Writing in The Times, the former party leaders and political rivals said the introduction of such a system would help people overcome concerns about online dangers.
They have published a report that makes 40 recommendations on how the technology could be used to transform the British economy and society.
This includes curtailing the power of the Treasury to "micromanage" spending on science and technology and appointing "executive ministers" who are not MPs or peers and who could shape the government's future approach to science and technology.
They also advocate increasing the use of artificial intelligence assistants in schools to help teachers and provide personalised support to pupils at home, as well as streamlining the planning system to allow laboratories and other technology infrastructure to receive faster approval.
Their report argues that slow decision making in Whitehall has left the UK struggling to keep up with the rapidly changing face of modern technology.
"Spending is subject to extensive bureaucracy, which also micromanages it into small, siloed pots and creates continual annual funding cliff edges rather than facilitating sustainable investment," the pair said.
During his time as Prime Minister, Blair oversaw an attempt to introduce ID cards for British citizens that ultimately caused a major backlash and was abandoned in 2011.
"If you look at the biometric technology that allows you to do digital ID today, it can overcome many of these problems," Blair said on BBC Radio 4's Today programme.
"The world is moving in that direction; countries as small as Estonia and as large as India are moving in that direction or have moved in that direction."
He added: "Here's our problem: We're spending a lot, we're heavily taxed and the outcomes are poor. So, the question is: what changes that situation? If you take, for example, the ambition we have on climate, there is no way we can meet that ambition without changing planning. There's literally no way we can do it.
"A lot of these things, they're not airy-fairy, they're actually about people's lives. People already live their lives digitally. The question is whether government and politics can catch up with that reality."
To ID, or not to ID? How to solve the UK's digital identity dilemma
If the government is going to encourage public uptake of digital ID, it will have to provide people with better and more secure experiences of the technology.