The Prime Minister also plans to impose a limit on the number of peers representing each party. Although Labour may enjoy parity with the Conservatives after hereditary peers are abolished, it will not hand itself the huge majority in the Upper House now enjoyed by the Tories as a result of their 300 hereditary peers.
Mr Blair will give up the Prime Minister's historic right to select peers by accepting a recommendation to be made next month by the Neill committee on standards in public life. It will propose that people nominated for peerages should be vetted and approved by an independent watchdog.
The body could block nominees if it judged they had a shady business background or were too close to a political party after donating money to it. Downing Street is also considering a plan for peers to be nominated by an all-party commission rather than by party leaders, as at present.
Mr Blair's concessions are aimed at spiking Conservative guns before a full-scale constitutional battle with Tory peers over the Bill to reform the Upper House.
The Tories are threatening to lay siege to the Bill and have warned that unless Mr Blair makes clear how he intends to carry through the second stage of Lords reform, they will ignore convention and block the measure by using their majority in the Lords, overriding the wishes of the Commons.
Sources in the Lords said they expect the Government will have to invoke the Parliament Act to get the Lords reform Bill on to the statute book. That could involve a delay of 12 months, bringing it dangerously close to the general election in 2002.
Mr Blair's new safeguards will be included in a government document, to be published before Christmas, which will set out its options for further, wide-ranging reform of the Lords including an elected element to be enacted after the next general election.
A cabinet committee chaired by Lord Irvine, the Lord Chancellor, will meet later this month to start drawing up the "options paper". It will include a plan for two-thirds of the Lords to be elected and one-third appointed, and will call for a Royal Commission or an all-party committee on the make-up and powers of the new-look Lords.
One minister said yesterday: "As well as abolishing hereditary peers, we are determined to show we are serious about setting up a process to decide our long-term reforms."
The move reflects growing concern among ministers that Mr Blair is vulnerable to the charge of turning the Lords into a "Labour quangocracy" after the hereditary peers lose their rights in the first stage of his reforms.
Mr Blair has already provoked Tory claims he has rewarded several of " cronies" by appointing life peers who have given money to the Labour Party. They include Lord Sainsbury, former chairman of the supermarket chain, Lord Bragg, the broadcaster, and Lord Puttnam, the film director.
Ministers have also been stung by Tory claims that Labour may never proceed with stage two of its Lords changes because of fears that it might prove harder to get its legislation through a partly elected second chamber.
The Government has decided to introduce the Bill in the Commons, where it will win a huge majority, to reinforce the pressure on the Lords to bow to the views of the elected House.
Lord Strathclyde, the Opposition chief whip in the Lords, has warned that the Government would face "sustained resistance" if it tried to force through a Bill banning hereditaries.
A government source said last night: "There is no doubt the Tories are upping the ante. But we are ready for a battle and we will call their bluff. Do they really want to die in the ditch to preserve the rights of hereditary peers?"
At present, the Tories have a total of 474 peers, of whom 300 are hereditaries. Labour has 175, including 17 hereditaries. There are 325 crossbenchers (independents), 200 of whom are hereditaries, and 70 Liberal Democrats (24 hereditaries).Reuse content