In a move that marks a significant rapprochement between the government and the Prison Officers Association (POA), Mr Blunkett is expected to announce the change when he addresses its annual conference tomorrow.
It is understood that part of the deal between prison service managers and the POA will be the replacement of annual salary rewards with a three-year pay deal linked to better training and more flexible working practices.
And despite strikes being made technically legal, it is also expected that a no-strike agreement will be part of the eventual deal.
Relations have long been poor between the government and the POA. The Conservatives introduced the ban on industrial action in 1994, as part of its Criminal Justice and Public Order Act. Labour subsequently disappointed the union by failing to reverse the rise in prison numbers and halt the establishment of private prisons.
The home office minister, Beverley Hughes, was booed when she addressed the POA's conference last year. It had issued a press release the day before warning of the poor reception.
Tomorrow's announcement also comes with speculation over a possible merger of the prison and probation services. Martin Narey, the government's new commissioner for correctional services, told the Times today that "ministers think it may be a possibility but no one has taken a position on that yet".
Advocates of a merger point to the need for a more integrated approach between the two services, especially with the introduction of "custody plus" punishment in which offenders will serve part of their sentences in prison and part in the community. A review of correctional services is currently being led by a businessman, Pat Carter.
