The Prime Minister faces the prospect of Britain becoming the first developed country to be accused of a breach of the convention on freedom of association, drawn up by the UN-backed International Labour Organisation.
In the first substantive negotiations between the occupant of Number Ten and union leaders for 14 years, Mr Major said that, while he would not accuse individual staff members at the GCHQ 'listening centre' in Cheltenham of a lack of loyalty, there was a conflict of interest nevertheless between membership of a national union and such intelligence work.
In a statement, Mr Major said that 'to his regret' the gaps between the two sides had not been bridged, but he was willing to consider any further proposals from the five unions concerned.
Mr Major, accompanied by David Hunt, Secretary of State for Employment, told the meeting that he was not hostile to unions but had not changed his mind about the necessity to maintain the unique security services supplied by GCHQ.
The ILO's 'committee of experts', drawn from both sides of industry, will consider the outcome of the meeting in the spring, and the full conference of the organisation is expected to censure the British Government next June.
Britain could then become the first non-Third World country to attract such condemnation. Mr Major's decision to accede to the union leaders' request for a meeting is a measure of how seriously the Government takes the issue.
Bill Brett, general secretary of the specialists' union, IPMS, who led the delegation, described the talks as a 'civilised meeting without a civilised end. The problem is in the minds of ministers, no one else.'
Mr Major's offer to grant additional rights to the non-union staff federation created in the wake of the union ban was rejected by civil servants' leaders. The Prime Minister said the federation would be allowed to affiliate to the Council of Civil Service Unions - an umbrella body - but would not be allowed to join the TUC or merge with any other union.
The proposals would not serve to get the Government 'off the hook' because it did not give GCHQ staff the right to join a union of their choice, said Mr Brett, who is a vice-president of the ILO. 'It is deeply offensive to say there is a conflict of loyalty in belonging to a union. I have many members at the Ministry of Defence and no one has ever suggested their loyalty is in doubt.'
He pledged that the fight would go on to restore union rights, including a demonstration at GCHQ's base next month to mark the 10th anniversary of the ban. A Bill to restore union rights at GCHQ is to be introduced in the Commons on 25 January by David Winnick, Labour MP for Walsall.
Leading article, page 13