Britain will hold a referendum on May 5 on changing the electoral system after the government overcame stiff resistance in parliament to pass legislation authorising the vote.

The centrist Liberal Democrat party demanded the referendum as a key condition for joining a coalition with the centre-right Conservatives after the Tories failed to win a clear general election victory in May 2010.

But the two sides hold sharply different views on electoral reform, meaning Conservative Prime Minister David Cameron and Lib Dem Deputy Prime Minister Nick Clegg will campaign against each other ahead of the vote.

"This is a real milestone in restoring trust in our political system and making our democracy fairer," said Clegg, who cancelled a trip to South America to try to resolve a parliamentary stand-off over the issue.

"For the first time, through a referendum, voters will have a say in the system they use to elect their MPs."

A group of peers from the House of Lords, the upper chamber of parliament, had tried to derail the legislation by insisting on a minimum turnout of 40 percent in the referendum, but the government defeated their moves late Wednesday.

The bill had to be approved by Thursday for the vote to take place in May as the House of Lords was about to go into recess.

The Conservatives want to stick with the current first-past-the-post voting system, in which the constituency candidate who wins the most number of votes wins outright.

This is also used in countries including the United States, India and Canada and tends to favour a two-party system.

The Liberal Democrats, traditionally the third largest party, see electoral reform as a touchstone policy and will support a switch to the Alternative Vote (AV) system, as used in Australia, in the referendum.

This allows voters to rank candidates in order of preference, although does not go as far on electoral reform as the party would eventually like.