Labour to rebrand Lambeth as 'John Lewis' council

Labour is planning to rebrand one of its local authorities as Britain's first "John Lewis council", offering council tax rebates to residents in exchange for helping to run services, in a direct challenge to the Conservatives' pioneering "easyCouncil".

In a move which could propel town hall politics into the national general election campaign, ministers are to champion the south London borough of Lambeth as their new vision of how local government can work.

It will put Lambeth head-to-head with the north London borough of Barnet, where the Tories are charging customers for services along the lines of the business model of budget airlines such as easyJet.

Under the plans, being promoted by Tessa Jowell, the Cabinet Office minister, Lambeth could borrow ideas from the way John Lewis is structured as it becomes a "co-operative council".

While users of services run by the "co-operative" council would not become shareholders, the people of Lambeth will be asked to get involved in the running of all their services along the lines of John Lewis and other "mutuals", with the possibility of financial recompense further down the line.

The council is confident this will deliver people the services they want at a saving. Research shows that if both employees and users become involved in the provision of a service, they become far more intolerant of waste and bureaucracy and significant savings can be made.

Labour's move is in retaliation for what it regards to be a piece of intellectual land- grabbing by the Conservatives earlier this week when they promised to allow public sector employees to take over the running of their services.

Labour has already announced it will make mutualism central in its forthcoming manifesto. The leader of Lambeth council, Steve Reed, said: "We are all looking at a reduction of 20% of funding from central government, and no council can afford to keep on doing what it's been doing. But while Barnet have come up with a plan to pare back what services they offer, we don't want to. Instead we're looking at a different settlement that will move the boundaries of who does what, getting users involved in putting together the services they want. Mutual and co-operative values will be our compass. We'll give the voters a clear choice – cuts if you vote Tory but with us, not only fewer cuts, but also positive side- effects around community cohesion."

Two weeks ago Lambeth's ruling Labour cabinet approved the idea of becoming the first co-operative council.

After negotiations that have been under way since autumn 2009, the council plans to set up a commission of experts, local community leaders and the electorate that will report in April. Should Labour be returned to run Lambeth council in the May election, the party will publish a blueprint in July with a formal launch in August. The council wants its commission to consider:

An "active citizens' dividend" offering a council tax rebate to those involved in community organisations or mutuals that take responsibility for services.

Allowing service users and local residents to vote on turning local services such as local primary schools, Sure Start centres and youth clubs into citizen-led mutuals.

Offering tenants more control of their housing estates by setting them up as co-operatives.

Setting up "micro-mutuals" for people to use their personalised budgets for care service users.

The council is working with local groups to complete the transformation of the old Lilian Baylis school site into a community hub.

This would be the largest single transfers of assets from local government to a community in the country.

Greenwich Leisure, an employee-owned company, is already running Lambeth's leisure centres. Two Brixton housing estates are about to join a national grouping of tenant-run estates. Lambeth already has more tenant-run estates than any other London borough.

Jowell, who has helped secure a more central role for mutualism in Labour's forthcoming election manifesto, said: "Modern mutualism speaks directly to what local people want from their local councils.

"The mutual movement is one that will be grassroots-led, not Whitehall-imposed – which is why the leadership that the people of Lambeth are proposing to show is so important."

Michael Stephenson, the general secretary of the Cooperative party, said: "In contrast to the Conservative party plan announced this week, Steve Reed's proposals draw on cooperative values to give power to everyone in their community, not just public sector employees. Unlike the Tory flagship borough in Barnet, this is about building better services, rather than simply chopping them off at the knees."