The government appears to have put off a potentially damaging confrontation with trade unions over the controversial private finance initiative.

The GMB union has announced that it has shelved plans for a ballot on strike action after winning an assurance that the government will address their fears over pay and conditions.

The union had been set to call on catering workers, road sweepers, care assistants and council workers to back strike action in protest at the PFI.

But it appears to have been won over by assurances from senior ministers who have vowed to address the issue of "two-tier" workforces.

John Edmonds, the GMB union's general secretary, said: "The ball is now in the government's court. The prime minister has pledged to work with the unions to abolish the two-tier workforce and we are prepared to give him time to deliver on that pledge.

"It is in the interests of both the unions and the contractors that this dispute is resolved speedily.''

Earlier this week the unions delivered a bloody nose to the government when they secured party conference backing for a motion calling for an independent review of the PFI.