The party faces months of strife and internal wrangling as union leaders and senior party officials bicker about the scale and pace of reform.
A card vote counted only after Wednesday's debate on party-union links, affirmed conference backing for a continued union vote at all levels of decision- making, including election of the party leader and in the selection of MPs. Senior party sources attempted to dismiss the decision - taken by 3,193,000 votes to 2,118,000. They said 'it will not tie the hands of the review group'.
But one backer of Mr Smith's stated policy that 'we must base our system of internal democracy on the principle of one member, one vote, and not on the basis of the block vote', said the decision would 'strengthen the neanderthal tendency on the review group'.
Bill Jordan, president of the engineering union AEEU, and a supporter of abolition of the block vote in its present form, said the resolution had sabotaged the review group's work and damaged Labour's prospects. 'Unless reform comes in, we won't see the formation of another Labour government. The decision has slapped a pair of handcuffs on the review body. It's a prime example of the block vote being used to defend the power of trade union barons,' he said.
Nigel Harris, AEEU representative on the review group, predicted a bitter battle. 'It gives an excuse to those who want to leave things as they are.' The review body is working to a tight timetable so that proposals can be put to next year's annual union meetings before final approval by next year's conference.
To achieve one member, one vote, Mr Smith will have to take on his own union, the GMB, who voted for the resolution. John Edmonds, its general secretary, said the union backed a reduction of the block vote to 50 per cent over three years. For Parliamentary selections, it wants the unions to be able to contact local levy-payers and ask them if they want a vote in the selection of MPs, registering those who do with the constituency.
Opponents argue that that could let union members other than Labour supporters have a vote - but the idea is thought to be supported by Larry Whitty, the party general secretary. Unless Mr Smith can get the GMB to change its mind, supporters of allowing only party members to vote believe their best hope may be to show that Mr Edmond's proposal is impractical.
Bill Morris, general secretary of the transport workers, which with 19.4 per cent of conference votes has the largest block vote, said his union had voted for the resolution. But he denied it tied the review's hands. 'The review body can talk about anything. It's decisions come back to conference next year,' he said.
However, it is clear that union leaders who favour retaining close union links, like Mr Morris and Rodney Bickerstaffe, general secretary of the public service union NUPE, will use the decision to urge rejection of more radical proposals for reform.
Paul Gallagher, general secretary of the electricians' section of the AEEU, warned unions that they faced a dilemma. 'Do they want power in an opposition party, or influence with a friendly government? If they want the former they can carry on behaving like they did yesterday.'