The Royal Mail faces losing its exclusive right to deliver letters after union leaders threw out a fresh pay package.
As the Communication Workers' Union rejected a peace formula endorsed by its senior negotiators, the Government released details on plans to introduce the toughest union laws since 1979 .
Under plans being considered for the Conservative election manifesto, public sector workers could be required to sign contracts to take disputes to arbitration. Some Labour Party advisers support a similar policy, but Tony Blair has rejected the idea.
A number of senior Tories argue that legal immunities should be withdrawn from unions leading strikes in the public sector. Under such proposals unions could be sued by any individual or company who suffered damage through industrial action. If such legislation were passed it would amount to the most draconian labour law passed in peacetime.
Ian Lang, President of the Board of Trade, made clear that among the targets for legislation would be the Royal Mail and London Underground. "There is really no need at this stage of the 20th century for the nation to be brought to a halt by one narrow self-serving interest in a monopoly public service."
Senior ministerial sources indicated there were likely to be announcements at the Tory party conference at Bournemouth in October.
In defiance of their leadership the 24-strong postal executive of the CWU rejected a formula thrashed out at conciliation service Acas. It opposed "team-working" and insisted that 30 per cent of the mail should be set aside for the second delivery to protect jobs.
The union suspended a 48-hour stoppage due to begin today, but another day-long strike is scheduled for next Tuesday and the executive is expected to set dates for further action when it meets next Monday.
Union leaders now expect the Government to carry out its threat to suspend the Royal Mail's monopoly on delivering letters for less than pounds 1.Reuse content