PAY talks between Network Rail and the RMT have broken down, and the union said it will now ballot 16,000 staff over industrial action.
The failure of the negotiations will cause widespread concern across the railway industry, and the dispute also threatens to become an election issue.
Network Rail said it was experiencing 'financial pressures' and that its offer is fair, but the RMT has condemned the proposed deal as 'wholly inadequate'.
Talks had been underway for some weeks at the conciliation service Acas, but the union negotiators rejected a single payment of £500 this year, to be followed by three years of increases in line with inflation, which Network Rail described as 'a significant improvement' on its earlier offer. That offer had been rejected in a previous ballot by 93 per cent of RMT members in a turnout of 56 per cent, according to the RMT.
The union's general secretary Mick Cash said: "Despite intensive talks we have not been able to secure enough significant movement and that puts us into dispute and triggers the start of a national industrial action ballot. As far as we are concerned the one off, non-consolidated, lump-sum payment this year is wholly inadequate and fails to recognise the massive pressures staff are working under to keep services running at a time when the company is generating profits of £1 billion."
However, Network managing director Phil Hufton has defended the company's stance. He said: "Pay awards at Network Rail over the last four years have been well ahead of the rest of the country. Pay has increased eight times more than workers in the public sector, such as teachers and nurses, and double the pay for private sector workers. We remain open to talks with the RMT."
Network Rail, which became a government body last September, is facing an uncertain future, with rumours circulating that major changes are being contemplated by the DfT which could include an element of reprivatisation. It is also in trouble over some of its CP5 budget forecasts, with spending running ahead of target and some of its electrification plans said to be in disarray.