Charlie Mackenzie, a close colleague of Sir Ken Jackson, the outgoing joint leader of the Amicus union and an ally of Tony Blair, will be entitled to a package understood to be worth about £400,000 in pay and benefits over the next five years, when he leaves the union at the end of next month.

News of the pay-off, one of the biggest seen in the movement, will damage the image of leading unionists loyal to the prime minister. It could also boost the election prospects of union leftwingers hostile to Mr Blair.

Labour backbenchers last night joined trade unionists in criticising the deal.

Sir Ken, 65, will be entitled to severance pay and benefits worth nearly £250,000 when he steps down in a month's time. However, he has offered to accept a less generous package. As the top officials in the AEEU section of Amicus, the UK's biggest industrial sector union, both men have been at the forefront of a campaign to stop the demise of final salary pension schemes and protect manufacturing jobs. The size of the pay-off will anger union members, who voiced displeasure at Sir Ken's relationship with Mr Blair by electing a former communist, Derek Simpson, to replace him.

It is understood that Mr Mackenzie, 60, will receive three weeks' severance pay for each of the 25 years he has been with the union. He will also in effect continue to receive his £55,000-a-year salary, by receiving an income supplement on top of his pension - which he can draw immediately.

He is also expected to keep his official union car. Amicus officials, even some loyal to Sir Ken during his tenure as general secretary, hit out at the package, describing it as "unbelievable". "This is typical of champagne Charlie. When manufacturing is shedding jobs, what has he done to deserve this?" said one. "It's an absolute disgrace," said another. "This will hand next year's executive elections to Simpson and his supporters."

Peter Kilfoyle, Labour MP for Liverpool Walton, said it was the kind of "internal sweetheart deal that brings the trade union into disrepute. I can see no justification for it".

The agreement is based on assurances given to Mr Mackenzie when the old AEEU union merged with the electricians' union.

* Tony Blair has brought an experienced trade union fixer back into Downing Street to help him put relations with the union movement on a better footing. Pat McFadden, a political consultant and former Number 10 adviser, will replace Robert Hill as Mr Blair's political secretary.