Rail strike is key test of pay policy

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THE CABINET will today reinforce its determination to 'tough out' what yesterday escalated into an open confrontation with the main rail union. This morning, ministers will pave the way for another year's freeze on public sector pay bills.

In the starkest statement yet that ministers regard the rail dispute as the crucial test of their public-sector pay policy, John MacGregor, Secretary of State for Transport, said he would tell Railtrack it was 'not on' if it tried to exceed Treasury guidelines.

With ministers about to agree that 1995-96 spending should be brought within - and preferably below - a target of pounds 263bn, Mr MacGregor's hardening of the government line - decided at a Cabinet committee on Monday - came during the second 24-hour strike called by the RMT transport union.

The strike by the 4,700 signal workers brought the network to a virtual standstill, although British Rail doubled the number of services running compared with last week's stoppage. Road conditions were far worse than last week; people who decided to take a day off then, tried to get to work yesterday.

Signalling supervisors and managers were pressed into service amid allegations by the union that some were unfamiliar with conditions in the areas within which they were operating.

It is likely that the expected statement from the public spending Cabinet today will extend the Chancellor's stipulation of last November that there should be no rise in pay bills unless financed by productivity - and that in general settlements should be about 2.5 per cent.

Mr MacGregor insisted he was not 'interfering' in detailed negotiations between the two parties but added that the strike was 'irresponsible' because 'it's about a pay increase of at least 11 per cent with no strings attached.'

Mr Macgregor's strictures were reinforced by Michael Hesletine, the President of the Board of Trade. On a visit to Finland, he said: 'The one thing the Government is determined not to do is to indulge the excesses of the inflationary policy of the sort that has done so much to undermine our competitiveness in the past.'

However, union leaders argued that ministers were confusing the 2.5 per cent rise that was on offer to all workers in the railway industry with the productivity claim made by the signalling staff.

Bob Horton, the chairman of Railtrack, said that while he was not prepared to 'buy peace' on the railways, he was not concerned with pressure from the Government, but with 'the business and commercial imperative'.

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