British opposition leader Ed Miliband proposed on Tuesday to overhaul his Labour party's historic relationship with the trade unions, risking millions of pounds in political donations.

The unions helped found Labour in 1900 but Miliband vowed to end the process by which union members are automatically affiliated to the centre-left party unless they opt out.

The changes follow a row over efforts by Britain's biggest union, Unite, to get its favoured candidate chosen to contest an upcoming parliamentary by-election in Falkirk in Scotland.

"In the 21st century it just doesn't make sense for anyone to be affiliated to a political party unless they have chosen to do so," Miliband said in a speech to party activists in London.

Labour currently nets a reported ??8 million (nine million euros, $12 million) a year from almost three million union workers -- the majority of the party's funds.

Miliband is particularly sensitive to criticism about union influence after their support helped him beat his older brother, ex-foreign minister David Miliband, to the Labour leadership in 2010.

He admitted the proposed change had "massive financial implications" for a party which has struggled to attract private donations since losing the last election that same year.

But Miliband said he wanted to create "a modern relationship with individual working people" and said he hoped it would encourage a more involved, grassroots activism.

He added: "It could grow our membership from 200,000 to a far higher number, genuinely rooting us in the life of more of the people of our country."

Miliband acknowledged the reform could face opposition from the unions but said he hoped to push it through by the next election in 2015.

Unite general secretary Len McCluskey, who has been embroiled in a war of words with the Labour leadership in recent weeks, initially appeared to criticise the plans but later took a more conciliatory tone.

"As far as Unite is concerned, we are more than happy to engage in the discussion with him," he told the BBC.

Tony Blair, Labour's most successful prime minister who won three elections with his modernising agenda, said Miliband's proposal was "bold and it's strong -- it's real leadership".

Labour has a consistent ten-point lead over Cameron's Conservatives in opinion polls but Miliband has struggled to make an impact with the public.

A YouGov poll last week found just 20 percent thought he was up to the job of prime minister.