pressures of globalisation to drive down taxes and regulation, have led to a fundamental shift in Labour Party thinking regarding the principle of universal welfare provision. Despite a commitment to increased public expenditure on some areas of welfare provision, in office New Labour followed many of the policies of the previous Conservative government, including spending restraint, the use of market principles in the state sector, an emphasis on selectivity, and a more modest approach to the direct delivery of services, targeted at those who can demonstrate the most need. The government's policy priorities and Labour's attempt to steer a ‘Third Way’ between traditional concepts of universal welfare provision and the New Right commitment to the market, has led some to identify the emergence of a new political consensus on approaches to welfare. However, the extent of support for such a consensus within parliament and among the public is at present far from clear.

Recent years have also seen renewed debate about the role of parliament in the scrutiny of government policy. Successive governments have presided over a shift of responsibility for significant areas of policy away from Westminster to the European Union and quasi-independent bodies such as utility regulators and the Bank of England. Since 1997, the Labour governments have pursued an extensive programme of constitutional reform that has seen the devolution of power, including large areas of social policy, to the Scottish Parliament and the Welsh Assembly. There have also been significant changes in the operation and composition of the Westminster Parliament, with reform of parliamentary procedure designed to ‘modernise’ the House of Commons; and substantive reform of the House of Lords, in an effort to make the upper House more representative and legitimate. The removal of the hereditary peers has for the first time led to Labour being the largest party in the Lords, and also prompted an influx of new life peers, from a range of backgrounds and experience, including a number with backgrounds in social policy.