The need for convincing alternatives to market-led politics is urgent, especially as the government continues to defer to the financial markets rather than challenge them. Lord Mandelson's determination to part privatise Royal Mail is the most high profile rebuff to what should be a common sense moratorium on handing anything more to private business.
There are many unsung alternatives that people are creating as they refuse the idea that market-driven policies are the only way. Take the Royal Mail itself. Go behind the union-bashing and you'll find that the Communication Workers Union and the management of Parcel Force, a subsidiary of Royal Mail, are constructing a model of industrial democracy that has turned this public organisation around from near collapse, showing that a democratically managed public sector company can provide better value for money than most of the private companies with which it now has to compete.
What if we systematised and drew broader lessons from such practical experiments?
A laboratory of public service change
I was fortunate enough last year to be able to study, from the inside, a self-consciously public process of public service reform. I squatted in an empty office in Newcastle's civic centre for several months interviewing the staff, management and trade union activists responsible for a five-year programme of modernisation of the council's IT and related services, and with it improvements and savings in the systems of collecting council tax, delivering benefits and making its services accessible to the public. What gave the process its special character was people's pride in transforming these basic services as public servants, following a hard-fought struggle against their privatisation led by the city council branch of Unison.
'It wasn't about resistance to change,' explains Tony Carr, who was the full-time Unison rep for the staff involved in these services. 'It was about controlling your own destiny and not having someone come in and manage us through change.'
Such an explicit effort at publicly-led reform created an ideal laboratory to test and elaborate the hypothesis that democratisation rather than privatisation is the most effective and appropriate way to modernise and improve public services. In testing this, my intention was also to explore exactly what are the specific mechanisms of change driven by democratic public service goals rather than by profit maximisation.
Keeping it public: a strategic campaign
This explicitly and determinedly public-driven programme of internal reform was the outcome of a struggle between 2000 and 2002 to keep these strategic services public. At stake for a private company was a £250-million, 11-year contract. For the staff and the union, it was 650 jobs and the quality of strategic services on which other council departments depended and that could be a base for public-public partnerships in the region.
The strategy of the Newcastle city council branch of Unison to keep these services public had five essential elements, all of which laid down foundation stones for the democracy of the transformation process itself:
1. First, building on a tradition of participatory organisation, the priority was to involve members in every step of the campaign: from mass meetings and the election of reps when market testing was first announced, through industrial action against privatisation, to the reps directly scrutinising the private bid and contributing to the 'in-house' bid.
2. The second element in the strategy was to intervene in the procurement process and campaign for an effective in-house bid. 'We had to recognise that even though we were against the whole concept of market testing, if we actually wanted to win an in-house bid we had to intervene at that level from the beginning,' says Kenny Bell, then convenor of the Unison branch.
3. Third, campaigning meant reaching out to the public, building popular support for a general opposition to privatisation. 'Our City Is Not For Sale,' declared the banner leading several demonstrations of trade unions, community organisations and dissident Labour councillors.
4. Fourth, although the union filled a political vacuum in standing up against privatisation, Unison no more wanted to take the final decisions about who should deliver services than it wanted management to do so. The aim was not to substitute the union for council officers but to make the council genuinely 'democracy'- led.
The pressure on the elected politicians eventually paid off, with the council passing a resolution insisting that alternatives to privatisation must be found.
5. Campaigning was little use unless it was grounded in strategic research. Key to the success of the Unison branch was the work of the Centre for Public Services, which in the course of 30 years of collaboration with trade unions and community organisations has honed a participatory method of work that shares skills and intellectual self-confidence. The CPS's work had an impact on members' consciousness as well as on trade union strategy. For Unison shop steward and housing benefits worker Lisa Marshall, collaboration with the CPS on investigating the bid of the private sector rival was a turning point: 'As we looked over their bid, we found a lot that we knew could be done better. From then on I felt confident about what we were trying to do keeping it in-house.'
This leads into the final component of Unison branch thinking: the leadership treated their members as skilled people who cared about their work. Josie Bird chairs the branch: 'We recognise that our members want to provide a service. It's not a romantic idea that they live to work. No, they work to live - but it does matter that it's a public service that they work for.'
The campaign was successful. The in-house bid drawn up by management in agreement with the unions was clearly better public value for public money.
In 2002, the then Labour-run council (since 2004 it has been Lib Dem) gave it the go ahead and borrowed £20 million to invest in it on the basis that savings would eventually more than pay back that investment. Jobs would go but without compulsory redundancies and with exceptional resources for training and redeployment.
Why union strength is vital to democratic reform
The union campaign laid the basis for real staff engagement in the process of change. The union was involved at every stage, from selecting new managers to discussing every significant change. 'It's our job to keep the management accountable, not so much to the staff but to the change' was Kenny Bell's description of the unions' role.
'The union keeps us honest.' Ray Ward, the senior manager who led the changes, echoes the point from the management's point of view. It's a collaboration but the union has retained its power to act independently and to escalate a conflict if necessary. And the management knows this. The union wouldn't be trusted by its members if it could not. The result is an experiment in industrial democracy with real benefits in terms of quality of services and the best allocation of public money.
By 2008, net savings of £28.5 million had been achieved, projected forward over an 11-year period. Every area of service has improved significantly, from the speed and accuracy of benefit payments to the high levels of satisfaction with the new call centre and the 'one stop shops' for all council services for which community groups have campaigned for years.
The role of the union in these achievements requires emphasis because although there is now widespread talk of the 'empowerment' of public service workers, there is scant recognition of the necessity of a well-organised and democratic trade union to achieve it.
A break with traditional managerial elitism
But it takes two to tango for change. And the nature of the City Service management team was important too. (City Service is the name of the new department that brought all the reformed services together.)
'It's the people, stupid' has been the slogan of City Service. People's capability and commitment are assets to be realised, not costs to be cut. This focus on people, on encouraging them, believing in them, has been systemic to the transformation. Management is about 'coaching not commanding'. Initiative and responsibility has been pushed away from the centre, layers of supervision have been eliminated and replaced by support. The dynamism of the department lies in working across its different sections through project groups involving all those with a relevant angle on a problem to come together to resolve it.
All in all, City Service transformed the centre of its organisation from a traditional model of local government management into a hub from which management supports numerous, largely autonomous projects and activities. A new kind of public sector organisation has emerged, with a leadership role that is more about facilitation and developing a shared direction than it is about exercising control.
The kind of people who made up this leadership is revealing. Ray Ward for example, first chose to work for local government, aged 16, because it was 'a good place to sleep' after nightly gigs in a rock group! In 2003, many years later, with much experience as a senior manager but not forgetting his own early experiences, his goal was to reorganise Newcastle's management systems to enable council staff to exercise their creativity in their day jobs, in the service of the public.
He recruited Kath Moore, who had transformed Newcastle's school meals system through involving the cooks and kitchen staff. She saw one of her missions as to release the staff expertise buried beneath the hierarchies and procedural fetishism that is too common in local government - as in much of the public sector. City Service management's ability genuinely to engage the staff in designing the changes, not simply accepting them, was a special key to their success.
A common vision
A precondition of this success of a decentralised system of management in an organisation facing huge challenges has been a clear common vision of high quality publicly-delivered public services. Every aspect of the transformation programme was geared to and judged by that goal. This shared goal provided a basis for motivation and common purpose, a mutually accepted reference point that avoided drift and helped to overcome conflict. It enabled the management and union leadership constantly to move the process forward.
The shared vision also served to dust off and bring to the fore a public service ethic that normally lies dormant or reduced to a matter of formal rhetoric. There was an active thinking through of what this meant in practice so that it became a practical force for change.
The political economy of democracy
There was a financial foundation to this revitalised public service culture. The goal was to maximise public benefit rather than to maximise profits. Again the determinedly public-led nature of the transformation process threw the distinction into sharp relief in every key relationship.
Consider relationships of scrutiny and democracy. Ray Ward sums up the difference: 'The private company can say that as long as we are adding shareholder value, share prices are looking good, profits are looking good, we're okay. We can't do that. The level of scrutiny is much higher, quite rightly because it is public funds.' If it is to be more than an empty or self-serving bureaucratic formula, the goal of 'maximising public benefit' rests on the importance of democracy as a live force, driving the efforts of everyone in a public organisation.
Until now, the focus on strengthening local democratic control over public money has focused on strengthening citizens' participation. The Newcastle experience takes our thinking about democratisation further by opening up and democratising the normally hidden, taken-for-granted internal processes of managing public resources. As long as the internal organisations of the public sector are top-down, fragmented and semi-oblivious to the real potential of their staff, all the participatory democracy in the world can be soaked up and defused or blocked by hierarchical structures and bureaucratic procedure. The process of internal democratisation, therefore, is a matter of economic as well as political importance, creating the conditions for a public sector business model that lays the basis for a political economy of democracy.
When we get into the detail of such a new political economy, an important practical implication of maximising public benefit is minimising, if not eliminating, the amount of money spent on institutional relationships that are not intrinsic to the delivery of a service. This is one of the costs of outsourcing and privatisation.
Time and time again I asked Newcastle staff what it would have meant if this relationship (whether at the highest level between the council's treasurer and City Service managers, or in the daily provision of a frontline service such as the call centre) had been with a private company instead of 'in-house'. Repeatedly the answer came that it would have meant all sorts of extra charges - for making changes to respond to needs or problems not foreseen in the original contract with the private company -and a lot of time diverted to negotiating these charges and changes.
City Service did have a relationship with the private sector but it was only where the public sector did not have the capacity to do something itself - for example, with the procurement of the IT hardware needed for the modernisation programme. Here the relationship was very much on terms set by the public sector, including a 'guaranteed maximum price' contract to ensure there was no unpredicted overspend. Another aspect of the relationship being on public sector terms was the rigorous transfer of knowledge from the private company to public sector staff who worked with it. So often it is the other way round, with knowledge being privatised and re-presented as a profit-driven tender the next time round.
Countering the depression
The service reforms in Newcastle's illustrate in a modest but practical way how the public sector can have its own criteria and mechanisms for efficiency, quite distinct from goals of profit. This story provides evidence that, with a clear shared vision, an egalitarian and professional management, a strong union and workplace democracy, the public sector generally has the capacity to 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. This is exactly the asset that Lord Mandelson's plans will squander.
But this story is not relevant simply to the case against privatisation; it is also fundamental to an alternative economic strategy to counter the fast-moving economic descent into a depression. Publicly-led public service reform on the basis of the kind of 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!
Depressions lead to social devastation. One foundation stone of a new, more humane political economy should be the expansion of democratically reformed public sector.
Hilary Wainwright is a member of Red Pepper's editorial collective and a fellow of the Transnational Institute.