He said that Northern Ireland Secretary Theresa Villiers may have to step in and extend legislation governing the flying of flags over government buildings like Stormont so that it also covers City Hall.
The Conservative peer told BBC Radio 4's World at One: "I am surprised there is a problem, because the issue could have been foreseen, a compromise was available. It seems rather strange the compromise has not been accepted. It's really strange that some parties who sit at Stormont and accept for government buildings the designated flag days, are out encouraging protests against designated days in other public buildings. It's a pity some parties are now not accepting that compromise."
The former Ulster Unionist Party leader said it made him suspect parties had "other motives". "I cannot avoid looking at the fact that the Alliance Party, who provided the majority for this compromise at City Hall, is the party that defeated the DUP in east Belfast in the parliamentary election," he said. "I wonder if this is something to do with trying to regain support that went to the Alliance Party at that stage. In which case I think it's a really quite cynical thing for them to be doing."
Last week's decision to limit the number of days the Union flag is flown at City Hall was followed by protests which sometimes flared into violence. At least 29 police officers have been injured and 38 people arrested, while Alliance Party premises have been targeted by loyalists.
The leaders of the DUP and UUP have reiterated their call for an end to the protests. The parties have been accused by political rivals of sending out mixed messages after some of their elected representatives attended the loyalist demonstrations despite earlier calls from the leadership to suspend the public events.
DUP leader Peter Robinson and UUP leader Mike Nesbitt said if protests were held in spite of their advice it was up to the judgment of their representatives whether they should attend, as long as they were certain they would be peaceful and lawful.
Mr Robinson and Mr Nesbitt have been holding a series of meetings with loyalist community figures in a bid to devise a political strategy to address their concerns. They said they would announce a new initiative when their discussions were finalised early next week.
Sinn Fein Belfast City councillor Jim McVeigh has received a second death threat but said it will not deter him or the party from continuing their work at the council. The latest threat was made on Friday afternoon in a telephone call to a local media outlet. "These death threats will only make me more determined to push ahead with Sinn Fein's work in the council of making the City Hall a more inclusive place for all the citizens of Belfast," he said.