AS the nation waits to learn the details of today’s Budget from the Chancellor, the largest rail union is warning that the latest inflation figures are set to ignite a new round of conflicts over pay.

Sources are predicting a modest reduction in income tax may be on the Budget table today, achieved by increasing the basic tax-free allowance, but the RMT said it was concerned that inflation had now hit 5.5 per cent, threatening to erode its members’ living standards.

Parts of the rail industry have been riven by various pay disputes over the past few months, often over the issue of Sunday working. Operators recently affected have included London Midland and Arriva Trains Wales, while London Underground is embroiled in a long running argument with both the RMT and TSSA following 800 job losses and a reduction in ticket office hours at many suburban stations.

But the new inflation level seems set to spark a fresh debate, as the unions attempt to maintain their members’ real income. Train operators, on the other hand, are anxious to contain their costs. First Great Western may take advantage of a break clause in its contract to surrender the franchise in 2013, three years early, and so avoid paying more than £800m in the premiums which would be due between 2013 and 2016.

The general secretary of the RMT, Bob Crow, accused the government of deliberately holding down pay increases.

He said: “It is crystal clear that the Chancellor and the ConDem Government have a strategy of bullying working people into accepting savage cuts to their standards of living to pay for this banker crisis. RMT will not tolerate that kind of assault on our members.

“With the latest surge in RPI inflation to 5.5% announced today our negotiators will factor this in to our pay talks across the UK transport sector. We will not accept a situation where our member’s standards of living are eroded as a result of the mistakes and the reckless gambling of the politicians and the bankers.

“With the looming increase in National Insurance, and other escalations in living costs, there is no doubt that the bar has been raised in terms of this year’s pay round. We are also taking in to account the continuing bonus bonanza in the City and are sending out the clearest possible message that RMT members will not bend the knee and take the hit for a financial crisis that was not of their making.”