The peer said he was leaving with a “heavy heart”, urging his former colleagues to save their political skins by ditching Mr Clegg before next year’s general election.
His announcement came as the Cambridge Lib Dems, who suffered a wipeout of councillors in the English local elections last week, joined Liverpool party members in holding a vote of no confidence in Mr Clegg’s leadership.
Lord Oakeshott also raised fresh questions about his friend Vince Cable’s involvement in a plot to oust the Lib Dem leader, suggesting the Business Secretary knew he had commissioned research into how the party would fare with someone else in charge.
The ICM findings from five crucial Lib Dem constituencies emerged this week amid immense pressure on Mr Clegg over the party’s disastrous local and European election results.
They indicated the party was on track to lose Mr Clegg’s own Sheffield Hallam constituency and those of other senior figures but the contests became tighter if someone else replaced him in the top job.
Lord Oakeshott was widely named as the source, sparking speculation that Mr Cable was manoeuvring behind the scenes.
However, Mr Cable – currently in China on an official trip – said he had “absolutely no knowledge” of the polling carried out in Mr Clegg’s constituency by Lord Oakeshott.
Announcing his departure yesterday lunchtime, just hours after Mr Clegg signalled he would face disciplinary action, Lord Oakeshott said: “I am sorry I have so upset and embarrassed my old friend Vince Cable and that we were not able to talk before he issued yesterday’s statement from China.
“The combined message of these five professional and reputable ICM constituency polls, Nick Clegg’s dire approval ratings year after year in all national polls, and Thursday’s appalling council and European election results is crystal clear: we must change the leader to give Liberal Democrat MPs their best chance to win in 2015.”
He added: “A few stout-hearted MPs and peers and hundreds, maybe soon thousands, of candidates, councillors and Lib Dem members all over Britain are now fighting constituency by constituency for a leadership election.
“I have tried to give them the evidence they need to make the change. I pray that they win, and that the right man, or preferably, woman is now elected to save the party.”
Lord Oakeshott, a former party spokesman, said Mr Cable had been involved in organising the poll in his Twickenham constituency and was told about the results of the others “several weeks ago”.
“Several months ago a close colleague, concerned about voting intentions in Twickenham, asked me if I would arrange and pay for a poll to show us Vince’s current position and how best to get him re-elected,” he said.
“I was happy to help, and Vince amended and approved the questionnaire, but at his request I excluded a question on voting intentions with a change of leader.
“Although Vince had excellent ratings, both as a minister and a local MP, he was slightly behind the Conservatives in this poll.
“That poll worried me so much that I commissioned four more in different types of constituency all over the country and added back the change of leadership question.
“Several weeks ago, I told Vince the results of those four polls, too.”
Lord Oakeshott also disclosed that he commissioned another poll last week in Danny Alexander’s Nairn, Badenoch and Strathspey constituency.
It found the Chief Secretary to the Treasury – himself mooted as a future Lib Dem leader – was set for a heavy defeat at the hands of the SNP. Alex Salmond’s party was on 32 per cent, with Labour on 25 per cent, ahead of the Lib Dems on 16 per cent.
Mr Cable said he hoped that, in time, Lord Oakeshott would reconsider his views on the party but rebutted claims he had knowledge of the leaked polling.
He said: “I was not involved in any commissioning of the surveys done in Sheffield Hallam and Inverness and, indeed, I criticised them very severely yesterday.”
Mr Cable said Lord Oakeshott was a long-standing friend, with their relationship running over more than 40 years.
He said: “I very much regret it has finished up in this way and I regret he has decided to leave the party. I have given a very full and complete explanation of what I knew about these polls. I think the explanation is straightforward.
“We have been through some very bad elections, a lot of people have been very bruised by it. I want to work with my party colleagues to put it back on track.
“The information released to the press and commissioned about Sheffield Hallam and Inverness was damaging. I knew absolutely nothing about that, I was not involved with it in any way. I made that clear yesterday.”
Detailing what he knew about the polls, Mr Cable said: “Parties conduct polls all the time at national and local level. In this particular case, Lord Oakeshott asked my election campaign manager if we wanted a poll done in my local constituency; we said yes. It was a private, local poll done for general election planning – absolutely nothing to do with national leadership.
“I was aware he was conducting other polls around the country. I was told in general terms what the trends were. But I had absolutely no knowledge, and was certainly not involved in any commissioning of surveys done in Sheffield Hallam and Inverness.”
The Lib Dems have questioned the methodology behind the research, arguing that last week’s election results indicated the party’s support was holding up in areas where they had MPs.
Asked about the row after delivering a speech in east London, Mr Clegg said: “I think it is totally unacceptable for the Liberal party, facing very, very difficult elections last week, as we were, to find out now with hindsight that a senior member of the party, far from actually going out trying to win votes, was spending money and time seeking to undermine the fortunes of the party.”
He added: “Look, this happens in politics from time to time – people start deciding to take potshots at their own side. It’s never sensible. At the end of the day, we’ve a year to go before the general election.
“This is not the time for us to talk to ourselves – now is the time to actually say we are going to carry on campaigning with our head held high.”
The runners and riders if Clegg goes
The favourite to succeed Nick Clegg as Lib Dem leader is party president Tim Farron, who is unashamedly a flag bearer for the left and has avoided holding political office in the coalition.
Mr Farron, who is 5/4 to take over, emerged as a serious candidate in 2012 when he used his conference to articulate the agonies the grassroots have with the party striking a deal with the Tories.
Hi age, 44, puts him ahead of many ordinary members’ preferred candidate, Business Secretary Vince Cable, who is at 7/2 with the bookmakers but is in his 60s. Mr Cable, who is a regular critic of his Tory partners, is seen as the conscience of the party.
The compromise candidate is energy secretary Ed Davey at 7/1 who is one of the few leading figures to appeal to both the left and “orange booker” right of the party. However, after the council results he now faces a more difficult task in defending his Kingston seat in London next year.
The so-called orange book candidate on the right is Danny Alexander at 10/1, the Chief Secretary to the Treasury and Nick Clegg’s closest political friend.
While Mr Alexander has been the most successful Lib Dem minister, raising the income tax threshold to £10,500, he is seen as too close to the Tories.
The outside bet is business minister Jo Swinson, at 25/1, who is seen as the best candidate in the next generation but is also struggling to hold on to her marginal East Dunbartonshire seat.
In full: Lord Oakeshotte statement
I am today taking leave of absence from the House of Lords and resigning as a member of the Liberal Democrats. I am sure the Party is heading for disaster if it keeps Nick Clegg; and I must not get in the way of the many brave Liberal Democrats fighting for change.
I leave, with a heavy heart, the party I helped to found with such high hopes with Roy Jenkins, Bill Rodgers, Shirley Williams and David Owen at Limehouse in 1981. We then, like most Liberal Democrats now, wanted a radical progressive party, not a “split the difference” Centre Party, with, in Shirley’s memorable words, no roots, no principles and no values. But that is where Nick Clegg has led us.
I am sorry I have so upset and embarrassed my old friend Vince Cable and that we were not able to talk before he issued yesterday’s statement from China. This is the background:
Several months ago a close colleague, concerned about voting intentions in Twickenham, asked me if I would arrange and pay for a poll to show us Vince’s current position and how best to get him re-elected. I was happy to help, and Vince amended and approved the questionnaire, but at his request I excluded a question on voting intentions with a change of leader. Although Vince had excellent ratings, both as a Minister and a local MP, he was slightly behind the Conservatives in this poll, as the full details on the ICM website (http://www.icmresearch.com/) show. That poll worried me so much that I commissioned four more in different types of constituency all over the country and added back the change of leadership question. The results were in the Guardian yesterday and on the ICM website (http://www.icmresearch.com/media-centre/polls/lib-dem-constituency-polling). Several weeks ago, I told Vince the results of those four polls too.
The combined message of these five professional and reputable ICM constituency polls, Nick Clegg’s dire approval ratings year after year in all national polls, and Thursday’s appalling council and European election results is crystal clear: we must change the leader to give Liberal Democrat M.P.s their best chance to win in 2015. On Thursday I also commissioned one more ICM poll, in Inverness, Nairn, Badenoch and Strathspey; the results should also be on the ICM website tonight at http://http://www.icmresearch.com/data/media/pdf/2014_libdems_inverness.pdf and icmresearch.com/data/media/pdf/2014_twick.pdf
A few stout-hearted M.P.s and peers and hundreds, maybe soon thousands, of candidates, councillors and Lib Dem members all over Britain are now fighting constituency by constituency for a leadership election. I have tried to give them the evidence they need to make the change. I pray that they win, and that the right man, or preferably, woman is now elected to save the Party.
When Charles Kennedy rang to make me a peer, from a panel elected by the party, fourteen years ago he said he wanted me to shake up the Lords. I’ve tried - my bills to ban non-dom peers are now law – but my efforts to expose and end cash for peerages in all parties, including our own, and help get the Lords elected have failed. I am very sorry to leave my many old, close comrades-in-arms on the Liberal Democrat benches all over Britain, and good friends and fellow campaigners across the House. But the unreformed Lords is now a bloated balloon and at 67 it’s time to concentrate on running my business and my charity.