Mr Tesla,
1st point, they can because there is no statutory criteria for selection, this criteria is down to the employer, they can select what they like as long as it is not discrimanatory as far as the law goes.
2nd point, there is no statutory legislation entitling you to an inflation linked pay rise, you take the money for doing the job, you have no right to a pay rise, check the law. Thus no pay rise does not mean that you are being paid less than you agreed it means your cost of living has increased, your problem not your employers.
3rd point, I know may people who have been dismissed for damaging works vehicles even in accidental situations, and some have even taken their employers on and to tribunal, soem with Union backing, they lost.
Make of this what you will, as I am sure you will