The Unite union says it will halve the number of affiliate members it provides to the Labour Party this year - meaning an effective funding cut of £1.5 million.
The move follows Ed Miliband's reforms to the party's structure - including its historic ties to trade unions - which were approved at a special conference last weekend.
Unite said the party's decision had set its relationship with affiliated unions on a "new course".
Responding to Unite's announcement, a Labour spokesman said the party knew its reforms would have "financial consequences", but added it was now hoping to grow a base of "many small donors rather than a few big ones".
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