The breakthrough came after Charles Clarke, the new Education Secretary, announced this week that funding for colleges would increase from its current level of pound;4.4 billion to pound;5.6bn in 2006.

The Association of Colleges agreed to new talks, believing his announcement opens the way for possible resolution of negotiations which had been hampered by uncertainty about funding.

Paul Mackney, general secretary of Natfhe, the lecturers’ union, said there will be no industrial action this month as the two sides seek a deal based on the new cash and assurances that the teachers’ pay initiative and an extra pound;32m, which had already been announced, would be consolidated in the following years.

The joint national council, which brings employers and unions together in the FE pay negotiations, will reconvene on December 9.

“I wouldn’t say I’m euphoric but it is a very generous funding offer,” said Mr Mackney. “We have suspended strike action in December, which is really confirming a decision which had been taken in committee on the assumption that we were likely to resume negotiations.”

The Association for College Management, which had not taken part in the industrial action which saw lecturers across the country walking out on November 5, is also confident of a three to four-year deal.

The meeting, which took place behind the scenes in Birmingham where the AoC was staging its annual conference this week, also included the other unions on the joint national council - Unison, the Association of Teachers and Lecturers, the Tamp;G and the GMB.

Whatever is thrashed out over the coming weeks and months, the spectre of localised strike action remains, with Mr Clarke reinforcing the Government’s position that colleges should retain local flexibility on implementing pay rises.

The latest Success for All document, published this month, after he replaced Estelle Morris, says: “The Government has no plans, for example, to impose a national pay structure on FE colleges.”