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David Cameron's decision to veto a new European Union treaty has come under attack from senior Liberal Democrats.

Paddy Ashdown, a former party leader, and Shirley Williams, a former Cabinet minister, both strongly criticised the stance taken by Mr Cameron.

Lord Ashdown of Norton-sub-Hamdon said the success of the Government was heavily dependent on ensuring the UK was "back in the game" in Europe, while Baroness Williams of Crosby claimed there had been "huge damage done to Britain's influence and reputation" across the world.

In a a rowdy Lords chamber a minority of backbench Lib Dems laughed mockingly as Lords leader Lord Strathclyde, a Tory peer, defended the Government's position after he had repeated a statement made in the Commons by Mr Cameron.

Lord Ashdown asked him: "Given that we have now cast a veto without stopping anything, that we have in the name of protecting the City of London made it more vulnerable, that we have at a time of crisis given greater incentive for investors to put their money in northern Europe rather than isolated Britain, that we have reduced our leverage in Europe and our voice in Washington, is it not now necessary that we should take every step to get ourselves out of the position we find ourselves in, to make ourselves relevant to the argument and back in the game?

"Will you tell us how we intend to do that and do you realise how much depends for this country and I might say for this Government on our success in doing so."

Lord Strathclyde said that he could not agree and that the UK was "very firmly in the game" and its voice was "not diminished".

But Baroness Williams of Crosby asked: "Do you recognise the huge damage done to Britain's influence and reputation far beyond the European continent as any reading of recent journals in the United States or for that matter Russia indicate very clearly?"

And she called for the UK to make clear that "the EU institutions will not be in any way blocked" from discussions between the other countries

Lord Strathclyde replied: "I really don't believe that Britain's influence or reputation have been affected in any way negatively by what was done at the end of last week.

"In many ways it has been enhanced by a British prime minister who laid out very carefully what he was going to protect British vital interests. He went and negotiated and when he could not get what was right he said 'I'm not going to agree'. That is a position of courage."

He said it was "too early" to take a view on what EU institutions would be involved and what the Government's position would be on that.