The firefighters simply don't get it. They mustn't be allowed to prevail

Here is a quiz question to enliven a grey November morning. Can you name the politician who made the following boast about the benefits of higher public spending? "You only have to travel to see it: 180 miles of new trunk roads being built; railways being electrified; Tube stations vastly improved; new power stations; £900m next year to improve the water supply; 51 major hospital projects under construction. This is a colossal programme."

The mystery speaker sounds like Gordon Brown on speed, someone who was being colossal for a purpose. Actually the speaker was not a he but a she. It was none other than Margaret Thatcher at the height of her powers – and power – in November 1986. Such was the dismal state of the public services that the Lady who had not been for Turning had to turn pretty damned quickly. On entering Downing Street she had proclaimed the need to cut public spending. After a year or two she suggested more meekly that she would "contain" the level of public spending. By 1986 she was showing off about the rise in spending.

What is more, this was not merely a presentational sleight of hand. In the Budget that followed, her Chancellor, Nigel Lawson, announced more than £10bn of additional spending on schools, hospitals and housing. He did not just announce it. He boasted about it. He was being colossal too.

Why was it, then, that during the Eighties there was a notion that Conservative governments cut public spending when they had done no such thing? Indeed, public spending under Mrs Thatcher rose considerably compared with what it was under the previous Labour government. The answer is one that the firefighters and others should reflect on this weekend: much of her additional cash was soaked up in pay increases for existing workers in the public sector. So both of the following statements are true: the Thatcher government spent more on health, education and housing; the NHS, education and housing deteriorated.

Here we go again, or here we might go again if the firefighters get their way. At a time when the Government is daring to argue for higher public spending (in its long timid phase, New Labour forgot that Mrs Thatcher had also argued for higher public spending in the speech quoted earlier), the public-sector unions are seeking huge pay increases without reform. If the unions were to prevail, it would be a catastrophe for the public services and for the argument that the level of public spending can make a difference to the quality of life, all our lives.

In the past this column has criticised the Government's fearful caution over "tax and spend" and opposed its tendency to believe, vaguely, that the private sector can nearly always come to the rescue of the public sector. There is, though, another side to the equation. Now that Mr Brown has set aside largeish sums for the public services, those who work for them must do their bit. The refusal of the firefighters to discuss reforms of their working patterns in return for a substantial pay increase show that they simply do not get it. They do not get what is at stake over the next two or three years. The same applies to other complacent bodies in the public sector, from the hospitals and universities to the BBC. If they think they deserve additional cash without changing the way they function, they do not realise that in each case they are in the last-chance saloon.

This is what will happen if the firefighters receive large pay rises without reform, or the universities receive big increases in resources while remaining staidly bureaucratic, or the hospitals soak up resources in pay increases without becoming more efficient: those who believe that higher spending cannot lead to better services will claim triumphant vindication.

Of course, they will do so without good reason. The fact that travelling anywhere in Britain is the equivalent of taking part in a daily assault course, that still some hospitals cannot cope, and that universities are unable to compete in a global market, is partly due to lack of spending. But remember that Lady Thatcher spent, and services got worse. In order to make a difference, and be seen to make a difference, the current additional public spending must be focused on Britain's creaking infrastructure, as well as employing more people where necessary and paying them higher wages in return for reform.

After all, Britain has a lot of catching up to do. When Lady Thatcher was showing off about the improvements to the public services in the mid-Eighties, she did not add that this was tiny compared with our European partners, or that her spending spree followed decades in which Britain had been cutting back (note that in her 1986 speech she boasted only about the renovation of London Underground stations. She did not dare to make the claim that anyone would actually be able to catch a train. When will a politician ever be able to make such a claim?). While Lady Thatcher is wrongly associated with spending cuts, mythology suggests that the previous Labour government was a reckless spender. In reality, "Old Labour" was cutting back ruthlessly on spending by 1975, a year before the IMF wielded the axe. Even when that government was spending, it tended to be on wasteful food subsidies – and wage increases that were wiped out by inflation – rather than on the country's infrastructure. So the current government, belatedly and sometimes incoherently, is attempting to overcome a shortfall in spending that has lasted since the early Seventies. The unions should be co-operating rather than trying to undermine this modest crusade.

Will the Government stand firm? My guess is that it will, but not always for creditable reasons. It was supine in the face of the fuel protesters because parts of the media – and the public – shared an appetite for lower petrol prices. This time, much of the media is on board and the firefighters have stretched public sympathy with an excessive demand and, crucially, a refusal to discuss other reforms. No doubt some of the more ardent Blairites will naively try to out-Thatcher Thatcher in their condemnation, assuming that Middle England will be impressed with their machismo. But presentational style is, as ever, a diversion from the main issue, which is this: public services in Britain are poor to the hindrance of all of us, especially those on low pay. They can only improve with much higher public spending and reform. If the Government concedes ground to the firefighters it will lose the case it has tentatively made for higher taxes. The only beneficiaries will be the fantasists who claim that it is possible to have much lower levels of taxation and European standards of public services.