Rhodri Morgan says the 'moderate' option is possible by 2007

A party conference in Cardiff voted overwhelmingly to support the move - which will also see changes to the way assembly members are elected.

The conference was called to decide on Labour's devolution policy, after the Richard report recommended full law-making powers.

The conference was opened on Saturday by the First Minister Rhodri Morgan.

He referred to the two options for developing the assembly's powers as the "big bang approach", in other words full law- making powers, and the "evolutionary building block approach".

Devolution must have the support of the people of Wales to be successful Wayne David MP

He described how this second approach - which would give AMs the power to amend legislation passed in Westminster, but not the power to make their own laws - provided "a set of workable and durable powers".

He added that none of this would be possible without the party uniting to secure a third term Labour Government.

Delegates voted to back two stages of reform.

Firstly they supported the assembly being allowed to vary laws passed at Westminster.

Secondly, if Labour wins the next election, they backed a consultation on a limited further extension of responsibilities, or full law-making powers.

There were differences of opinion at the conference over whether there was a need to go as far as what would essentially be a Welsh Parliament, and where a referendum would be essential.

Addressing delegates on Saturday, MEP Eluned Morgan said that the proposals did not stand up to scrutiny, stating her support for full law-making powers.

Rhodri Morgan says the 'moderate' option is possible by 2007

She added that she would reluctantly accept the prospect of a referendum on the issue.

Jim Hancock from the TGWU said that the proposals were "a small step forward but not the major stride that he and many in the trade union movement had been looking for".

He said that his union favoured full law making-powers for the assembly, but recognised that the document put before the delegates was all that could be achieved at this stage without "a bloody war in the party".

Peter Law, AM for Blaenau Gwent, described the proposals as a "positive way of going forward" while Wayne David MP said they reflected the "political reality".

"Devolution must have the support of the people of Wales to be successful," said Mr David.

"If there's a radical departure from the current settlement there's a moral obligation to go back to the Welsh people."