Blair criticised for trying to keep PM's right to nominate peers

Tony Blair has been accused of missing an opportunity to repair the damage caused by the "cash for honours" affair by refusing to surrender the Prime Minister's right to nominate people for peerages.

A White Paper on House of Lords reform to be published soon is expected to propose that 30 per cent of members of the second chamber should be nominated by leaders of the political parties. Half of the members would be elected from party lists on a regional basis and the remaining 20 per cent nominated by an independent appointments commission.

Ministers who want a fully or 80 per cent elected Lords urged Mr Blair to try to draw a line under the "cash for peerages" controversy by ending party leaders' nominations. Four businessmen who made secret loans to Labour were proposed by the Prime Minister but blocked by the commission, sparking a Scotland Yard investigation into whether honours had been sold.

Ministers who want to scrap party leaders' nominations include David Miliband, the Blairite Environment Secretary; Peter Hain, the Northern Ireland Secretary, and Hilary Benn, the International Development Secretary. They will be allowed to vote for a fully-elected Lords when MPs vote on its composition but have lost a cabinet battle over the recommendations to be made in the White Paper. One ministerial source said: "We have missed a golden opportunity to restore trust in politics. It is not just bad democratically. It is bad politics.

"The perception that there is something dodgy could be swept away by having an elected Lords."

Another critic added: "We will be saying that 30 per cent of the members should still be appointed on the whim of party leaders, even though there is distaste about a system that has been discredited by recent events." A final decision on the make-up of the Lords will rest with MPs, and supporters of radical reform believe that they may be more likely to vote for an 80 per cent or 100 per cent elected House.

Allies say Gordon Brown, who is expected to become Prime Minister this summer, will vote for a fully-elected second chamber. However, he may delay wide-ranging reforms until after the next general election if there is no agreement between the Commons and Lords. He believes that Labour might need a stronger manifesto commitment to be endorsed by voters before it could force through changes using the Parliament Act, which allows MPs to override peers.

Jack Straw, the Leader of the Commons, who is finalising the White Paper, believes that the critics are wrong because nominations by leaders will be vetted by the appointments commission, who will weed out unsuitable nominees. "The Lords is a political body, so party leaders should still be able to put people forward," said one ally. The Government faces criticism from supporters of constitutional reform that political parties would keep a grip on 80 per cent of the membership of the proposed chamber under the White Paper.

The 50 per cent elected element could be chosen from party lists in proportion to the votes cast on a regional basis in elections to the European Parliament.

The changes would be phased in over 12 years so that existing life peers were not forced out of their jobs. The size of the Lords could eventually drop from 740 to around 500.