Ed Miliband drew unlikely praise from both Tony Blair and the Unite general secretary, Len McCluskey, when he announced plans to remake Labour's relationship with the trades unions by requiring all union-levy payers to make a positive individual decision to affiliate to the Labour party, rather than be affiliated automatically by their union headquarters.

McCluskey praised Miliband for a bold and brave speech. Blair poured praise on Miliband for showing real leadership and said he wished he had made the move himself.

"It's not often I agree with Tony Blair but I think he is spot on," McCluskey said. He added the union's support will depend on the details of the proposals, but he was in favour of individual trade unionists being more active in the Labour party.

"The one thing I'm opposed to is the status quo. The current status quo is not acceptable and therefore new politics, a new relationship is something I'm very comfortable about," he told BBC News.

Miliband, setting out his proposals at the St Bride Foundation in London, close to where the party was formed 100 years ago, insisted they should be implemented before the general election, but said details of a timetable will require more work.

He said he had appointed the former Labour general secretary Lord Collins to oversee the process and work through the details of the plans, including the possible implications for unions' voting power at the Labour conference.

He said he was seizing the moment after the controversy at Falkirk, which he described as the death throes of old politics and as "closed machine politics".

"I do not want any individual to be paying money to the Labour party in affiliation fees unless they have deliberately chosen to do so. Individual trade union members should chose to join Labour through the affiliation fee, not be automatically affiliated. In the 21st century it does not make sense for anyone to be affiliated to a political party unless they have chosen to do so."

He refused to consider the possibility of the proposals being defeated and the reaction from McCluskey suggests some unions think they will give them greater freedom over how they allocate their political funds.

"Moving to this system has big and historic implications for both the trades unions and the Labour party," he said.

The Tories described the proposals as a sham, and said Miliband was merely changing the channel through which unions give money to the Labour party.

Miliband confirmed he is not seeking any changes in the law to require union members to opt in to pay the political levy, but is requiring political levy payers to make a positive decision to affiliate to the Labour party rather than be automatically affiliated by the party.

If few union members affiliate to Labour, union political fund coffers are then swelled, and the cash could then be provided to Labour through direct donations to the party. Miliband wants caps on unions' donations of £10,000, but only as part of a wider deal on party funding.

The Conservative chairman, Grant Shapps, said under Miliband's proposals: "Len McCluskey would still bankroll the Labour party, pick Labour's candidates and still elect Labour's leader. Nothing has changed."

Miliband tried to put his proposals in the context of rebuilding trust in politics, saying he would also like to see restrictions on outside earnings of MPs, adding he would like to see primaries in which all registered supporters could vote. He also said he would like to see a revival of all-party talks on party funding, ended only last week by the Nick Clegg.

Miliband said: "The question of MPs' second outside jobs has been discussed but not properly addressed for a generation. The British people expect their MPs to represent them and the country and not anyone else. Can it be right that rules allow MPs to earn hundreds of thousands of pounds form private legal practice while they are supposed to be an MP?"

He promised: "We will change things in the next parliament. Being an MP should not be a sideline. It's a privilege and a duty."