ED Miliband's radical plans to reset Labour's relationship with the trade unions have hit a "major stumbling block" as he seeks to scrap the complex electoral college method of electing the party's leader.
It has emerged that the issue of the electoral college - made up of a third of parliamentary votes, a third of party member votes and a third of trade union votes - has become the main hurdle to securing a deal.
Paul Kenny, general secretary of the GMB, said talks had "broken down" but Labour HQ disputed this.
The GMB has already decided to drastically cut its funding to Labour in protest at the reforms. Other unions could follow if no agreement is reached.
A union source close to the talks said: "A major stumbling block is the refusal by the Labour leadership to change the electoral college voting system to one member, one vote. The leadership is protecting the undemocratic position of MPs in that voting system."
Mr Miliband is linking his controversial proposal to move from automatic to voluntary affiliation fees with changes to the electoral college, wanting to make sure only those union members who have consciously decided to become associate party members are able to vote in the leadership election.
One source, pointing out there were more changes afoot than simply the proposal on fees, said: "Ed has always been clear that the scale of his reforms mean there are likely to be consequences for other rules and structures in the Labour Party. He is proposing that we change the way we elect our leaders and discussions on party reform are continuing."
His proposed changes followed controversy last year over the selection of a Labour candidate in Falkirk, where Unite was accused of signing up members in the constituency so it could influence the choice.
Unite has always denied doing anything wrong.