It is up to public service workers to prove that money can make things better

Inadvertently, the strikers are allying themselves with those who argue that there is no point investing in public services

The timing is unfortunate, to say the least. On Tuesday the Government spends a fortune on public services. Yesterday a strike by local government workers disrupted public services in most parts of the country. The rubbish bins in parts of Sunderland were not emptied, the schools in the London borough of Haringey were closed and the doors of some libraries in Bournemouth were locked. This was a strike that went nationwide.

The timing is unfortunate, to say the least. On Tuesday the Government spends a fortune on public services. Yesterday a strike by local government workers disrupted public services in most parts of the country. The rubbish bins in parts of Sunderland were not emptied, the schools in the London borough of Haringey were closed and the doors of some libraries in Bournemouth were locked. This was a strike that went nationwide.

In theory, leaders of the councils should be feeling more twitchy about this than anyone else. After all they are theoretically responsible for delivering the local services. In a more rational world they would be pulling every lever to sort this out. In some areas, perhaps, that would involve paying their workers more money, in others it might mean a deal in which additional cash was linked to greater productivity, in some they might decide to take their workers on, arguing that compared with the private sector they are enjoying relative security and good working conditions and holidays.

The slight problem with this is that these local leaders do not have the levers to pull. The level of their budgets is largely determined and provided by central government. Council leaders might be twitching in Bournemouth, Haringey and Sunderland, but there is not a lot they can do. Those who are twitching with some justification are ministers in Whitehall. They are the ones who pull the levers, providing 85 per cent of the cash spent by councils and more or less deciding how the money is spent.

Ministers are justified in their twitchiness. This week's Comprehensive Review was not a great, unexpected thunderstorm from a clear political sky. The overall level of spending was announced at the time of the Budget. The amounts involved, although large, will mean Britain is still spending slightly less of its GDP on public services than in the mid-1980s under Margaret Thatcher. The significance of the Spending Review lies more in the dramatic shift in the nature of the political debate.

Until recently both major parties pretended that the level of public spending was not especially significant. Labour argued in its 1997 manifesto that the level was less important than how the money was spent. The debate has changed now. As Tony Blair said in his illuminating two and a half hours in front of the Liaison Committee on Tuesday, the basic divide between the centre-left and right is that the former has more faith in government as a positive force. The Government is proposing to invest and reform, to be highly active, while the Conservatives are hinting that they would step back, spending less and being much less active as well.

Tony Blair and Gordon Brown have transformed the political situation from the 1980s and 1990s, decades when their party was not trusted to spend a halfpenny. The turnaround is one of the more significant political achievements of the post-war era.

But they are taking a risk. They are experimenting with social democracy in a country that suffered from a delusion for a quarter of a century that public spending would not make any difference. The delusion was irrational. If a person buys a run-down house he or she might change the way the house is cleaned and organised, but they would also spend some cash on the infrastructure. For some reason the same logic was not applied to public services. Even now right-wing newspapers scream about rising crime and the state of the hospitals. They scream with an equally high pitch when the Government spends more money in order to recruit more nurses or to get more police on the street. They seem to see no link between the squalor they report hysterically and the need to spend money to reduce it.

They are not alone. There will be plenty of taxpayers wondering this week whether their money is going down a bottomless pit, especially as they struggle to get to work without the Tubes or discover that their local leisure centre has been closed for the day. Which is why those who work in the public services have at least as pivotal a role as the Government in proving that the money can make a difference to the quality of services. An outbreak of large-scale strikes in this new political context would be disastrous.

Excessive pay demands that swallow up most of the additional cash would also be disastrous. Some of the money will rightly be spent on paying existing staff more, but this cash must also be targeted at recruiting more staff and improving the infrastructure of public services. The political case will be lost if the only people to feel a direct benefit from the Comprehensive Spending Review are those who already work in the public sector.

Yesterday's strikers and the London Underground workers taking industrial action today are inadvertently allying themselves with those who argue there is no point in investing in public services, that all the money will go down the drain.

The Government, for its part, must realise that the current imbalance between national and local responsibilities is crazy. A bin is not collected in Sunderland? Contact the Deputy Prime Minister, the man in charge of local government. For the past year there has been much agonising in Downing Street and the Treasury about how to encourage more local flexibility and innovation without losing all control over how the money is spent.

It is the biggest conundrum facing the Government. As Mr Blair said to the Liaison Committee, it is not politically feasible in these early days of higher spending for a Government to take all the risk by raising taxes and then to hand over the cash with no questions asked. It is even more difficult and riskier when local levers have not worked for decades. Ken Livingstone observed in the mid-1990s that anyone who wanted to be a councillor, given the decimation of local government, needed the help of a psychiatrist. He was right. There are now a few very good councils, but many in need of help.

Managing a transition from highly centralised control to a more pluralist approach is a nightmare. The Government is genuinely grappling for a solution to the conundrum. Regional development agencies are getting bigger budgets and much more choice over how they are spent. Headteachers and better performing hospitals will also get more autonomy.

But Britain remains the most over centralised country of any advanced economy. That is why the "tax and spend" narrative is not over yet. There is another stage. The Government, once it has pushed up standards from the centre, must let go of the levers and hand them over to local bodies and allow them to get on with it. There will be risks, but also plenty of benefits. Not least, other politicians will have to take responsibility if a rubbish bin is not collected in Sunderland. In that brave new world the Deputy Prime Minister would be able to tell an irate householder from the North-east to contact the leader of his council about the state of his bins.

s.richards@independent.co.uk