Clegg finds unlikely ally in Osborne for Lords reform plans

Lib Dem leader will take a backseat in selling new round of proposals for constitutional change

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George Osborne is to become an unlikely ally of Nick Clegg in the battle to reform the House of Lords, as the coalition prepares to steamroller plans through before the next election.

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Despite Tory/Lib Dem relations souring in recent weeks, the Chancellor is prepared to support the Deputy Prime Minister's reform plans. Mr Clegg will use the Parliament Act to deliver one of the coalition's most far-reaching policies, The Independent on Sunday has learnt.

In a further sign of improving relations between the two parties, Chris Huhne, the Lib Dem Energy Secretary, has won a battle with the Treasury over the Government's commitment to cutting carbon emissions.

The developments come after pleas by Lib Dem members of the Cabinet to David Cameron to force Mr Osborne to be more consensual – although some close to Mr Clegg may view it as mere tactics.

A ComRes poll for The IoS reveals voters believe it is better that the Tories are in coalition with the Lib Dems than that they govern alone. Surprisingly, Conservative voters are more likely to agree than disagree – 44 per cent to 38 per cent.

This week Mr Clegg will present a draft Bill to Parliament on replacing the House of Lords. However, in the wake of his defeat in the referendum on the voting system, the Lib Dem leader is anxious to avoid seeming obsessed with constitutional matters at a time of deep spending cuts. Instead, two Tory ministers – Mark Harper and Lord Strathclyde – will take to the airwaves to sell the policy.

There is still behind-the-scenes wrangling over what the new upper house will be called, with Clegg allies favouring the retention of the House of Lords over a US-inspired "Senate".

In meetings with peers to persuade them to support their own abolition, Mr Clegg has made it clear that he is prepared to use the Parliament Act to force the Bill through the Lords. Any intervention by Mr Osborne is likely to carry significant weight and will mark a surprise about-turn after Lib Dems publicly criticised his role in the referendum campaign.

Lib Dem party managers are also preparing to turn the issue into a major test of Ed Miliband's leadership of the Labour Party. An internal briefing for staff at the Lib Dem HQ suggests that Mr Miliband is seen as weak and unable to unite his party in favour of reform. "He doesn't pass the 'blink test' – he just doesn't look, in the instant in which people make the judgement, like a potential PM."

The latest IoS poll adds to Mr Miliband's woes, revealing Labour's lead over the Tories has been cut to just one point. And only 22 per cent of voters believe he is turning out to be a good leader of his party, just one point more than Mr Clegg, who has been pilloried for months.

David Laws, who will this week be suspended from the Commons for seven days after breaking expenses rules and repaying £56,500, is expected over the coming months to become involved in Lib Dem policy development, notably around Mr Clegg's concept of low-paid, hard-working Alarm Clock Britons. This will pave the way for a possible return to a formal government post, perhaps as a minister of state overseeing policy with his Tory counterpart Oliver Letwin.

Sources close to Mr Clegg said Mr Laws was a "first-class brain and a first-class politician" whom Mr Clegg would turn to, especially in drawing up a reform programme for the second half of the parliament, known as Coalition 2.0.

Tomorrow David Cameron will make a staunch defence of the NHS, insisting it will always be free to those who need it. He will also criticise waste in the primary care trusts which are due to be replaced by consortia of GPs contracting care for patients. However, Labour wrote to Andrew Lansley, the Health Secretary, yesterday, claiming that his controversial NHS reform Bill is "on its last legs [and] needs putting out of its misery now".