Hilary Wainwright: Key to economic recovery lies in unlocking workers' creativity

The future of our public services will be as central to the next election as the future of the economy. Indeed they are increasingly bound together. On this as on many other issues, party leaders are speaking the same language: the language of competition and outsourcing to private companies.

We have to look beneath the political radar to find an alternative.

The workers and managers at Newcastle City Council for example have demonstrated the practicality of an alternative based on releasing the creativity of public sector staff. A genuine partnership between an innovative management and a strategically-minded trade union is reaping benefits for all.

Public Sector Reform...But Not as We Know It is the story of how staff, trade unions and managers at the council joined forces to defeat the privatisation of the authority's IT department and went on to transform the department, simultaneously producing £28.5m in savings and making dramatic improvements to services – all without a single compulsory redundancy.

Key principles guided their achievements:

* Treating workers as assets, not problems, and creating a genuine culture of collaborative problem solving.

* Putting a genuine public service ethos at the heart of the transformation.

* Recognising the critical role of trade unions in providing a strong voice for staff and in providing an infrastructure for workplace democracy.

The resulting reforms provide strong proof that the public sector has its own criteria and mechanisms for efficiency, quite distinct from goals of profit. They show that, with a clear shared vision, an egalitarian management, a strong union and workplace democracy, the public sector can make itself a highly effective steward of public money. In particular it can realise its special asset of skilled staff committed to serve their fellow citizens – the very asset that Lord Mandelson's policies will squander.

But this story of democracy-driven change is also fundamental to an alternative economic strategy to counter our fast-moving descent into a depression. Publicly-led public service reform driven by the principles exemplified in Newcastle lays the basis for creating new and useful jobs in the public sector throughout the UK – in building council housing, caring services, youth services, environmental services, ICT, strengthening the social economy and so on. It is not as though there is a lack of things that need doing!

Taken from a report by the Research Director of the New Politics Programme at the Transnational Institute, published today by Compass