400 senators could take the place of Lords

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The move would see salaried members representing local areas and would complete reform of the Upper House after years of deadlock.

Justice Minister Jack Straw is leading cross-party talks aimed at reaching a consensus over detailed proposals before MPs leave for the summer recess.

At present there are 748 peers, who include life peers and remnants of the hereditary peerage who elect 92 of their number to sit in the Lords under a previous deal. A policy paper last year suggested cutting the numbers to 540, with a mixture of elected peers and those appointed by the Government.

Hereditary and life peerages would be phased out over time. The talks are now moving towards a smaller chamber of about 350 to 400 members. They would be either 80 per cent elected or even 100 per cent, the FT reported.

The senators would stand for up to three terms of four or five years each, to a maximum of 12 or 15 years, possibly holding elections on the same day as European polls or those of the devolved Scottish and Welsh assemblies. Systems of proportional representation might be used, with groups of four or five senators being elected to super-sized constituencies.

Instead of drawing expenses at £82 a day as peers do, the senators would be paid a full-time salary, probably less than the £62,000 paid to MPs.