Blair warned to think again on reform of the Lords

Tony Blair has been warned by a trusted ally that reforming the House of Lords with directly elected peers will lead to demands for more powers and financial support for the second chamber.

The former cabinet minister Jack Cunningham was put in charge of a review of Government plans for cutting the power of the Lords to hold up controversial legislation passed with Labour's majority in the Commons. It was widely expected that he would endorse the strategy for cutting the powers of the Lords. But yesterday he delivered a unanimous cross-party report rejecting the Government's plans with a warning that could cripple Mr Blair's hopes of completing the reform of the Lords as one of his lasting legacies.

Lord Cunningham of Felling said giving peers a mandate by electing them would mean "all bets are off" about their powers. His report was confined to the powers of the current House of Lords, but he made it plain that he believed Mr Blair or his successor would be advised to think again before going ahead with wider reforms .

Jack Straw, Leader of the Commons, is due to propose a reformed second chamber comprising 50 per cent elected and 50 per cent appointed peers. The Government has threatened to use the Parliament Act to force the reforms through the Lords, if agreement in the Commons can be reached.

However, Lord Cunningham gave the clearest signal so far that Mr Blair was heading for a constitutional crisis with peers if he used force.

He said: "If I was in government I would take a long hard look at this report before I launched into any proposals, because given what I think is the quite powerful nature of this unanimous report, we are clearly reflecting strong views across the political spectrum."

His committee rejected a Labour manifesto commitment to cut the time that the Lords can hold up Bills to 60 days. The committee said there should be no limit, but Bills delayed more than 80 days should be clearly identified.

The peers also opposed a government plan to limit to three the number of times Bills can be returned to the Commons by the Lords, a process known as "parliamentary ping pong".

Next week, the Government will face a fresh round of "ping pong" over its controversial legislation to allow fast-track extradition for suspects such as the NatWest Three - bankers facing trial in the United States over offences allegedly committed in this country.