Disgraced peers will face expulsion in future

Disgraced peers could be expelled from the House of Lords for mis-conduct under government plans for an elected second chamber, to be proposed by Nick Clegg.

The stripping of the knighthood awarded to Fred Goodwin, the former Royal Bank of Scotland chief executive, has highlighted an anomaly under which peers cannot be ejected from the Lords even if they commit a criminal offence or fiddle their parliamentary expenses.

Although MPs jailed for 12 months or longer are automatically expelled from the Commons, no such sanction applies in the Lords. Peers cannot even resign in disgrace if they want to "fall on their sword".

The Cabinet agreed on Tuesday to include Mr Clegg's Lords Reform Bill in the Queen's Speech at the start of the Coalition's second parliamentary session this spring. It would turn the 700–strong, mainly appointed second chamber into a 300-strong body, with 80 per cent of its members elected by proportional representation and 20 per cent of independent crossbenchers appointed.

Mr Clegg wants the first elections to the modernised Lords to take place on the same day as the general election in 2015. But he faces a long battle to force his Bill through the Lords, with many peers reluctant to vote for their own demise – and doubts whether David Cameron will throw the Conservatives' full weight behind the fight.

The Deputy Prime Minister does not want to include specific sanctions for misbehaving peers in his legislation, which will give the chamber the power to set up its own disciplinary rules.

A senior Liberal Democrat said: "This is just one of the many good reasons why the Lords should be reformed. A modern second chamber would have the power to remove peers whose behaviour falls short of what is expected."

It is unclear whether expelled peers would be able to keep their title or would merely lose their right to sit and vote in the House.

It is understood that some senior Conservatives have little appetite for tougher sanctions against peers.

The sanctions will not be retrospective, although peers who have been convicted are unlikely to stand for election in a reformed Lords. They include the novelist Lord Archer, who served a jail sentence for perjury and perverting the course of justice and Lord Black, former owner of The Daily Telegraph, jailed in the US for fraud.

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