Lord Mandelson and the cabinet dogmatically insist that Royal Mail can only be effectively modernised by bringing in a private, profit-driven business, but evidence suggests otherwise. I have just investigated a local experience, Newcastle Council, where the public sector itself has reformed and improved its own services. Far from the public sector trade unions always ‘defending the status quo’ as Mandelson likes to mock, the changes in Newcastle illustrate public sector trade unions and managers with a visionary drive to maximise public benefit rather than private profit. To develop alternatives to free market chaos we should learn from such successful local experiences.

Newcastle’s five-year programme is modest compared to Royal Mail. It included improvements in collecting council tax; delivering benefits; making services accessible – but the principles it illustrated have a wider relevance. In Newcastle there was a distinctive determination to demonstrate that public servants could transform the services they deliver. This followed a hard fought struggle in 2000/2002 against privatisation. Since then the council’s management, working closely with the union, have transformed services and found savings of £28.5 million, projected forward over an 11year period. From the speed and accuracy of benefit payments, through to a responsive new call centre, and the 'one stop shops' for all council services which community groups have campaigned for years, results were delivered. It is an impressive example of innovation and cost savings -exactly what politicians are calling for.

Three principles relevant for public service management generally, and Royal Mail specifically, can be gleaned from this experience:

First: develop and support the capacities of staff. 'It's the people, stupid' was the slogan in Newcastle – a focus on the abilities of staff was systemic to the transformation. Management was about 'coaching not commanding'; initiative and responsibility were pushed away from the centre, layers of supervision eliminated, replaced by support. Work went on across sections and departments, in project groups of those with a relevant angle on a given problem. What emerged was a new kind of public sector organisation where leadership was more about developing a shared direction than about exercising control.

Second: active union engagement is crucial. Newcastle Unison was involved at every stage, from selecting new managers onwards. 'It's our job to keep the management accountable, not so much to the staff but to the change' as the Unison convener put it. 'The union keeps us honest,' said the senior manager who led the changes. It's management/union collaboration where the union has retained power to act independently and escalate a conflict if necessary. Management know this. The union wouldn't be trusted by its members if it could not. 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 in this.

Third: create a common vision, in this case high quality, publicly delivered public services. Every aspect of the transformation programme was geared to and judged by that aim. It provided a mutually accepted reference point that avoided drift and help to overcome conflict. It acted as a compass for management and union leadership to guide the process forward. The shared vision also served to dust off and bring to the fore a public service ethic that is sometimes reduced to a matter of formal rhetoric. An active thinking through of what public service meant in practice became a practical force for change. The goal was to maximise public benefit rather than profits. This awareness was present in every key relationship and negotiation.

I asked Newcastle staff what it would have meant if the changes had been driven by a private company instead of ‘in-house’. Their answer was more expense and less flexibility and collaboration when making changes to respond to needs not foreseen in the original contract, and a lot of time diverted to negotiating these charges and changes. Limitations they were happy to do without.

Publicly-led reform of public services has benefits for democracy too. A private company may say ' we are adding shareholder value, profits are looking good, we’re okay' but the public sector can’t do that. The level of democratic control should be much higher because it holds public funds. There is much to be done to open up the mechanisms of the public sector to democratic pressures for change, but the Newcastle case is one of many that illustrates what can be done.

Newcastle City council’s achievement provides evidence that, with a clear shared vision, an egalitarian and professional management, a strong trade union and workplace democracy, the public sector had the capacity to become an effective leader of change. In particular it realised its special asset : skilled staff committed to serve their fellow citizens. This is exactly the asset that the dogmatism of what remains of New Labour, like that of Mrs Thatcher before it, will squander.

Hilary Wainwright Editor of Red Pepper has just written 'Public service reform but not as we know it!' Published by Compass, Unison and the Transnational Institute, published May 5th £7.95. Available Red Pepper magazine for £5 (including P&P) www.redpepper.org.uk/Exclusive-book-offer

“Public Service Reform…But Not As We Know It!” will be launched on 5 Tuesday May at 6.15pm in the Boothroyd Room, Portcullis House, Westminster.

At the launch with Hilary Wainwright will debate the reports findings with Secretary of State for Communities and Local Government, Rt Hon Hazel Blears MP. Jon Cruddas MP; Heather Wakefield of UNISON; and Kenny Bell of the UNISON Newcastle City Branch will also take part in the debate. RSVP  info@compassonline.org.uk