Coalition split as Tories go cold on Lords reform

George Osborne says ministers want to focus instead on 'things that really matter'

A Coalition rift was growing last night after the Conservatives distanced themselves from reform of the House of Lords and suggested that any shake up of the second chamber could be put to a referendum.

The Queen's Speech on Wednesday, in which the Government sets out its programme for the next parliamentary year, will include a commitment to create an elected senate to replace the Lords. But George Osborne, the Chancellor, played down the importance the Coalition would give to the contentious proposals, arguing that ministers would focus on "the things that really matter".

Last night, the Liberal Democrats insisted the Coalition's commitment to the policy remained and poured cold water on the suggestion of a national referendum on Lords reform.

Following the Tories' drubbing in last week's local elections, the party leadership suffered furious protests from backbenchers that it had become sidetracked on such issues as Lords reform and gay marriage. David Cameron will come under fresh pressure today when two former ministers, John Redwood and David Davis, set out their plans for an "alternative Queen's Speech".

They are calling for a referendum on Britain's position in the EU, lower taxes on businesses to stimulate economic growth and a war on red tape stifling industry. Mr Osborne acknowledged yesterday that voters wanted the Government to concentrate on the economy, education and welfare and not "get distracted by too many other issues".

He told BBC1's Andrew Marr Show: "We've got to stay focused on what really matters and I think the issues that matter are actually not House of Lords reform, not gay marriage." His comments on the Lords implied he would be prepared to allow the reform plans to run into the sand rather than devote weeks of parliamentary time to them.

Separately, Conservative sources indicated they were moving towards a position where they would support Lords reform being put to a nationwide vote. Either move would infuriate their Liberal Democrat coalition partners, who are convinced of the constitutional importance of creating an elected second chamber.

A senior party source said: "The Government remains committed to legislating for democratic elections to the second chamber 100 years after we first started talking about it."

Lib Dem sources, however, were relaxed about the Chancellor's comments on gay marriage. They pointed out that the plans were being consulted upon and there had never been a plan to include them in the Queen's Speech.

The legislative programme is expected to put crime, tackling employment legislation, family-friendly measures and reform of the high-street banks at its heart. Today Mr Cameron will also announce plans to create a new offence of driving under the influence of drugs.

The moves are designed to demonstrate to voters that the Government is focusing on issues close to their hearts.

THE QUEEN'S SPEECH: THE POLICIES THAT ARE IN – AND OUT

IN: JOBS

To the dismay of trade unions and some Liberal Democrats, moves to make it easier to hire and fire staff are back on the Government's agenda. Ministers insist that plans to make it harder to claim unfair dismissal and tip industrial tribunals in favour of employers are essential to encourage companiesto take on staff.

IN: CRIME

Britain's answer to the FBI, the National Crime Agency, will be set up to co-ordinate the fight against drug-smuggling, people-trafficking and international fraud. Community punishments will be toughened up in an attempt to reduce the numbers in prison. Cameras will be admitted to English courts (in a strictly controlled way) for the first time.

IN: BANKS

The high street and riskier investment parts of high street banks will be separated under legislation to be published in the autumn. A Banking Bill will also make it easier for people to switch accounts from one bank to another and promise that protecting ordinary savers' accounts will be prioritised if a bank gets into trouble.

IN: DRUG DRIVING

It will become illegal to drive under the influence of drugs, mirroring legislation for drink-driving. The maximum penalty for this offence will be six months. David Cameron will also pledge today to roll out "drugalysers" to enable police to carry out roadside checks on erratic drivers.

IN: FAMILIES

Maternity and paternity leave will be made more flexible as part of a package of "family-friendly" policies. The bureaucracy surrounding adoption will be streamlined, particularly to enable inter-race adoption. Extra support will be provided for couples contemplating separation.

IN: SURVEILLANCE

Contentious measures for communications companies to keep information about mobile calls, emails and internet visits have already prompted a civil liberties backlash from the Tory Right and Liberal Democrat Left. But the Government insists the moves are essential to keep track of terrorists and criminal gangs exploiting new technology to communicate.

IN: HOUSE OF LORDS

The Queen's Speech will contain a promise of Lords reform with the creation of a wholly or mainly elected second chamber. But it will be worded blandly enough to signal to Tories that David Cameron's commitment is skin-deep. The Liberal Democrats remain resolute that reform must happen.

OUT: OVERSEAS AID

The Coalition promised to enshrine in law its commitment to spending 0.7 per cent of national income on overseas aid. Its absence from the Queen's Speech will please Tory right-wingers, but Government sources say it is not too significant. It is a personal priority for Mr Cameron, who has overseen large rises in aid spending.

OUT: SOCIAL CARE

Like their Labour predecessors, ministers have delayed action on one of the trickiest problems facing them – how to afford the burgeoning cost of care for the elderly and disabled. All-party talks have begun on the subject, but tough decisions over making people pay more could be harder as an election approaches.

OUT: UNIVERSITIES

Plans to make it easier to set up American-style private universities have been abandoned in the face of protests from academics who warned the moves would dilute standards. The Liberal Democrats also opposed any fresh reform to higher education following their bruising experience over raising tuition fees.

OUT: HIGH-SPEED RAIL LINK

The decision to press ahead with a high-speed rail link between London and Birmingham provoked howls of anguish among Home Counties Conservatives along the proposed route. Construction will not begin until after the next election, so the need for a Bill is not too pressing. But opponents will still gain heart from its absence this week.

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