Ministers are set to pull the plug on a new pound;5 million pay offer for lecturers because of their union's decision to go ahead with a strike ballot.
The two-day NATFHE strike on October 3 and 4 coincides with the Labour party conference in Brighton - timing that will cause the Government maximum embarrassment.
Ministers offered an extra pound;5m last month in the hope of breaking the impasse between NATFHE and the Association of Colleges over the 3.7 per cent national pay offer.
But the cash is tied to the Teachers Pay Initiative modernisation fund, created to reward only those "qualified" in terms of skills and experience. NATFHE wants the extra pay for all lecturers.
Union leaders and college employers were blaming each other this week for the lost opportunity. The AOC insists the union rejected a good offer that would have been available to most staff.
Ivor Jones, the AOC director of employment policy, said: "Had NATFHE's FE committee agreed to recommend to lecturers the acceptance of our pay award of 3.7 per cent and this addition from Government, worth 0.3 per cent, qualifying lecturers would now be looking forward to a pay rise of 4 per cent."
But NATFHE says it had received no guarantees that the cash would be used to boost lecturers' pay.
Paul Mackney, general secretary of NATFHE, said: "The additional cash could have given every lecturer an extra 0.2 per cent. End-loaded for the last three months from next April, it would have effectively boosted salaries by 4.5 per cent at no extra cost to the employers."
Both sides were also claiming to be the victors in persuading ministers to give the extra pound;5m. Mr Jones said: "The AOC has worked closely with the Department for Education and Skills to secure extra funding, and we welcome any Government offer to improve college pay."
However, Mr Mackney insisted: "We gained this money through talks with Margaret Hodge through the summer. We expected something at least symbolic to help all lecturers catch up with school teachers this year."
Sources close to ministers during talks with NATFHE said it would be possible to reward all lecturers with the extra pound;5m. It could be shared out as a recognition of the extra work done by all staff.
However, letters dated August 30 from senior civil servant Peter Lauener, DFES director of learning delivery, to David Gibson, AOCchief executive, and Mr Mackney, suggest a toughening of attitudes.
While emphasising the minister's desire to progress on modernisation of the pay structure, he said: "You will appreciate that these discussions cannot take place unless NATFHE decides to recommend to its members acceptance of the current pay offer in the ballot which is scheduled for next week."
The letter to Mr Gibson also said the AOC request for an extra pound;33m general FE funding was rejected.
NATFHE's decision to hold the ballot from next Thursday until September 21 was narrowly carried last weekend. Ministers are gambling on a rejection of the strike and a rethink by NATFHE executive. They are hoping the incentive to strike will have gone as many lecturers will now have received their 3.7 per cent rise and the first rise from the pound;85m TPI money.
A Government spokesperson this week said: "We will wait until the September 21 before we decide on the extra pound;5m. Our main concern is to get on with improving all lecturers' pay through the TPI."
He insisted the 3.7 per cent deal, accepted by other unions, was fair and accused NATFHE of "sabre rattling". He said: "We urge NATFHE members not to vote for strike action. The basic 3.7 per cent offer is fair and has been accepted by other unions."