 When the Labour leader Ed Miliband outlined his view of the future of the British political economy last month in Liverpool, he spoke of drawing a distinction between good and bad capitalism: a choice between "wealth creators" and "asset strippers" - or, more pithily, "producers" and "predators".  For some, it was time-warp politics - a mixture of continental-style state intervention and industrial policy, which is where the Labour party left off before it was rudely interrupted by Margaret Thatcher in 1979. But to party insiders, this interpretation was wrong.  "What Ed was talking about was that employee benefits were given a greater priority than the role of equity ownership. That idea has underpinned the Labour party for 100 years," says Tessa Jowell, shadow cabinet office minister.  Next month, the government will publish its plans to open up public services, following its consultation paper in the summer. Labour's thinkers say this is the kind of transfer that needs to be examined using Miliband's resonant language.  While Cameron's key lieutenants Steve Hilton and Oliver Letwin talk about letting citizens and users seize control of the "big state", the Labour party's brains see such policies as cover for letting private capital creep in and take over public services.  That is one of the central messages of a new pamphlet by the centre-left thinktank Policy Network, entitled What Mutualism Means for Labour: Political Economy and Public Services. Jowell, who wrote the foreword, says there is a race between the parties "to see who can come up with the best version of a moral capitalism".  For Jowell, mutuals provide the riposte to the Tory advancement of private equity. "In the wake of the credit crunch, the public have made it very clear that they are unwilling to put their trust in organisations that they feel are not run in their interests and operate outside of their control." She points out that co-operatives have thrived in Europe. although we have the worker-owned John Lewis department store, with sales of ?8bn a year, this is half the size of Spain's Mondragon co-operative - a bank-to-bikes international conglomerate.  The latest research from CECOP, the European lobbying group for mutuals, shows that co-ops have not only outpaced their private sector rivals in terms of creating jobs during the recession but they have also experienced fewer failures.  So great is the success that in some countries, such as Sweden, 15% of the economy is mutualised. However, this seems unreachable in the UK, given the government's direction of travel, says Tristram Hunt, historian and Labour MP for for Stoke-on-Trent Central. He argues that renewable energy co-operatives have seen funding cuts, as have co-operative schools, while ministers have shelved plans for more co-operative Sure Starts and housing trusts. Hunt says "co-operative values are deeply embedded in the Labour party's DNa; for David Cameron, they are only skin deep".  While the coalition agreement promised to "foster diversity and promote mutuals", Labour says the government is failing on three key areas. The Cabinet Office says it wants a million public sector workers owning their own firms by 2015, but so far just 45,000 have done so, it points out, and the Treasury has rejected remutualising the Northern Rock bank.  The most significant failure, says Labour, is that ministers are not really promoting true co-operatives. Rather, the government is redefining co-ops to include entities that are majority-owned by private shareholders but where there is a minority stake held by workers.  Circle Healthcare, which is in line to run NHS hospitals, is 51% owned by City investors and pays them a dividend but is classed as a mutual by the government. In contrast, a true co-operative and all its profit is owned by members.  "This is really a trick of language," says Jowell. "The coalition calls them mutuals but they are in fact corporates. Our concern is that there is no asset lock and so when we are transferring public assets to these so-called co-ops, which are in effect private equity firms, they can make easy money by selling off (the assets)".  What happens when an asset lock is not in place - and money is dangled before once community-minded mutualists was proved in the mid-1980s when building societies were given the right to demutualise. Bradford &amp; Bingley and Northern Rock both seized on this, then were brought to their knees in the financial crisis.  Gregg McClymont, Labour MP for Cumbernauld, Kilsyth &amp; Kirkintilloch East, also points out that the coalition wants mutuals to compete with private firms. This means they will need large war chests to vie with companies that will eventually "hollow out" the mutual with private equity taking ever-larger stakes.  "at 80% ownership the private equity firm has complete control over the company, not the employees. at 75% ownership a shareholder can, under company law, amend the articles of association in any way the majority shareholder sees fit," says McClymont.  In a response to the government's consultation, unions today warn that the coalition is increasing the private sector takeover of public services. "When multimillion-pound public service contracts are up for grabs, any pretence of empowering public service workers goes out of the window," says TUC general secretary Brendan Barber, pointing to the failure of employee-owned Central Surrey Health to win a recent contract awarded to a private provider 75% owned by the Virgin Group.  McClymont is no dewy-eyed enthusiast for co-ops. They have been unpopular with trade unionists who fear the differences in pay and conditions that decentralisation gives rise to. He writes in the Policy Network pamphlet that when "(public services) at the local level are mutualised . . . one can argue that they could possibly become more responsive. Currently, the best one can say is that it is too early to accept the evidence whic 