Jack Straw, the Leader of the Commons, wants to phase in the shake-up over many years in a move designed to win round Labour peers, many of whom are refusing to vote themselves out of a job.
Tony Blair's decision to put Mr Straw in charge of Lords reform in this month's Cabinet reshuffle was seen by some MPs as an attempt to kick the issue into the long grass. Mr Straw voted against elected peers three years ago but is now starting to canvass support among Cabinet colleagues, Labour MPs, peers and other parties for his gradualist reform package.
A cabinet committee on modernising Parliament, chaired by Mr Straw, has met for the first time. Although no final decisions were taken, there was broad agreement for the number of elected peers to be increased gradually - perhaps over three or four parliaments, each normally lasting four years.
Electing 60 per cent of peers would disappoint some reformers who want a vast majority of them to be elected. But supporters say the move would be a big improvement on the all-appointed House, now known as "Tony's cronies" after Mr Blair turned Labour into the largest party in the second chamber. One Cabinet source said: "A lot of people think the issue will be buried, but the opposite is true. Jack is getting stuck into Lords reform with relish. There is widespread agreement that the Lords has got to be reformed."
Ministers who back reform are pressing for a Bill to be included in the Queen's Speech in November. As well as paving the way for elected peers, it would abolish the right of the 92 remaining hereditary peers to sit and vote in the Lords.
But some ministers, including Gordon Brown, are believed to want to put off reform until after the next election, fearing that many voters would not want the Government bogged down in a "Westminster village" issue in the election run-up. If the Lords refused to back any reform Bill approved by the Commons, the Government might try to resolve the stand off by using the Parliament Act, which allows MPs to overrule peers.
Amid chaotic scenes, all the options for reforming the Lords were voted down in the Commons three years ago. Although Labour promised another free vote in its election manifesto last year, ministers plan to "give a lead" to MPs next time in the hope that their package will be endorsed.
In an attempt to win over the opposition parties, ministers will pledge that they do not want to neuter the Lords following a spate of defeats for the Government. But they will insist that the all-elected Commons must retain its primacy over the second chamber.
An all-party committee of peers and MPs, chaired by the former Cabinet minister Lord Cunningham, was set up yesterday to review the conventions under which the Lords can delay legislation. Some small-scale changes may be recommended by it.
Aides deny that Mr Blair has suddenly developed an interest in Lords reform because of the "cash for peerages" scandal, saying that plans were under consideration before the controversy erupted.
At present, Labour has 207 peers, the Tories 204, the Liberal Democrats 74, and there are 190 independent crossbenchers, 26 archbishops and bishops and 12 others.