The Salamander, a sort of dragon, is in trouble with the Fire Flies, because he is unable to create a fire by breathing on a pile of sticks.
To redeem himself he is sent on a mission to burn down Papertown.
The paper inhabitants, including the Papertown Crier (a newspaper), the Postman (an envelope), Professor Paperback (a book who runs the bookshop), Mr. Quid (a pound note who is the Bank Manager) and Lady Carrier Bag – gather their resources to meet the threat. Spike the Pen (the litter collector), Fireman Silver, and even the cheeky Litterbug become involved, and the two petty criminals, Blotch and Carbon, are released to join the forces.
In the end, Salamander, who has fallen for timid little Tishoo, joins the paper people in thwarting the Fire Flies, and Papertown is saved from destruction.