The revolt threatens the coalition between Conservatives and Liberal Democrats, The Guardian reported. Deputy Prime Minister Nick Clegg, the Lib Dem leader, has made reform of the upper house of Parliament a signature issue.
The bill's second reading was approved 462-124 after Labor leader Ed Miliband instructed his members to vote with the government. But Cameron dropped plans for a "program motion" that would have set a timetable for action on Lords reform and sent the bill to committee.
"This was a tactical withdrawal to avoid an operational defeat," a source in the government told the Guardian.
One Conservative said the prime minister made a "disgraceful" show of temper, yelling at Jesse Norman, a member of Parliament who heads of Campaign for an Effective Second Chamber. The campaign favors appointment of Lords rather than election.
Since the late 1990s, most members of the House of Lords have been life peers, effectively given a lifetime appointment, while hereditary peers elect some representatives from within their own ranks. High officials in the Church of England sit as Lords Spiritual.
Under the bill endorsed by Cameron, 80 percent of the Lords would have been elected by 2025.
One Conservative member resigned as a ministerial aide so he could vote against the second reading. Another was fired as an aide after casting a no vote.
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