Despite internal opposition, Labour's ruling National Executive Committee (NEC) agreed to hand over the job of recruiting and communicating with the party's 390,000 members to a private company.
The NEC rejected an in-house bid from Labour officials to upgrade the party's ramshackle system, which is beset by delays and problems. It takes four weeks to join the party and two weeks to renew membership - tasks which a private firm could perform within hours.
The in-house proposal, leaked to The Independent, admitted that 20 per cent of the membership data was inaccurate and that the party needed to nurture a "service-led culture" among its staff. It reported "constant fire-fighting leading to low staff morale which further deteriorates the quality of the service".
A study by KPMG management consultants found that expanding the membership department at Labour's Millbank headquarters in London would cost pounds 1.8m a year. A 10-year partnership deal with acontractor would cost between pounds 1m and pounds 1.5m a year, and the bill would fall over time.
Party officials hope the new system will enable Labour to tailor its services to individual members, thereby boosting its fundraising efforts.
A party spokesman said there would be no compulsory redundancies among the 11 membership staff, some of whom would join the firm which wins the contract when it has been put out to tender.
Six NEC members voted against the privatisation deal, including the left- winger Liz Davies, who said: "We should not have anybody but Labour Party members vetting party information."
But Mr Blair told the meeting that contracting-out would provide a better service. "We should have moved beyond the point where we should be worried about taking decisions which most organisations have taken a long time ago."
Mr Blair warned that the Labour machine still required a lot of change. "If we don't take steps to modernise, we will find that the members lose heart," he said.
The change was approved by 19 votes to six, with Ms Davies joined in opposition by fellow left-wingers Cathy Jamieson, Pete Willsman and Mark Seddon and trade union representatives Mary Turner and Steve Pickering.
Labour hopes to recruit an outside contractor by September. Sources said the party would do business only with a well-established, reputable operator. Its membership list would not be sold to other companies to raise funds.Reuse content