Private woman, public mission: Margaret Hodge, former council chief, now a consultant intent on local authority renewal, talks to Rachel Lipman

MARGARET HODGE looks up from her notes and apologises for her office. 'I'm here only one day a week so they've stuck me in the back,' she says. We are meeting not at Price Waterhouse, where the former leader of Islington council is a public sector consultant (with the obligatory plush office), but at the Institute of Public Policy Research, the Labour Party think-tank. Twenty years in politics is a long time, she says, so she works for the IPPR on Fridays because she cannot bear to cut the umbilical cord. This enables her to take part in seminars, travel to Central and Eastern Europe for the institute, formulate Labour Party policy on public services, and even speak to 'the hero (J K) Galbraith' occasionally.

'My one day a week here is very important to me,' she says. 'There is a lot of important thinking going on about the positioning of the left in the UK and elsewhere, so I'm happy to be here.' The link keeps her in touch with a powerful group of Labour women, such as Lady Blackstone, Patricia Hewitt and Harriet Harman, who are influencing Labour policy and who put women's issues on to the party agenda.

Margaret Hodge, who is 48, was leader of Islington council for 10 years, during which she was hissed at by the tabloid press and pilloried for introducing practices that have become orthodoxy such as racial and gender monitoring, now known as equal opportunities, and workplace creches. Her 'loony left' label seems ridiculous with her well-cut hair, tailored cerise jacket, lipstick, and friendly manner. But you dare mention it. 'It makes me cross when people assume that because I come from a well-heeled, middle-class background I am somehow a class traitor for belonging to the Labour Party. It's the awful British class system. I am an outsider: I don't feel part of a class and never have.'

The mother of four came to this country at the age of five from Egypt, where her Austrian mother and German father met and married. They were refugees after the war, desperate to find a country that would accept them and their four children. A fifth child was born here. Her father made money out of steel before nationalisation and raised the family in some comfort in Orpington, Kent. 'My commitment to democratic socialism came because I was an immigrant and stateless. If anything, I feel deeply European,' she says. She speaks French, Italian and German.

In April 1992, she had hoped for a role in a Labour government - she is not saying what, but some believe as a local government expert in the Lords - but when Labour lost, she decided to seek new challenges.

She also felt it was time Islington had a change. So she joined Price Waterhouse last November, and to her surprise, is liking her new job more than she thought she would. So far. 'I am finding the work very varied and stimulating. It is certainly a change not to be the boss person, and that's very relaxing.' She is intrigued that people are actually nice to each other, 'which you can't always say about politicians', or indeed the tabloids.

She deplores 'the myth of the great divide' between the private and public sectors and wishes 'the Berlin Wall' between them would come down so that both sides could benefit from the other's knowledge and expertise in evolving policies. 'It is crazy to believe that because you belong to the Labour Party you work in the public sector and because you belong to the Conservative Party you work in the private sector. The sectors have a different purpose, certainly. We make money out of providing advice to improve the public sector. Equally, in the public sector, we had to ensure we got the best value out of the money we spent. They are different sides of the same coin, really.'

So what does she do now? 'I am doing what I was doing before, only now I'm getting paid for it,' she quips. This means advising councils, government departments and government agencies on anything from local authority reorganisation to market testing to setting up a housing co-operative on an inner-London estate. Her selfstyled mission is local authority renewal. 'That's my catchphrase.' She is convinced there will be a renewal of the public sector because the Thatcher government was unable to privatise everything and the Major government talks about improving public services.

What has happened, Margaret Hodge believes, is not privatisation but what she calls externalisation. There has been a fragmentation of the public sector into GP fund-holders, hospital trusts, opt-out schools, quangos, housing associations, and so on. All are still funded by the public purse. 'In the early Eighties a lot of councils were labelled loony left. Now there are a lot of councils who are loony right. They have ended up with a hodgepodge of contractors who run services in a totally incoherent way so that the whole issue of accountability is emerging. There is the kernel of recognition by the Government that simply opening up services to competition is not enough.

'After all, how do you get accountability for your local hospital if it is run by a trust?' Equally, how can you expect accountability from a government that has put accountability out of fashion? 'When your opt-out schools start failing, when you can't get into hospital for your operation, people will start asking questions and demanding change. The key to improving the quality of public services is opening them up to public account.' These are issues both the Government and the Labour Party need to address, she says, adding that the challenge for Labour is to seize the initiative and develop good policies. There are two ways, she believes: the democratic way of using a range of management tools (such as complaints or performance indicators like truancy in schools) to improve quality, or the Government's way of buying or selling. 'Saying to people you can have a fiver in your pocket if your train is half-an-hour late doesn't solve anything. Your boss is still unhappy because you are late for work, and your objective is not compensation but getting to work on time.' The fragmentation and centralisation of local authority power opens a new opportunity for local councils, Margaret Hodge believes: local elected representatives can use the power of their office to expose the failings in the public sector and call the body responsible for that failure to account.

She says: 'Rather than being the traditional provider of social services, the councillor can be the voice of the community. Ironically, the Government may be hoist on its own petard because it's rather a good role: power without responsibility.' She laughs heartily at the image of local councillors around the country demanding to know why a hospital trust, or opt-out school, or housing association has failed to deliver what it promised. 'When people realise the potential, they may grasp it with enthusiasm.'

(Photograph omitted)