WHEN NORMA Redfearn took over West Walker primary school on the outskirts of Newcastle in 1986 she found a school in a state of collapse. Only a third of the classrooms were in use. Most of the children were on free school meals and from families with no recent experience of work. Most of the parents were lone mothers, who had left school as soon as they could, with few qualifications or happy memories. About a fifth of the school was absent without leave on any one day; many of those that did turn up came without having had breakfast - at about 10am.

She set about reviving the school. In the process she transformed herself into a “civic entrepreneur” and the school became more than an educational institution - a focus for community renewal. She involved the parents, local people and staff in rethinking what the school’s job was - not just to teach children but to educate entire families; not just to deliver lessons but to enable people to learn by making sure they were fit, healthy, well-fed and housed. To do her job as headteacher, she had to focus not just on what went on inside the buildings, but on the web of relationships - with parents, politicians and local businesses - that supported the school.

These days West Walker is thriving. A breakfast club, (sponsored by food companies because the local authority would not fund it), serves about 60 children each morning. Some of the spare classrooms have been converted into an adult education centre, so the parents can learn alongside the children. Two parents from the school have set up a cr che to allow others to go on training schemes.

The school is home to an environmental warden who looks after the nearby urban park, and a social services worker who is on hand to work with many of the parents. Some parents who got together creating an environmental garden at the school, set up a housing association, which has just built a 70-home estate on derelict land opposite the school.

West Walker’s renewal demonstrates the politics of the Third Way in action. The ingredients which have gone into its revival are at the core of what the Third Way should mean for our education system: innovating to meet changing needs and to generate higher social value from under-used assets; and breaking down the professional and organisational demarcation lines within the public sector, which prevent people finding mutually advantageous solutions.

The central ethic of the Third Way is simple, and rather traditional: co-operative self-improvement. The Government’s job is to help people get together to help themselves. The three ingredients of that formula matter.

First, the Third Way is about unleashing a drive for self-improvement. That is unashamedly individualistic but not consumerist: learning is the key to self-improvement, not spending.

Second, politics of the Third Way encourages people to recognise their shared needs and the potential for shared solutions. It promotes co-operation and collaboration, as well as ambition and striving. This is not wishy-washy political correctness. The most dynamic, knowledge intensive sectors of the economy - software and biotechnology - thrive on a mix of competition and collaboration.

Third, the Government has a role, as a regulator and facilitator, to encourage co-operation and to set standards. That means the Government focusing on making sure providers, both public and private, deliver the outcomes that people want from publicly-funded services. It does not mean the public sector has to provide these services itself.

These principles could be applied to most of the education system - but to illustrate what they could mean, take the future of local education authorities as an example. It is clear that there is a role for a middle tier in the education system, between the Department for Education and Employment, which sets standards, and the school, which attempts to meet them. This middle tier has two main functions: to provide schools with collective services and rules which they cannot provide themselves, such as special needs teaching and coherent admission policies for a locality; and to help schools meet the standards expected by parents and the Government.

This latter role is crucial. To fulfil it would mean having an intermediary body which was capable of acting as a public sector venture capitalist, spotting good ideas in one school and helping to spread them to others. The role of the middle tier is to identify and spread best practice, to be a clearing house for good ideas and a home for innovators.

The trouble is that too few local education authorities, trapped by local party politics and bureaucracy, are up to playing that role. That means in future we should have a wide diversity of organisations bidding to fill this middle tier. Some of these intermediary bodies could be private sector education and training providers. Others could be created by groups of schools in a district getting together to create their own “management-buy out” of the local authority. Another option would be for a local authority to be directly elected.

The future lies in promoting diversity and experimentation in pursuit of value-creating innovations. A greater variety of organisations playing the intermediary role will promote more diversity and experimentation with delivery - with perhaps a growth in home-based learning or specialist schools - within a general curriculum and standards set by government.

The problem with much of our public sector is that it has failed to learn and innovate at the pace of the society it seeks to serve. For the Third Way to deliver, it must be more than feel-good rhetoric; it must be the politics of public service renewal through innovation.

Charles Leadbeater is a senior research associate with the think-tank Demos. His most recent book, ‘Civic Entrepreneurship’, is published by Demos, price pound;9.95. Next week: Roy Blatchford