Millions of workers to be given eight more days' holiday

Millions of workers will be guaranteed an extra eight days paid holiday a year under a peace deal hammered out between the Labour leadership and the trade unions.

Millions of workers will be guaranteed an extra eight days paid holiday a year under a peace deal hammered out between the Labour leadership and the trade unions.

After negotiations lasting until 3am yesterday, unions leaders hailed a wide-ranging package of employment rights as a significant breakthrough after a period of difficult relations with the Government. The deal will also ensure that unions bankroll Labour's general election campaign. Labour officials were seriously concerned about the party's finances following the decision by the GMB general union to withhold £750,000 from the election fighting fund.

Ministers promised to extend workplace rights in return for union support in heading off a revolt by grassroots Labour members at a key policy meeting which ended yesterday. Hostile motions about the Government's education and health policies were heavily defeated at the national policy forum at Warwick University, which means Tony Blair could have a relatively smooth ride at Labour's annual conference in September.

The concessions include ending the practice under which employers can count bank holidays towards the minimum holiday entitlement of 20 days a year.

The Government agreed to drop its opposition to a European Union directive which seeks to ensure that agency and temporary workers enjoy similar rights as permanent employees. It accepted for the first time that workers who are transferred en masse to new employers would have their pension rights protected.

There was no commitment to union demands that companies should be forced to contribute to workers' pension funds. But ministers agreed to consider compulsion following the completion of a government inquiry into the issue. The Government also signalled support for moving towards a minimum 50 per cent employee representation on the boards of pension trustees and pensions becoming a collective bargaining issue under union recognition legislation.

When public bodies purchase goods and services from the private sector, they will be urged by the Government to take into account the impact of their decisions on British companies and their employees. Ministers said they would also "move towards'' a situation whereby British industry received the same degree of support as in Germany and France.

Labour sources said that the agreement was a "balanced package" based on fairness, but the deal could worry bosses. On the eve of the meeting, the CBI urged Labour not to abandon its good relationship with business by making concessions to the unions.

However, there was no agreement on union demands for the Government to re-nationalise the railways, and this could be put to a tricky vote at the September conference. There will also be demands for local authorities to play a bigger role in the provision of housing.