Some senior party figures appear to have dropped their previous preference for the alternative system, which is not a proportional voting system.
The alternative vote ensures that all MPs are elected by a majority following the elimination of candidates who come bottom of the poll, and a redistribution of voters' second preferences.
Liberal Democrats were yesterday delighted by the agreement between the parties, which they regarded as a climbdown by some senior Labour opponents of electoral reform.
The decision was part of a practical package of constitutional change to "renew democracy", tied up between Labour and the Liberal Democrats yesterday. But the two parties warned that the prerequisite for reform was ending the Conserv-ative culture of the "one-party state", and a change of government at the next election.
The agreement could also overcome the practical obstacles that blocked previous attempts at reform. Bob Maclennan, the Liberal Democrat spokesman, said yesterday that the history of constitutional struggle was littered with failure.
"In the Sixties," he said, "a Labour government with a huge majority failed to reform the House of Lords. In the Seventies, plans for devolution came to nought. Our two parties have to do better."
Robin Cook, shadow Foreign Secretary and the man who led the Labour negotiating team, said: "Both parties have gained from reaching agreement on a comprehensive programme of reform which offers each of us a better prospect of achieving the objectives of our policies on the constitution."
The areas of agreement covered not only devolution, electoral reform, and the removal of the right of hereditary peers to sit and speak in the House of Lords, but also a code of human rights, freedom of information, the independence of the national statistical service, greater scrutiny and accountability for quangos, statutory force for the civil service code, and a modernisation programme for the Commons.
While the Liberal Democrats disagreed with Labour's proposal to hold two referenda on Scottish devolution, one on the setting-up of a parliament and another on its powers to vary taxes, yesterday's agreement said they "would not seek to frustrate or delay referendum legislation".
Yesterday's statement said that once the initial referendum had been carried, "both parties would support legislation to establish the Scottish parliament within the first session of Parliament after the general election" - by the summer of 1998.
Both a Scottish parliament and a Welsh assembly would be elected on an additional member system; the proportional voting system which retains constituency seats, but gives an additional proportion of places to the "best losers" among defeated candidates. That system will be one of the options for an electoral commission that would be given a year in which to propose a referendum choice between the existing first-past-the-post system and "one specific proportional alternative" that would "command broad consensus among proponents of proportional representation."
Mr Cook said he anticipated that the referendum, and any subsequent legislation could take place "in good time" for PR to be introduced for the following general election.Reuse content