Labour MPs' fury at union reforms

Cabinet ministers with their eyes on the Deputy Prime Minister's job have moved in to smooth over a row that is threatening to break out between Tony Blair and Labour MPs over the party's age-old trade union links.

Tony Lloyd, the elected spokesman for backbench opinion, is reported to have seen Mr Blair yesterday to warn him that plans for restricting the way trade unions fund political parties have provoked furious opposition among Labour MPs with union backgrounds.

The row has blown up over a review by a former civil servant, Sir Hayden Phillips, into the funding of political parties, set up in the wake of the "loans for peerages" scandal. Sir Hayden's draft proposals suggest there should be a limit of £500,000, falling over four years to £50,000, on the amount that any single organisation, including a trade unions, can donate to a political party.

This could end the century-old arrangement under which unions affiliated to the party pay hundreds of thousands of pounds in fees in return for a block vote at conferences and representatives on committees including the national executive committee. The NEC will meet in emergency session today to discuss the issue.

The Education Secretary, Alan Johnson, a former trade union boss who is running for Labour's deputy leadership, tried to defuse the row by calling for the old link between party and unions to be updated. "The Tories and sections of the media attack the link between the Labour Party and the trade union movement as something sinister... They are wrong," he said.

The International development Secretary, Hilary Benn, who is also running for the deputy leadership, told a union meeting recently that unions could expect a resurgence in membership.