Employers and union leaders are increasingly optimistic that they can agree a deal to reform the pension plans of thousands of local government workers.
Eric Pickles, the Communities and Local Government Secretary, is due to publish his response to a proposal by local councils leaders which would freeze pension contributions of existing workers for the next two years.
Workers would then be given the chance to increase their contributions or stay at the lower rate and get reduced benefits.
Sources on both sides of the negotiations expressed cautious optimism that a deal was possible.
But union negotiators warned there was still little progress on other public-sector pension schemes which – unlike the local government scheme – are paid out directly from the Treasury in tax revenue.
Yesterday The Independent revealed that Brendan Barber, the TUC general secretary, had held private talks with George Osborne and other ministers on the fringes of the Conservative conference about the pension issue.
In the next few days the Government is expected to publish details of how much money the Treasury is prepared to contribute to the new schemes, which will then form the basis of more detailed negotiations.
Union officials said unless the Treasury was prepared to forgo short-term increases in revenue from raising contributions immediately it was hard to see where a deal would come from.
But they were more optimistic about the local government scheme – a view that employers echoed.
A spokesman for local government employers, who put their proposals to reform the scheme to the Government last month, said they hoped that would form the basis of a deal.
"This is certainly a better offer than the 3 per cent across-the-board rise in pensions proposed in the civil service," a spokesman said.
"There is no deal yet but we believe our submission forms the basis around which a settlement can be reached."
Brian Strutton, a negotiator for the GMB union, said there remained significant challenges. "In some ways the local government scheme is easier to negotiate because it has more flexibility than the centrally controlled schemes," he said.
"For the others, a lot will depend on the attitude of the Treasury and whether they are prepared to compromise on their insistence that in the short term contributions must rise to pay off the deficit."