The ruling coalition in Britain suffered its worst crisis yesterday as David Cameron’s Conservatives and their junior Liberal Democrat partners blocked key parts of each other’s electoral reform plans.

I cannot permit a situation where Conservative rebels can pick and choose the parts of the contract they like

Liberal Democrat leader Nick Clegg said the coalition – formed two years ago after an inconclusive national election – had entered new territory after the Conservatives refused to back his plans to modernise the upper chamber of Parliament, the House of Lords.

Lords reform had been a key plank of the coalition agreement between Mr Cameron’s Conservatives and the Lib Dems, who in turn have now vowed to oppose Conservative plans to reform parliamentary constituency boundaries.

The boundary changes, which broadly favour the Conservatives, were also part of the coalition deal, and Mr Clegg’s opposition to them will further strain the already frayed partnership between the two.

“Clearly I cannot permit a situation where Conservative rebels can pick and choose the parts of the contract they like, while Liberal Democrat MPs are bound to the entire agreement,” Mr Clegg told reporters yesterday at a hastily convened news conference.

Dropping Lords reform is especially humiliating for the Lib Dems because the party backed a controversial proposal, as part of the coalition deal, to increase university tuition fees, a move that saw them haemorrhage support in opinion polls.

“My party has held to that contract even when it meant voting for things that we found difficult,” Mr Clegg said.

“The Liberal Democrats are proving ourselves to be a mature and competent party of government and I am proud that we have met our obligations,”he added.

“But the Conservative party is not honouring the commitment to Lords reform and, as a result, part of our contract has now been broken,”he said.

The centre-right Conservatives courted the much smaller, left-leaning Lib Dems after failing to gain an outright majority in 2010 elections. The two agreed to overcome their natural ideological differences in the interests of seeing Britain through its worst economic crisis since World War Two.

Mr Clegg said the balance between the two ruling parties needed to be restored. The two parties have publicly said they aim to continue their partnership up to the next general election in 2015, but Cameron has faced growing restiveness among his rank and file MPs, who have been increasingly vocal in recent months in rejecting Lib Dem proposals.