Cameron and Clegg forced into humiliating retreat

David Cameron insisted his preference for a parliamentary inquiry over the rate-fixing scandal was the best option (PA)

David Cameron and Nick Clegg were forced into a humiliating last-minute retreat last night to head off a defeat over plans for an elected House of Lords.

The Prime Minister and his deputy blinked first in a stand-off with more than 100 rebel Conservative MPs who oppose Mr Clegg's flagship reform of the second chamber.

Although the House of Lords Reform Bill was given a second reading last night, the Tory rebels believe their symbolic victory means they will be able to prevent the measure making progress. In a final attempt to salvage some reforms of the Lords, Mr Cameron and Mr Clegg will put pressure on Labour to support them in a crunch Commons vote in the autumn. But there is little sign the Opposition will rescue the Coalition from its turmoil over the Bill and Labour may opt to prolong the Government's agony.

An alliance between the Opposition and rebel Tories meant the Coalition faced certain defeat last night on a timetable motion to prevent opponents talking the Bill out by making marathon speeches.

Tory whips predicted the Coalition Government would suffer its first defeat by a margin of between 20 and 30 votes. Mr Cameron decided yesterday morning that delaying this critical vote until the autumn was the lesser of two evils. A reluctant Mr Clegg eventually agreed yesterday afternoon.

The Tory and Liberal Democrat leaders appear divided over the way forward. Mr Cameron intends to water down the Bill by the autumn to try to win over some of the Tory opponents. That could include scrapping plans for peers to be elected under proportional representation to serve 15-year terms without facing the voters again. But Clegg aides insisted he would fight to preserve the current Bill.

Angie Bray, a Conservative parliamentary aide who joined the rebels, said: "What we have got here is a capitulation. The Government whips have blinked first."