Deputy Prime Minister Nick Clegg, a Lib Dem, said a bill would be submitted to parliament proposing a referendum on 5 May 2011 on whether to keep "first-past-the-post" or switch to another system known as the Alternative Vote (AV).
He also announced plans to cut the number of members of parliament (MPs) to 600 from 650, change the rules on dissolving parliament and set the legislative term at five years instead of letting the prime minister pick a convenient election date.
Clegg said these changes would make the voting system fairer and better enable MPs to hold the executive to account.
The bills are likely to face a bumpy ride in parliament as some of the measures would have a profound impact on British politics.
The referendum on AV will place the government in an awkward position because the Lib Dems, the junior partner, will campaign in favor of the change to AV while Prime Minister David Cameron's Conservatives will oppose it.
"By giving people a choice over their electoral system, we give that system a new legitimacy," Clegg told parliament.
"Surely when dissatisfaction with politics is so great, one of our first acts must be to give people their own say over something as fundamental as how they elect their MPs."
He was referring to a scandal over MPs' expense claims last year that discredited the political class in the eyes of many voters and has created, the Lib Dems hope, momentum for reform of the political system.
Vote of no-confidence
First-past-the-post voting, in which the candidate who gets most votes in a constituency wins even if he or she falls short of 50% of the total, has favoured two major parties, the Conservatives and Labour, while marginalising the Lib Dems.
Under AV, if no candidate wins 50% of the vote, the second preferences of voters who picked last-placed candidates are redistributed until someone reaches the 50% mark.
AV falls short of the Lib Dem dream of proportional representation, but the party sees it as an improvement on the current system. A referendum offering AV was the price of Lib Dem participation in a Conservative-led government.
"They did go into the coalition knowing that this would happen and while it will be a strain it's not likely to be the end of the world," said Tony Travers of the London School of Economics.
Equally controversial will be the proposed changes to how parliament can be dissolved and the government brought down.
Clegg said the coalition had dropped a plan to make it harder for a vote of no-confidence to pass by requiring support from 55% of MPs instead of 50%. The opposition Labour Party immediately labelled this "a major U-turn".
Clegg said support from 50% of MPs would still be sufficient for a vote of no-confidence. However, that would no longer force the prime minister to resign immediately and trigger an election.
Instead, the prime minister would have 14 days to try and form a new government capable of winning a confidence vote. Only if such efforts failed would there be an election.
A separate measure would allow parliament to vote to dissolve itself early, but only by a two-thirds majority.
Clegg said these proposed changes represented a transfer of power from the executive to parliament, but he is likely to face fierce opposition from many MPs who fear the new system would make it easier for governments to cling to power.
(EurActiv with Reuters.)
