Labour wants to cut the number of list MPs and increase the number of electorate MPs in a bid to keep the MMP system but improve it.
It does not want MMP to become the biggest issue of the next election, but it wants to be consulted by the National-led Government on the referendum.
The issue was debated on the floor of the Labour Party conference in Rotorua yesterday.
National has promised a referendum on MMP.
It will probably be held at the next election though that has not been finalised.
Labour's electoral reform spokesman, David Parker, said it was proper to have a referendum on the issue and Labour should not resist it.
But the party did not want to be "dragged into giving this more importance than it deserves".
The present Parliament of 122 MPs has 70 electorate MPs and 52 list MPs.
The number of electorate MPs is based on a formula set out in the Electoral Act that starts with the South Island having 16 general seats.
But there is nothing magical about 16 seats. On the basis of past elections, proportionality could still be achieved by having more electorates - of smaller size - and fewer list MPs.
A move by Labour-affiliated unions at the conference to support the present balance between list and constituency MPs failed.
Hamilton list MP Sue Moroney spoke in favour of the present balance but the argument used was that a reduction of list MPs could reduce the representation of women.
Labour's representation of women in the north is almost entirely by women on the list because so many Labour women have lost seats.
Mr Parker said there were legitimate concerns about representation of women and minorities. But the other argument was that unless people's concern that MMP had too many list MPs was addressed, the greater issue, which was MMP, would be put at risk.
Mr Parker said he expected Labour - and and the minor parties, which could be obliterated by the removal of MMP - to be consulted about the referendum.
Justice Minister Simon Power said last night that he had a record of consulting other parties on electoral issues.
He expected to take a proposal to Cabinet in the next three or four weeks.
Prime Minister John Key has suggested the public might prefer the supplementary member system.
SM received only 5.6 per cent support in the 1992 referendum, the least of the four options offered.
Under this system, only a small number of the total seats would be set aside for proportionality.
Labour: More electorate MPs preferred
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