The North-East is seen as the most likely venue for an elected assembly

The Conservatives praised Lord Greaves, a former Lancashire county councillor, for his stand against what they said was a "shabby" agreement.

His decision to quit came as proposals to allow English regions to hold referendums on whether they wanted their own parliaments reached their report stage in the House of Lords.

Lord Greaves spoke out against an amendment proposed by fellow Lib Dem peer Baroness Hamwee, which the Lords later approved by 129 votes to 79.

The Tories are campaigning to keep both county councils and district councils, which currently operate alongside each other.

Baroness Hamwee's proposal means voters in areas which have those two layers of local government will have a say on which layer makes way for a new assembly.

The government said last week it would accept the amendment, which means voters would choose between two options for the future structure of local government in a referendum.

Crunch time

Lord Greaves is angry his party has agreed with the government's insistence people will not be allowed to choose to keep two tiers of local councils.

He told peers on Monday: "The crunch here is whether in areas which are to have referendums on regional assemblies, whether people in those areas have the democratic option to decide for themselves and not be told by the Minister or Number 10 Downing Street or anyone else, that two tier local government is not allowed.

It is quite hard to justify going forward for a referendum, even in the North East Andrew Selous Tory MP

"I have to say that regrettably my party has now agreed to be blackmailed, bullied and browbeaten."

His move was applauded by Baroness Seccombe, a Tory frontbencher.

She said: "Lord Greaves stood up against a shabby deal done by the Liberal Democrats with the government to scupper the future of county councils.

"The Liberal Democrats have caved in without a fight for our historic counties. Lord Greaves has spilled the beans."

Government minister Lord Rooker said Baroness Hamwee's amendment was sensible because delays over the detail risked "killing the bill".

"It is up to the Boundary Commission to come up with options and I will not accept that this is designed deliberately to snuff out county council government in this country."

Sounding responses

The Campaign for the English Regions said the new deal was "a huge bonus" for campaigners, who could now push for assemblies with the right powers.

The government has now finished its "sounding" exercise aimed at gauging interest in the idea of English regional parliaments.

There were about 5,000 responses to the consultation, the government has revealed.

A spokeswoman for the Office of the Deputy Prime Minister called that a "good and healthy" number.

Many of the responses would be from organisations representing a range of people, she said, and would help give Deputy Prime Minister John Prescott a good indication of interest levels, she said.

Dead duck?

But Conservative MP for South West Bedfordshire Andrew Selous called the "small" number of responses "staggering".

"It is quite hard to justify going forward for a referendum, even in the North East," Mr Selous told BBC News Online.

"In the East of England, I hope it is a complete dead duck. This is a grave indictment of this government's obsession."

Other surveys suggest there is strong support for assemblies in some regions, such as the North-East and North-West.