The Treasury has been accused of blocking train operators from offering unions a pay rise that would have avoided Christmas strike action, amid growing fears that public sector wages risk spiralling out of control.
The Government is said to have vetoed proposals for a pay increase of between 8pc and 9pc over two years on Monday, despite indicating 48 hours earlier that Whitehall would support a deal.
Rail staff are planning to bring travel to halt with eight days of walkouts in December and January as a result.
It comes as ministers scramble to head off a wave of strike action across the public sector, with nurses, doctors and civil servants all threatening industrial action unless they can secure significant pay increases.
Treasury officials are thought to be concerned that giving in could trigger a jump in inflation and pile extra costs on the taxpayer.
Sources claimed that last Saturday, officials from the Department for Transport ordered train negotiators to offer pay rises to their counterparts from the Rail, Maritime and Transport union (RMT) in order to avoid further strikes.
All pay increases must be signed off by the Government, which has been responsible for train operators' finances since the Covid crisis.
An indicative deal was thrashed out that rail bosses thought would be sufficient to end the biggest wave of industrial action on the railways for a decade.
The Telegraph understands that train companies were willing to offer pay rises of between 8pc and 9pc over the next two years under a national framework that would be agreed by operators and their unions.
But when representatives from the train operators on Monday asked the DfT for approval to put the deal in writing, officials are said to have backtracked.
Industry sources claim that the DfT was blocked from sanctioning the pay rises following discussions with the Treasury. A DfT spokesman insisted it did not block a deal.
On Friday, the RMT agreed to wage increases of between 7pc and 9pc on Scotland's railways.
A senior industry source said: “This is the week the curtain has fallen and everyone can see who is holding things up.
“Monday was a slow-motion car-crash which was totally avoidable. Government flip-flopped over the course of a weekend and ended up making a non-denial denial that they had stopped an offer being made.”
The claims are consistent with those made by union leaders earlier this week, when they blamed Whitehall meddling for crashing hopes of an agreement.
The industry source said: “[RMT head] Mick Lynch called them out. He was right to.”
Following the collapse of talks, the RMT announced the biggest single wave of industrial action of its campaign to date.
Its 40,000 members that work at train operators and Network Rail will walk out on December 13, 14, 16 and 17, and January 3, 4, 6 and 7.
The strikes will effectively bring rail services to a near-standstill for a week from December 13 and the first working week back in the New Year.
Coupled with engineering works between over the festive period, passengers on some lines will suffer major disruption for the best part of a month – from Dec 13 to Jan 8.
Mr Lynch met with Mark Harper, the Transport Secretary, on Thursday for an introductory meeting. It is understood that Mr Harper pledged to fast-track Whitehall decision-making in effort to head off Christmas rail strikes. A Government source said: “We are a bit more optimistic now, but we need to move at pace.”
However, Mr Harper later insisted he would not simply “hand over enormous sums of money”.
The senior industry source said: “We have ten days now to sort this out, it can be done but the Government needs to decide what's more important. Doing a deal, or the economy taking a billion-pound hit?
“We can solve this, and even protect Christmas but time is short, Ministers and officials need to get real, get out of the way, and let the companies make an offer.”
A spokesman for the Department for Transport said: “We did not block a deal and have no interest in blocking a deal. Industry, trade unions and government are all in agreement that this dispute has been going on for way too long now and we would like it resolved in a way that works for the traveling public and the taxpayer.”