Question: The government is seeking greater private sector involvement in the public services, why?

Lord Hattersley: I don't believe that private sector has an ethos, a spirit, an attitude which is consistent with providing high levels of public service. I'm not opposed to the government buying in from services outside. I'm not even entirely critical of the partnerships which allow private money to be invested in building hospitals and schools, even though it's a very expensive way of doing them. All it really does is provide some money now and mortgage the future for our children and grandchildren. I am not opposed to purchasing private facilities, private provision, private commodities. What I am opposed to is the public service being managed according to the principals of private enterprise, partly because I don't think it will work.

A private enterprise is immensely competitive, immensely successful, immensely efficient, that's because they operate a certain ruthless determination to maximise marginal revenue. You can't work that way in the health service, you can't work that way in schools. The private company that say runs a school or runs a hospital would have to decide whether it was going to apply the rules of private enterprise or not. If it did it would destroy the public service element, if it didn't it would be no more efficient than the way we run the hospitals and schools at present.

Question: The government claims that people are trying to misrepresent their views on privatisation of public services, would you go along with that?

Lord Hattersley: The problem is that the government has said two different things. During the election it was very damning about the failings of the public service and quite intentionally gave the impression that it wanted privatisation. I don't know if it really did want it or not, but that's the impression it gave during the election, for electoral purposes. Having thought about it, its begun to climb down. The problem is, we don't know what its true position is, what it said during the election, or what it's said since. This is the difficulty you get into if you say things to catch headlines without having worked out the policy and the philosophy behind it first. And if people are more worried than they need to be and I hope that's true, then the government is entirely to blame for overstating its intentions during the election campaign.

Question: What's at stake with Labour's relationship with the unions if it continues along this private good, public bad track?

Lord Hatterlsey: It depends how the government approaches the trade unions. The trade unions clearly want conciliation, the trade unions don't want to confront the government. They don't want to confront the government because they are sympathetic to it. They don't want to confront the government because they don't want industrial dispute which undermines their members' standard of living, and the trade unions believe in the public education system and the health service. And a confrontation would produce chaos, particularly in the hospitals. What has to happen now, is the government has to find an accommodation with the trade unions. Believe me the trade unions will grasp it with open arms. If the prime minister, as I fear is his character, goes on trying to rub their noses in it, tell them how inefficient they are, tell them they are all Luddites, tell them all that they aren't capable, competent of running public services; then I fear they'll have a confrontation - whether the leaders want it or not, the members will have it. If a government tries to come to some sort of accommodation, the trade union leaders, and I think most members will grasp it with both hands.

Question: Blair has said he will meet the unions six times a year - will that head off trouble?

Lord Hattersley: I think the six times a year meeting is a great step forward. First of all it's a sign of grace, you don't meet people for whom you have contempt, and there have been times when the Prime Minister and some of his more gung-ho ministers have exuded contempt for the public service and the public service unions and this is a sign of respect, so that's a step in the right direction. Also I think it will educate ministers. With the exception of John Prescott, most of the ministers involved in this really don't know how trade unions work and don't understand what to do to take them along with you.

Question: What do you mean, don't understand them?

Lord Hattersley: Well trade unions are spiritual as well as economic entities, its not just a matter of what's in my pocket today and what's going to be my condition at work next year, trade unions are held together by a spirit of solidarity, and they have principals about trade unions organisation, and how trade unions should be treated. I think that too many people on the Blairite Labour party think that all the men and women who work in the hospitals think of is 'what's going to be in his pay packet at the end of the month?'

An example of this, my mother who died in hospital six weeks ago, when I went to the ward in which she died, the day after her death and talked to the staff nurse, I was saying that they had a terrible time; hard work, long hours, very distressing circumstances - old people's surgical ward in which death was very common. And she said 'Well it doesn't matter I feel I am doing a job that's worth doing', and then she told me what her wages were which I thought were appalling, and she said 'The wages aren't the real thing, I'm here because I like doing the job which I think is service'. And then she said 'All that upsets me is when people attack us and say the public service isn't doing its job right'. Now this is an extreme example of how trade unionists in the health service feel, but I think that very many of them would echo that opinion in one form or another.

Question: And they feel that the Labour government attacks them for not doing their job properly?

Lord Hattersley: Well of course they do. From time to time the prime minister says something favourable about nurses, but for most of the time it's an extension of Mrs Thatcher's general view that the public service is doomed to failure, because public service doesn't have the same level of automatic efficiency that private enterprise, the market and competition provide. And they don't believe in any of those things, they don't believe in competition, they don't believe in enterprise. And if they keep hearing that they're in the wrong part of the economy, the inefficient part of the economy, the old fashioned part of the economy, the unwilling to change part of the economy, it unnecessarily stresses them. And not just nurses, who are the people for whom we have the most emotional attraction, but for porters, for orderlies, for people doing the really rather unromantic side of health service work. Many of them think that they are doing something which is important and they're right, and they don't want to be diminished all the time.

Question: Do you think the public's attitude is changing on the public and private sectors. For instance, do you think the public want railways renationalised?

Lord Hatterlsey: Well we know the public want it renationalised.

Question: Do you think it's a possibility?

Lord Hatterlsey: I saw the prime minister rule out the nationalisation of the railways on a television interview. I think he's wrong to do so, I think the number of ways it could be done, if we are going to put £60 billion into the railways, it seems perfectly reasonable to say and what's more we want that £60billion to carry a percentage of shares so that our money is represented in the power we have over Railtrack. I mean if it were a private company putting that sort of money in, if it were a merchant bank putting that sort of money in, you'd say we're not just lending it to you; the government isn't just giving it to you. It would say we want the shares that correspond with it to enable us to decide how the money is going to be spent. I think the government is really foolish not to operate that sort of technique. And I'll tell you it'll be very important. Every week I travel between Derbyshire and London on Railtrack on Midland mainline, and every week the people in the carriage with me say what a mess it is what a mess privatisation was and why on earth doesn't the government take it back into pubic ownership.

Question: So why doesn't he follow public opinion on this?

Lord Hattersley: Well he doesn't always go for public opinion you know. I've never said that the prime minister is only interested in getting elected. I've been a critic of the prime ministers but I've never doubted his sincerity and his honesty. My problem with the prime minister is not that he doesn't believe in anything, but he believes in the wrong things. And I've no doubt at all - I know him very well, he worked for me for four years when I was shadow chancellor, but he actually thinks that private enterprise is going to deliver better results than public enterprise. It's very strange for the Labour leader to be, I wouldn't say obsessed, but captivated by private enterprise, but he really is.

Question: Do you think people would be more willing to pay more tax for public services?

Lord Hattersley: I've absolutely no doubt that we need to pay more direct taxes for public services, I've absolutely no doubt that people would be prepared to do it. Not only the opinion polls suggest that, but the great success of the Liberal Democrat party emphasises that there are votes out there for somebody who is honest enough to say 'we need more money to get the public services right'. And I think Neil Kinnock's idea announced in The Guardian a day or two ago, that we can have a hypothecated tax called the 'health service tax'. I believe that people would willingly pay a health service tax if the government could demonstrate that it could, that every penny of that extra tax was going directly to the health service to improve services.

Question: So at the last election, the Lib Dem's ideas about tax were closer to your view than Labour's proposals?

Lord Hattersley: Yes, and of course on education.

Question: Do the public who provides their public service as long as it is free at the point of delivery?

Lord Hattersley: I think that's probably right, I think the public wants is a health service that meets their needs, but what I said at the start of this interview, I don't believe a privatised health service could. If you look at the bits of the health service that have always been privatised or recently become privatised, if you look at the provision of the ancillary services, lets say dentistry; now dentistry was a service which some of us thought of as free at the point of use. And is, in theory, free at the point of service, unless you live in one of those areas where the private enterprise ethos has taken over, where dentists say 'we don't take health service patients anymore, all we do is private patients'. If you are living in one of those areas, and they are to be found in almost all the inner cities, certainly the part of London where I live. You don't have a choice; you either go private or you travel long distances until you find a dentist who will take you on. Now that's what happens, when the idea of making money creeps in. So its not so much as we don't care who runs the services as long as they're run well, if there is the private spirit behind running them, they won't be run well unless people understand it.

Question: George Howarth says that you are harking back to an era that no longer exists - is he right?

Lord Hattersley: Well he's quite wrong and I'm surprised George says that. I am harping forward to what will be the future of our public services if we adopt what I think pressure will in the end force us to adopt the European standards of public provision. We talk as if the idea of public provision is something that everybody else has abandoned; in France, in Germany, particularly in Scandinavia, the principals which I advocate are operating very successfully and that I think is what pressure from Europe and the social element in the European treaties will force us to do. And in any case, George Howarth ought to have more sense than to judge ideas by their age, you want to judge ideas by their merit, not how old they are.

Question: The last parliament was rather quiet - do you expect to see more assertive Labour back benchers this time round?

Lord Hattersley: I think Labour back benchers will be not as different as they ought to be, but will be to a degree different from how they behaved in the last parliament. Many of them were just grateful that we'd won after 18 years - so was I. Many of them were apprehensive that we wouldn't win for a second time, I'd no doubt that we would, they were treading softly to make sure that happened; and they were also told by the Prime Minister that the first two years are going to be tough, the next two years aren't going to be as good as you hoped for, but the second parliament; life will change. Well, if it doesn't, they'll begin to complain, they were waiting for second parliament.

There is also a more, how should I put it, more cynical element; I think all those young people who got elected in 1997 - all of the them thought they would be cabinet ministers one day. Well a lot of them now think they won't even be parliamentary secretaries because promotion hasn't come their way. There's nothing to ferment independence of mind more than discovering that you are not going to be promoted. We all know stories, there was one from the Tory party in the Sunday newspapers, somebody rebelled and was approached by a whip and said 'this is your career over'. If his or her career is over already, they'll have more commitment, more convictions, more self-respect.

Question: With such a massive majority - how can they make a difference?

Lord Hattersley: I don't think they can make as much difference as I would like to see them make which is why I said, and got into trouble for saying, that I hope the Labour party wouldn't win by a landslide but will win by a reasonable majority. I think that backbenchers are much more powerful when you only have a majority of 50 than if you've got a majority of 200. But the important thing is for some people to start speaking out and I think that's going to start happening now.

Question: What sort of things do you think they will be speaking out on?

Lord Hattersley: I think they will predominately speak out on the public service issues and providing the adequate services for the health and education needs. I think also they'll talk about poverty. The Chancellor of the Exchequer in a sense is our great hope of poverty - he really feels very strongly about child poverty, and I think if he is able to pursue the assault on child poverty he hoped for then that will prevent a rebellion. If he doesn't then I think that there will be a big rebellion, a very big rebellion indeed.