Review recommends stripping Lords of veto on new regulations
The House of Lords should be stripped of the power to veto new regulations and instead be restricted to calling on MPs to rethink proposals, a review commissioned by David Cameron has recommended.
The review by Tory grandee Lord Strathclyde recommended that a new law should be passed which would ensure that the Commons had the "final say" over secondary legislation.
The move comes after Labour and Liberal Democrat peers infuriated ministers in October by combining to block Chancellor George Osborne's plans to cut tax credits for the low paid.
Lord Strathclyde said: "In my review, I have looked carefully at the history and current practice of the House of Lords as it regards secondary legislation and financial matters and I have spoken to a wide range of parliamentarians.
"I believe that my recommendations strike the right balance between preserving the vital role of the House of Lords in scrutinising legislation, and enabling the elected House of Commons to have a decisive role on statutory instruments."
Mr Cameron will respond to the report's recommendations in the new year.
Under the proposed procedure, the House of Lords would be able to " invite the Commons to think again" but could then be overruled by a vote in the Commons.
The report - compiled with the help of a three-strong panel of former senior parliamentary officials - chose the solution over two other options: removing the Lords from the process altogether or clarifying and codifying the existing arrangements.
The report concluded that the convention in place since 1968 that the House of Lords should only rarely, if ever, reject statutory instruments "has been interpreted in different ways, has not been understood by all members of the House, and has never been accepted by others".
The tax credits veto "broke new ground", it said, and "suggests that the convention is now so flexible that it is barely a convention at all".
Lord Strathclyde warned that the upper chamber must not be allowed to become "a highly politicised 'House of Opposition'".
"At the heart of my recommendations is a new procedure which does not involve the loss of a proposed regulation on the back of a single Lords defeat but which allows the Commons, having thought again, to vote a second time and insist on its primacy.
"The Lords has built up considerable expertise on secondary legislation scrutiny. Of course, the Government suffers defeats in the Lords, but the patience of the Commons is not unlimited and as the Lords has developed its revising and scrutinising role it may wish to keep in mind that its primary purpose is to complement the work of the Commons and not to block its will - too often."
Existing convention had been "stretched to breaking point" by "the combination of less collective memory, a misunderstanding of important constitutional principles, a House more willing to flex its political muscles, and some innovative drafting of motions against statutory instruments", he said.
Labour MP Graham Allen, who chaired the House of Commons Political and Constitutional Reform Committee in the last parliament, criticised the " casual, undemocratic" manner of the reform and said it ought to have looked again at the question of whether there should be a fully-elected Lords.
" Major alterations in our system of governance should not be the product of a closed and narrow internal process, backed up by party discipline. In other countries, constitutional amendment is a more inclusive activity, involving a genuine consensus across different political groups and the wider public.
"It is clearly time that we took a wider look at a whole constitutional system, through a specially convened constitution, comprising representatives of all parties and none, and members of the public. Only by this means can we hope to form a more stable democracy for the whole UK."
Labour's leader in the Lords, B aroness Smith of Basildon, said the reform was based on "weak" evidence and "paints a very unattractive picture of a Prime Minister and a Government that will not tolerate challenge; that loathes scrutiny and fears questioning."
"We are very open to genuine suggestions for clarification, for modernisation and for changes.
"But that has to be in the context of fulfilling our duty and our legitimate constitutional role. And not just because the Government didn't like losing a vote."
Statutory instruments had been vetoed in the Lords only four times in the last 16 years, she said.
Katie Ghose, chief executive of the Electoral Reform Society, said: "If the Government accept the recommendations of Lord Strathclyde, they will be scrambling in response to the politics of the day, rather than implementing real, lasting and democratic changes.
"If the Government is planning to go to the trouble of passing a law to reform the Lords, they should stick to their official party policy and pass the one reform people really want - an elected second chamber.
"The problem with the House of Lords isn't its blocking power, it's that it has no legitimacy.
"We have the second largest upper House in the world (after China's), and the only fully-unelected second chamber in Europe. But to have a truly effective revising chamber it needs to have a mandate, and that can only come through people being able to hold peers to account."