Haunted by his party's history, Blair remains defiant

It was a long time coming, but the Prime Minister is determined to win his first major showdown with the unions

If anyone questioned Tony Blair's resolve to resist the firefighters' strikes, his remarks to a Labour fund-raising dinner in Cardiff last Thursday left his audience in no doubt. "What we are never going to do as a government is to go back to the days that we left behind us, that scarred us, that left us with 18 years of opposition," he said.

Mr Blair has never forgotten the images of a Britain paralysed by strikes during the 1978-79 Winter of Discontent, which left many voters with a long-lasting impression that Labour was unfit to govern. "Never again" is his maxim.

The inevitable clash between the Blair government and the trade unions was a long time coming. But when it came, Mr Blair was not prepared to pay the price of defeat.

The dispute started badly for the Government. There were mixed messages from ministers. John Prescott, the Deputy Prime Minister, worked tirelessly behind the scenes to bring the FBU and the local authority employers to the negotiating table. He hinted that extra government money might be available to meet the transitional costs of a pay deal linked to modernisation of working practices.

But Gordon Brown, the Chancellor, had other ideas. With public-sector inflation more than twice that in the rest of the economy, he was not prepared to see the billions he has pumped into public services soaked up by higher pay.

The different signals from ministers encouraged the employers and the union to try to squeeze more money out of the Government. Twelve days ago, they cooked up a deal involving a 16 per cent rise over two years, which depended on taxpayers' money to bridge the funding gap. But their middle-of-the-night hopes soon ended when Mr Prescott, kept informed at his country retreat at Dorneywood, would not endorse an agreement that included unquantified costs for the Government.

So an eight-day strike went ahead, on top of a previous 48-hour stoppage. The employers and the union blamed the Government for vetoing a deal. Worse still, a slick public relations operation by the FBU blamed Mr Prescott for not wanting to get out of bed. In fact, he was up most of the night, but the damage was done.

The Government suffered its worst moments of the dispute. "We were slow off the mark," one insider admitted. For once, the Number 10 spin doctors had been outspun. Mr Blair's official spokesman hit back with a strongly worded statement, attacking the overnight talks as a "ludicrous charade" and saying the country could not "be held to ransom".

The temperature was rising fast. Over the weekend before last, there were still mixed smoke signals from the Prescott and Brown camps. Tony Blair, just returned from a Nato summit in Prague, knew he had to take personal charge.

He called an unscheduled press conference at Downing Street on Monday last week in which he warned the FBU it had embarked on a strike that it could not win. "It would not be a defeat for the Government. It would be a defeat for the country," he said. Number 10 insiders claim that the Prime Minister's appearance steadied nerves inside the Government. "From that moment, we were back on track," said one aide.

Although there were still some false starts – for example, when Mr Prescott unintentionally suggested that 11,000 firefighters' jobs might be at risk – ministers sensed they were in the driving seat.

The Downing Street spin doctors, who had perhaps underestimated the FBU at the outset, concluded that while the union was clever at day-to-day tactics, it lacked a strategy. The union, they said, had opened "a can of worms" by allowing the dispute to shine a torchlight on the archaic working practices in the fire service. Their rising optimism was boosted by opinion polls suggesting that public support for the firefighters was waning.

As the eight-day strike drew to a close on Saturday, the fraying nerves were in the union rather the Government. Dave Patton, an FBU national officer, insisted the armed forces were "not coping well" in providing emergency cover. Adam Ingram, the Armed Forces minister, hit back, saying Mr Patton was "not fit to lace their [the servicemen's] boots".

The bitterness increased on Saturday when Andy Gilchrist, the FBU general secretary, addressed the Campaign Group of Labour MPs in Manchester. "I am quite prepared ... to work to replace New Labour with Real Labour," he declared.

To his allies, it was more a statement of his views as a senior Labour Party activist who hopes in the long term to bring about changes in the party's direction, rather than evidence that he was a Scargill-like figure who believed in industrial action as a political weapon.

But his remarks were immediately seized on by ministers. The Prime Minister's private criticism of the FBU leadership as "Scargillite" seemed vindicated.

Although ministers saw the outburst as a crucial turning point, the truth might be more complicated. At the same time as firefighters' leaders were damning New Labour and all its works, they were already engaged in discussions to bring their dispute to an end.

Yesterday, FBU officials revealed they had been in talks with Rita Donaghy, the chairwoman of the conciliation service Acas and former TUC president, since last Friday.

Tough talk in public and moderation in private is a tried and tested weapon in the trade union armoury. Mr Gilchrist had clearly decided that a long strike would only reinforce the resolve of ministers, erode public support and result in an eventual disintegration in the solidarity of his members.

His analysis, however, was not popular with a substantial minority of the FBU executive, which met in Norbiton, south-west London, yesterday. Mr Gilchrist was under pressure to press ahead with the next eight-day strike, scheduled to start tomorrow. It took the FBU general secretary and his more moderate colleagues some four hours to win agreement for suspension of industrial action to allow talks with Acas to take place.

Talks are expected simply to involve an exchange of views between the union and employers over modernisation. Among the points at issue will be the staffing of fire stations during the night, the degree ofjoint working for part-time and full-time firefighters, and the scope for introducing joint control centres involving all three emergency services.

Fire employers were at pains to point out that the proposed session would not involve active mediation by Acas officials, and certainly not arbitration. The deal tentatively struck between the FBU and the employers before the eight-day strike had involved arbitration – a point the Government was not prepared to concede.

The planned Acas session will be "talks about talks'', but they are likely eventually to result in some kind of agreement to call off industrial action. While FBU officials argued that a further eight-day stoppage due before Christmas remains "live'', Mr Gilchrist is not likely to be able to march his soldiers up to the top of the hill again.