The decision is seen by many to be a move away from the party's old-style socialism towards a more European-wide agenda.

It ends the widespread policy of some employers who discriminate against employees who are not members of a union.

Labour sources reveal it is hoped the new policy will reduce government's accusations that the party is dominated by trade unions.

Shadow employment secretary Tony Blair said the move was crucial for a sustainable approach from the party to employment.

"We have got to bring our law into line with the rest of Europe," he said.

"That is sensible in the run up to the single European market and also it allows us, which I think is crucial, to try and get some stability in industrial relations to get a settlement in industrial law that lasts.

"That is the key thing for rebuilding our industrial base."

Sell out

But while many union leaders have reluctantly agreed to an end to the Labour policy it has met with anger from MPs to the left of the party.

Many are accusing the decision as being a "sell-out" of socialism and a further move away from traditional Labour policies.

Labour MP Eric Heffer who is opposed to the policy, said: "It adds up to a very real retreat as far as our principles are concerned.

"It is unnecessary because we can win the next election without giving away any of our principles."

The policy change has been welcomed by the government and comes ahead of its new employment bill which will be published this week and will help curb unofficial strikes.

Employment secretary Norman Fowler said employees should be considered on merit and not on their union affiliations.

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