Was a deal done or not? Watch Tony Blair and William Hague at Prime Minister's Questions

Mr Hague stunned MPs during Prime Minister's Questions by stating that Tony Blair made the offer in a bid for a private deal with the opposition to win Tory agreement on reform of the upper chamber.

But Mr Hague said he was rejecting the offer as his party was not prepared to acquiesce on major constitutional changes that were "not based on common sense or principle".

Tony Blair says Lord Cranborne agreed a deal

Accusing Tony Blair of a huge climbdown, he said his party believed it was wrong to embark on changes to parliament "without any idea of where it is leading to".

Mr Blair said the government was prepared to agree that in the first stage of Lords reform - the removal of hereditary peers - one in 10 hereditaries would stay until the second stage of reform was complete.

'Lords leader agreed'

Emma Udwin reports from the House of Commons

He said he thought he had the agreement of the Lords leader, Viscount Cranborne - and indeed, the government did have his agreement, said Mr Blair. It showed the opposition leader no longer spoke for his party in the Lords. But he wanted to know where Mr Hague stood.

Mr Hague told him: "You need be in no doubt who speaks for the Conservative Party."

And he stated: "No deal has been made with the Conservative Party."

But the exchange revealed a rift between Mr Hague and Tory peers, who have given their backing to Lord Cranbourne.

After Question Time, the Conservative peers went into a meeting addressed by Mr Hague.

'Cronies' accusations

The compromise plan was originally proposed by independent cross-bench peers and before the Queen's Speech the shadow cabinet agreed to reject it.

In the Commons, Mr Hague accused the government of trying to create a chamber of cronies and horse-trading to achieve it.

But, amid rowdy scenes, Mr Blair hit back, saying even Mr Hague's "cronies" in the Lords agreed that reform was necessary.

Labour is facing a huge political battle in its bid to strip hereditary peers of their voting and sitting rights in the Lords - the flagship of their second parliamentary session.

Mr Hague told the Commons that Lord Chancellor Lord Irvine had approached the Conservative Party with a proposal to keep a proportion of the hereditary peers, explicitly sitting as hereditary peers, in exchange for his party's acquiescence in the rest of the changes.