Labour expects to be forced to lay off party staff and sell property because the Government’s Trade Union Bill could see its funding cut by £6m a year, according to an internal party document.

The Bill, which will be debated in the House of Lords on Monday, includes a provision requiring union members to agree in writing every five years to contribute to the union’s political levy. Currently members automatically pay into the levy, but can opt out if they wish.

A confidential Labour document seen by the Guardian says the effect on the party would be significant.

“The party could not absorb a loss of £5-6m and maintain its current structure. With an annual salary cost in excess of over 50 per cent of total costs, it is clear that current staffing levels could not be sustained,” it says.

“In addition to a staffing review, all contracts would need to be challenged to remove any discretionary costs and offices considered for sale or sublet.”

The document says about 10 per cent of union members are expected to opt to pay the levy.

The Government is also considering cutting the amount of public money given to political party, which would mean Labour loses another £1.3m a year.

Lord Collins, a former Labour general secretary, told the Guardian that the change to the way unions are allowed to fund political parties was “entirely partisan”.

He said it would “hit the income of the party and union political funds very hard”.

“No balancing measure is being taken to cap the donations of the Conservative party,” Lord Collins added.

Just under five million union members paid the political levy in 2013, of which 3.7 million people were in unions affiliated to the Labour party.

The average payment was £6, creating a total of £22m in the political fund of unions affiliated to Labour.

The loss of £6m a year would be slightly lower than a previous estimate by Sir Paul Kenny, the outgoing GMB general secretary.

He told The Independent on Sunday that Labour would lose £40m over the course of a five-year parliament, plunging the party into a “financial crisis”.

Baroness Neville-Rolfe, a junior business minister, has said the Trade Union Bill is designed to introduce “a greater level of transparency into union activities by requiring union members to make an active decision to contribute to a union’s political fund”.