Lots of governments do have that ability[1]. The difference here seems to be that it wasn't required by law (instead, heavily pressured by the government), but it's also just the ability to flag, not to remove. We're going to have to see how that pans out in practice (as well as if they can remove things only in the UK, which is true of some of the takedowns mentioned in [1], e.g. "We received two requests and two court orders from regulatory agencies to remove 105 YouTube videos that contain clips of the movie, "Innocence of Muslims." We restricted videos from view in Egypt").
[1] http://www.google.com/transparencyreport/removals/government...