Alone they stand, against a dominant PM

Tony Blair always believed in his heart that the unions were dangerous. Now he knows it, and he will

This is what Tony Blair told the Daily Mail during the 1997 general election campaign: "Britain will remain with the most restrictive trade union laws anywhere in the western world." For once, this wasn't spin. Blair was speaking a plain truth.

The wonder - as teachers join firefighters join local government workers join Tube and train drivers - is not why the trade union movement has suddenly become assertive, but why it has remained quiescent for so long.

Now that the unions are flexing their muscles, Blair is angry. The Prime Minister bestrides the world stage. He has mastered the House of Commons, annihilated the Conservatives and filled public life with his people. Working-class men - the strikers are mainly men and they mainly belong to an old working class that new Labour thought would disperse quietly - stand almost alone between Blair and political hegemony.

For most of the 1990s, the number of strike days lost to industrial action fell to Albanian proportions. Now it has risen, but it is still well below the OECD average and corresponds to around one-thirtieth of the man-hours lost during the winter of discontent in 1979. And yet, as was the case from Jim Callaghan's darkest hour to Blair's moment of triumph five years ago and up to now, Labour leaders believe they must be seen to give union leaders a hiding. Anything else would be portrayed as appeasement.

The reality is more complicated. But, as ever, this is a battle being fought through spin. The terms of engagement are being set by the Daily Mail,which briefly flirted with Blair around 1997 only to dump him, and the Sun, which wants to embrace him as the son of Maggie.

Blair's statements on 25 November were all about reasserting control. Tactically, as even his most loyal servants concede, the government has been caught off guard throughout the firefighters' strike - from the early warnings it ignored in June and July to the sudden decision to tear up an agreement on 22 November, much of which it initially agreed to.

Some conspiracy theorists at Westminster see the hand of the Chancellor involved in more dastardly tricks. Gordon Brown did indeed veto the terms of the deal, but there was no advantage for him in embarrassing Blair or his increasingly close friend John Prescott. Rather, this was a case of collective panic, a fear that a 16 per cent pay deal over three years for the Fire Service would be seized upon - by a Fleet Street they all still fear - as opening the floodgates across the public sector.

This dispute will establish a template, to the detriment of the TUC and the union movement in general. Blair has unwittingly landed on a new formula for future negotiations - all money above a maximum of 4 per cent will have to be found through "modernisation". Yet before the FBU submitted its 40 per cent pay claim, neither the Prime Minister nor anyone in government had the slightest interest in "modernising" the working practices of the firefighters. Now the FBU will get job losses for its efforts.

The ramifications go beyond pay and conditions for individual unions. The Department of Trade and Industry has been working on a review of the Employment Relations Act, introduced in 1999. That legislation was a classic example of the Third Way - Blair gave back to the unions a few of the rights they had lost under Margaret Thatcher but not many. It enshrined statutory recognition for the first time, extended parental leave and gave more workers rights to claim for unfair dismissal.

The DTI is due to report in January on the effectiveness of the act. It asked for submissions. And the TUC last month produced a long shopping list, which included allowing for union recognition in all companies, not just those employing more than 20 people. It reminded the government that Britain still fell way short of International Labour Organisation norms.

The word now from government, however, is: forget it. This was always going to be a sensitive subject. Now it is too hot to handle. Expect nothing more than the most minimal tinkering. And that, until the next election, will be that.

The rot in relations began not in 1997 (the unions expected Blair to round on them to woo the floating voter), but at the start of the last election campaign. Union leaders found to their horror a foreword to the manifesto in the name of the Prime Minister setting out private-public partnerships as the top priority for the next government. It was then spun as a challenge to the unions. Their worst fears were realised - not only was Blair proposing policies they disagreed with, but he was going behind their backs to do it. They kept their counsel during the campaign but let their anger rip afterwards.

So where does all this leave the unions? One step forward and one step back. The grudging respect that Blair showed them during his first term - when they were seen but not heard - has evaporated. He now sees them as the danger he always believed in his heart they were. But the government also knows that it has to come up with a more coherent strategy to deal with them.

John Kampfner, NS political editor, has been named Journalist of the Year (jointly with the Guardian's Suzanne Goldenberg) by the Foreign Press Association for a BBC series on the Middle East