In contrast to his hectoring performance at the TUC Congress in 1997, Tony Blair said the movement's drive to end the "us and them" conflict in UK industry was "immensely important" to the economy.
Mr Blair, who has previously emphasised the distance between himself and the unions, said pounds 5m would be made available to promote the concept of "partnership" between businesses and their workers.
His speech emphasised his positive support for the "new unionism" rather than his often-repeated profound distrust for the traditional trade union approach.
Mr Blair told a TUC session on industrial relations: "I see trade unions as a force for good, an essential part of our democracy, but as more than that, as a force for economic success." He said most people now paid lip service to the notion of partnership, "but we still need to encourage and deepen the change and rather than concentrate simply on rejoicing in removing the negatives, celebrate the potential a new era of partnership could unleash".
He said the new approach was not simply a welcome break from industrial conflict, it was an "essential" part of a modern workplace. "It is part of the answer to the quest for economic success."
Mr Blair's address came ahead of a controversial act on union recognition which is due to become law this summer. His speech was seen as by far the most supportive towards trade unionism for years.
Legislation is being introduced to make union recognition compulsory where more than half the workforce are members. The bill is due to receive Royal Assent in July.Reuse content