Even if the firefighters' dispute can be resolved, public pay policy is a muddle

There was a mounting sense of confusion and even near-panic at and near the centre of government

Perhaps it is not yet the beginning of the end. But it is certainly the end of the beginning. It may be too cynical or too optimistic, depending on how you look at it, to suppose that when the Prime Minister publicly "takes control" of a crisis, he has usually thought of a way out it. But there may be something in it. And by playing to his own unchallenged strengths as a calm and consummate communicator, he easily managed yesterday to make it look as though the Government at long last knew what it was doing in relation to a fire-service dispute that had shown every sign of running out of control.

Perhaps it is not yet the beginning of the end. But it is certainly the end of the beginning. It may be too cynical or too optimistic, depending on how you look at it, to suppose that when the Prime Minister publicly "takes control" of a crisis, he has usually thought of a way out it. But there may be something in it. And by playing to his own unchallenged strengths as a calm and consummate communicator, he easily managed yesterday to make it look as though the Government at long last knew what it was doing in relation to a fire-service dispute that had shown every sign of running out of control.

How far this is illusory and how far it is real remains to be seen. But it is certainly not before time. A weekend of wildly contradictory statements by cabinet ministers, a heavy-handed, and largely unforeseeable, last-minute intervention to stop a provisional deal to get the current eight-day firefighters' stoppage called off on Friday morning –-giving their union a new pretext for militancy in the process, a search, not always fully justified, for some scapegoats, and some rather cavalier treatment by some government spokesmen of the facts of the case had all contributed, –whether justifiably or not – to a mounting sense that there was a good deal of confusion and even near-panic at and near the centre of government.

The meetings that Mr Blair has now sensibly ordered should take place between a government team led by the minister Nick Raynsford and a cross-party group from the local authorities, led by Sir Jeremy Beecham, and that will begin tomorrow will at least set some explicit parameters for the negotiations on pay and modernisation that the local authorities have so far conspicuously lacked.

We'll come to the long-term implications of that for public-sector pay in a moment. But another reason for thinking that we may be entering a new phase in which with goodwill a settlement before the next strike ought to be possible is that the Fire Brigades Union (FBU) leadership did indeed start to move in the early hours of Friday morning; however, that movement may have fallen short of what ministers judged acceptable.

Let us, at the risk of tedious repetition, not mince words. The Fire Brigades Union's Spanish customs, as they used to be called in the print industry, are way overdue for sweeping change, from an archaic shift system to the degree of job control enjoyed by the union, with many other violations of modern industrial relations practice in between. It wasn't remotely smart of the union to lodge a 40 per cent pay claim. The union could have suspended its strike for another 24 hours to allow further talks on Friday. It is utterly unhelpful – and almost certainly an empty throwback to an age that won't come back – for leaders such as John Edmonds to use antediluvian-sounding language suggesting that this is now a wide and deep conflict between government and unions in general. And a good deal worse, unprintably worse, for far-left union leaders such as Bob Crow to try and put the language into practice.

But there is every sign that Andy Gilchrist, the FBU general secretary, has begun to look for a settlement, whether or not because his membership in some districts was not quite as monolithically solid in favour of an indefinite dispute as others. Not only was he accepting 16 per cent to last until November 2004, but he had agreed to do a little more than merely talk about modernisation; he had conceded that agreement would have to be reached on it before each stage of the cash was paid.

The signs are that John Prescott had appreciated that. Beside the employers, Mr Prescott has been identified in some quarters as the culprit for the dramas of Thursday/Friday in which the local authorities thought they were negotiating in line with government thinking and were then told, brutally and at the last minute, that they weren't. But Mr Prescott is no fool. There were vigorous complaints at Thursday's Cabinet ( not least from the Chancellor) at the inflationary implications of a 16 per cent deal. But no alternative strategy was agreed at the meeting in the absence of Mr Blair, who was en route to Prague, which required Mr Prescott to stop the local authorities from pursuing a 16 per cent pay and modernisation deal. It was only much later in the night that it was decided, more collectively, to overrule the second and, in the view of government, especially deficient, formula that the FBU had accepted.

Mr Blair was at his toughest and most lucid yesterday in explaining the deficiencies of the employers' approach. But his exposition raises, in turn, two further questions. The first, short term, is whether a modified version of at least the first Thursday formula – which the FBU unwisely, as it may yet turn out, rejected – could still form the basis of a settlement. It's a mistake to dwell too much on the tedious detail of this dispute, but equally a mistake to ignore it altogether. As I understand it, the Government's principal objections to this formula are, first, that the timing loads – assuming clear agreement on working practices – all 16 per cent of the increase into a single year of rises, instead of spreading them over a longer period; secondly, that the local authority employers were insisting that sweeping changes in working practices would not be self-financing and additional funding, at least for a transitional stage, would be sought from government. It may not be beyond imagination to bridge this gap, if, inexact a science as it is, the productivity changes recommended by Sir George Bain can be costed – perhaps, given that he says they could be self-financing, with the help of Sir George himself. (The gap between the £180m overall costs of the increase identified by the councils and the £500m identified by the Treasury closes rapidly if the calculations are made on anything like the same basis,)

But there is also a much larger question. Which is whether the Government can get by for much longer without a clear and overarching policy on public-service pay. Mr Blair initially appeared to imply yesterday that all rises over the allotted percentage have to be justified by productivity, though he also implied that might not apply in every case to the very lowest paid (much lower than the firemen for example). At the same time, while many public-service settlements have been much closer to inflation levels, others, like Scottish teachers (23 per cent over three years) and Ministry of Defence staff (20 per cent over four years) have been much higher. Of course, priorities – and labour demand – differ in each sector. But unless they can be sensibly allocated within an overall framework, it may be difficult to avoid the knock-on effects the Government rightly fears. Mr Blair will be very wary of anything that smacks of old-style corporatism. But the decision to intervene in the fire-service negotiations – and the government/employer talks that begin tomorrow – suggests that the time may have come for a public-sector incomes policy by any other name.

d.macintyre@independent.co.uk