Health secretary John Reid failed to avoid a grassroots defeat over plans to establish foundation hospitals at the Labour conference yesterday.

Inflicting the first defeat on Tony Blair at this year's annual gathering, activists dismissed Reid's plea not to lose sight of the government's wider health agenda.

The issue will now be referred back to Labour's National Policy Forum for further discussion.

However the prime minister had already made clear the vote will have minimal effect on government policy.

An advisor to the prime minister accused the unions as behaving "like a cartel" and claimed they were out of touch with their members. There was also a hint that the government would reconsider its relationship with the unions.

Following the vote a senior minister said that the conference's decision "does not mandate the government".

Dave Prentis of Unison, one of the four big trade unions which united over the issue, said: "All we want to do is say to the government that this is your chance to listen. We want to sit down and talk about how to deliver the best possible healthcare for all our people."

Earlier, visiting a local hospital, Tony Blair predicted that he would eventually win over his critics.

"When you do these things you get some opposition at the beginning, but usually that opposition falls away towards the end," he said.