Steve Richards: What's in it for us? The question Nick Clegg must ask himself

For Labour this a blissful moment with both Coalition leaders in severe discomfort

(James Benn)

Two of the three party leaders face some big decisions after the latest and most dramatic episode of the long-running Lords reform saga. What they decide to do may well shape the broader political landscape for several years to come.

Oddly, the one party leader who does not face agonising decisions is David Cameron. For him, the course is set. He might be Prime Minister, but Lords reform has illustrated most vividly the limits of the control he wields over his parliamentary party. Tory MPs not only rebelled against him, but did so with a resolute pride. One of many telling moments in the past few days took place on Tuesday when the Leader of the Commons, Sir George Young, blamed Labour for the failure to make progress. The increasingly famous Conservative MP Jesse Norman intervened defiantly to make it clear that it was his side that had been the block and he wanted their defiance recognised. This is hardly apologetic dissent.

Due to the Lib Dems' excessive generosity in the first year of the Coalition, Cameron was sheltered from the fact that he did not win the last election outright. More frequently in the past few months, and emphatically this week, he is reminded of his inevitable, unavoidable fragility. Cameron is in a weak position, as is any Prime Minister in a hung Parliament.

He is weaker still because he leads a parliamentary party with strong convictions. I disagree with the Conservative rebels, but I admire their principled stand. They believe profoundly that the reforms are dangerous and not properly thought through. The current Conservative parliamentary party, not least the ambitious 2010 intake, put their convictions first, even though a ministerial reshuffle is likely soon. This is admirable but makes them difficult to lead in the best of circumstances. For Cameron, this is not the best of circumstances. Unless there are significant changes to the proposed reforms, the Tory rebels will not change their minds between now and September. Cameron knows this and will almost certainly tell Nick Clegg he can only deliver far more modest reforms.

Which leaves Clegg with some big decisions to make. Does he accept that only a much smaller step towards a largely elected second chamber is possible? He has an alternative route. Several rebels have indicated a willingness to move towards his more ambitious proposals if specific concessions are made. There were persistent calls for a referendum and this is one of the demands of the Labour leadership. Will Clegg seek to press on with concessions, including perhaps a referendum?

With good cause Cameron is wary of granting one, not least because it would open the door for demands that he brings forward legislation on a European referendum binding the next parliament to hold one. In spite of this nightmarish prospect, he has previously shown a reluctant willingness to hold one on Lords' reform. Clegg is firmly opposed, partly because he knows that voters tend to support the status quo, but also on the more principled grounds that the referendum on Scottish independence is more than enough for this parliament. Nonetheless, he might have to offer one as the only way to keep his more radical reforms alive.

At the moment, he is inclined to hold out. The past few days have been more painful for him than electoral reform was because at least then the Conservatives kept their side of the bargain, which was to offer a referendum. If Clegg has to accept a miserly incremental change to the Lords, he must decide where this leaves his party as part of a Coalition that has failed to deliver electoral reform or radical Lords reform.

The threats to vote against the boundary changes, specifically made by the deputy leader, Simon Hughes, yesterday have annoyed the Conservative leadership, but are deadly serious. Clegg has almost no choice. He cannot credibly lead his MPs into the lobbies to help Cameron pick up extra parliamentary seats, partly at the Lib Dems' expense, without a shield of significant Lords reform. Clegg is angry at Labour's duplicitous manoeuvering, but he is nearly always angry with Labour. What is new is the degree to which he feels let down by some Conservative MPs and by Cameron for not making more effort to deliver them. When introducing his proposals on Monday, Tory rebels treated Clegg with raucous disdain. Afterwards, he noted to an ally that Lib Dem MPs had politely supported policies over which they were deeply uneasy and remained civil to Cameron in the Commons. When he outlined a proposal that was part of the Coalition agreement, all hell was let loose.

For Labour, on one level this is a blissful moment with both Coalition leaders in severe discomfort. But Ed Miliband broadly supports the cause that is causing such internal strife. Can he continue in the autumn to advocate Lords reform while killing off this particular proposal? I sense he has already decided to be unyielding in his opposition to any new timetabling proposal. But changes to the substance might be different, not least if a referendum is offered.

The Machiavellian twist, of course, is that Miliband's team wants to see the proposed boundary changes defeated, depriving the Conservatives of additional seats at the next election. Were it possible, he would like to be seen assisting the cause of reform while maximising parliamentary opposition to the boundary changes – what Tony Blair would call a third way. But if that is not available, he might still have some tricky decisions to make on how much he helps Clegg and the degree of pressure he puts on his party to do so.

No one knows what will happen next. On this, the two leaders are not fully in control of their parties. All I can predict with total confidence is that MPs who are stroppy in July do not become less so after the recess. This was always John Major's hope in the mid 1990s. "They will be calmer when they have all had a holiday," his ministerial allies used to say over summer drinks. They never were. They will not be this autumn, one of several reasons why Cameron hopes Clegg will accept a modest reform that Tory rebels can support. But I doubt very much this long-running saga will end as neatly as that.

s.richards@independent.co.uk; twitter.com/steverichards14