By Nick Assinder BBC News Online political correspondent

Tony Blair may have been relishing a fight with the unions over his plans for the public sector, but he probably didn't expect this.

His attempts to placate them with a keynote speech on Monday have dramatically failed.

The giant GMB union is so incensed at his plans to bring private cash into the public services it is slashing its donations to the party.

Edmonds warned of action

And it is warning, unless the prime minister changes tack, there will be further cuts amounting to �1m.

Whatever Labour spin doctors say, this will hit the party hard and set an example for other unions.

Ministers will now fear that others may follow suit and that some may even start seriously re-considering their affiliation to the party.

No vetoes

Mr Blair knew he was taking on the unions when he made reform of the public sector his key election pledge and his central policy for his second term.

He emphasised the role he would give the private sector in the public services and how he would allow no vetoes over the plans.

No one was surprised that his pre-election rhetoric was tough sounding, but he was expected to soften his tone after victory.

And did indeed appear eager to placate the unions - meeting them for dinner in Downing Street and then insisting he could not complete his reforms without their help.

Then, on Monday, he tried to talk over the heads of the union bosses and persuade their members to support his proposals.

Cash rows

But he appears to have underestimated the strength of feeling amongst the unions and their willingness to hit their party.

Unions oppose private cash

A good, old-fashioned row with the union barons - similar to Harold Wilson's famous "get your tanks off my lawn" - would have been one thing.

But to see them following through with their threats to cut donations and, worse, pledge to keep cutting unless there is a U-turn is of a completely different order.

Mr Blair has long been trying to reduce Labour's reliance on big donations from the trades unions.

That explained the rows over the massive individual donations which Labour has recently been attracting.

First, shortly after the 1997 election, there was the �1m gift from Formula One boss Bernie Ecclestone which had to be returned after it appeared his sport would escape the government's planned ban on tobacco advertising.

Then, more recently, Labour backbenchers and unions expressed deep concern when it emerged the party had received three �2m donations from Lord Hamlyn, Science Minister Lord Sainsbury and former Tory supporter Christopher Ondaatje.

At the time, Mr Blair said he was proud that the party was now attracting the support of successful businessmen and disaffected Tories.

He will be even more delighted to receive their support now that the GMB has decided to cut its cash.

What remains to be seen is how far both sides are now really willing to push this fight.