Mr Blair has ridden his luck. Now it's time to employ his judgement

Tony Blair has been extremely fortunate in his opponents. In recent years the Conservatives have presented him with the youthful William Hague and the inexperienced Iain Duncan Smith. Now he has struck lucky again. In a totemic industrial dispute Mr Blair is up against Andy Gilchrist from the Fire Brigades Union, a leader who has displayed a strategic ineptitude from the start. If Mr Blair had been praying for an industrial dispute in which to make a mark this would surely be it.

Mr Gilchrist may have won the occasional tactical victory against the Government, but step back from the daily fray and all he has succeeded in doing is to draw attention to the firefighters' generous working arrangements and the need for reform. Even worse, as far as Mr Gilchrist is concerned, the Army has been coping fairly well during the strikes with far fewer resources and a smaller staff. British soldiers are making more practical impact in keeping fires at bay than they will ever make maintaining the pretence that Britain is capable of standing "shoulder to shoulder" with the United States in Iraq. The Army is an efficient state-owned industry and could be profitably employed saving other public services. If I cannot get to see my GP I look forward to an appointment with Sergeant Smithers of the North London Platoon for advice on my asthma. Perhaps the increasingly inefficient Royal Mail could be replaced by a military coup. It would almost certainly be quicker if letters were delivered by tank.

Mr Gilchrist not only aimed too high. He mistimed his assault, leading a strike at a time when Gordon Brown was delivering his gloomy pre-Budget report. Mr Prudence is borrowing much more than he had expected to, and that is without agreeing to a pay claim at least eight times the rate of inflation. The Chancellor made his statement last week from his familiar position as the "leader in waiting", much the most awkward position in British politics. Michael Portillo knows what that is like, having acquired that role for several years in the Conservative Party. If Mr Portillo went to the opera it was seen as a leadership bid.

Whatever Mr Brown says and does is also seen by some as a plot to take over from Mr Blair. I have no doubt that Mr Brown wants to be Prime Minister and is conscious always that if he had paid more attention to his personal ambition after the 1992 general election he, rather than Mr Blair, might have been leader in 1994. He has no intention of being neglectful of ambition again. But that does not mean he will say or do anything to get the crown. His tough stance with the firefighters is one example of that: in an interview with me on ITV last Sunday he spoke of his "iron resolve" not to give in to them. It was not exactly an interview aimed at delighting the unions.

His pre-Budget statement last Wednesday was widely interpreted as a leap from prudence to risk-taking partly to appease Old Labour, in readiness for a leadership bid. This is nonsense. Mr Brown had three options: he could have put up taxes even more than he already plans (there is a hefty increase looming), cut public spending or increase borrowing. Politically and economically he chose the least risky option and put up borrowing to a level that is still small compared with Conservative governments of the 1980s.

The impact of international terror on the British economy, or a bungled war against Iraq could blow the economy badly off course, but the Chancellor paid off so much debt in the heady days of the first term he deserves the chance to borrow now.

The defining moment for the Government was not on Wednesday, but a year ago when Mr Brown – and then Mr Blair in an interview for this newspaper – came out in favour of higher taxes to pay for better public services. From that moment there was no turning back, certainly not in terms of spending less money on public services.

Unintentionally, Mr Gilchrist has made sense of the two men's wider message that reforms must accompany the increased investment. "Invest and reform" has been a ministerial slogan since 1997, but the words were virtually meaningless in the early years as Mr Brown chose not to invest and the reforms were not properly thought through. That first term has a curious ghostly feel to it, four years in which ministers seemed busier than they really were. Mr Gilchrist has given them an opportunity to be more fruitfully active.

That means being equally active with the police, the consultants and others who are on the whole better paid than the firefighters. To some extent this is already happening. David Blunkett reached an agreement with the police last summer in which the abuses of overtime arrangements were partially addressed. Alan Milburn appears to be standing firm with the consultants who seem taken aback by the idea that they should commit themselves to the NHS for a big pay rise and be available to work some weekends. But there are plenty of other odd working arrangements.

We all have anecdotes on this matter. I recall a period when it was increasingly difficult to get an appointment with my then GP, yet regularly bumped into him strolling with his wife on Hampstead Heath on a weekday afternoon. I sometimes wondered whether it would be worth arranging for a quick check-up at the nearby café. There is also the case of the so-called BBC executive whom I accidentally meet on the Buckinghamshire hills on a Monday afternoon. I could go on, but readers might start to ask questions about my working arrangements that enable me to bump in to these people on windswept slopes. I have an answer: carrying out research for this article. That's my story and I am sticking to it.

Mrs Thatcher has been much quoted in the firefighters' dispute, as if she had the measure of the public sector. Evidently this is not the case or else there would be no need for such sweeping reforms now. She was more interested in being seen to defeat the "enemy within" and then publicly "rejoicing" at the outcome. While she was busy rejoicing other unions in the public sector quite often negotiated fairly generous pay settlements without committing themselves to reform. Why work with a government that regards you as an enemy?

Which means that one of the current Government's toughest challenges is to avoid humiliating Mr Gilchrist and his allies in other trade unions. Mr Blair will require their co-operation to implement his much vaunted reforms. He will therefore need to manage the inevitable "victory" with more subtlety than he is managing the strike.