Nick Clegg announced details of planned legislation for fixed term parliaments and a referendum on moving to an alternative vote (AV) system, which will be held on 5 May 2011.
In a statement to the Commons, Mr Clegg said reform was necessary to rebuild public trust in the political system.
He said:
We have a unique duty to restore the trust in our political system that has been tested to its limit in recent times, and if anything was clear at the General Election, it was that more and more people realised our political system was broken and needs to be fixed. They want us to clean up politics. They want to be able to hold us properly to account.
So the government has set out an ambitious programme for political renewal, transferring power away from the executive to empower Parliament and away from Parliament to empower people.
Under the proposals, the size of constituencies would also be reviewed to ensure they are of a more equal size and to reduce the number of MPs from 650 to 600. Ministers believe the cap on the number of MPs will save £12 million a year in pay, pensions and allowances alone.