The former special adviser to Nick Clegg who said she was one of the victims of Lord Rennard's sexual harassment has resigned from the party in disgust and revealed that Liberal Democrat peers cheered the disgraced politician after being told he was being brought back into the fold.

Bridget Harris is scathing in her disgust over what she told the Observer was a "classic Lib Dem fudge" over findings of an investigation into the scandal.

"Party loyalty has tied everybody together into a devil's pact," she said, adding that she no longer believed in the deputy prime minister's ability to lead his party after a defiant Rennard ignored his request to apologise to the 11 women who made "broadly credible" complaints against him.

Clegg has said that Rennard, the party's former election chief, would play no part in the 2015 campaign after last week's report on the allegations by Alistair Webster QC concluded that there was evidence dating back several years of "behaviour which violated the personal space and autonomy of the complainants". But Webster said it was "unlikely that it could be established beyond reasonable doubt that Lord Rennard had intended to act in an indecent or sexually inappropriate way".

The party's internal disciplinary procedures require guilt to be established beyond reasonable doubt. He was cleared of bringing the party into disrepute, meaning he can still sit on its policymaking committee.

The report recommended that he apologise to women to whom he had caused distress but this was dismissed as an "absurdity" by Rennard's legal adviser, Lord Carlile QC. "Why should he? He's denied all those allegations," he said. Carlile added that Rennard had been denied the justice of being thought of as innocent until proven guilty. In a further sign of division within the party's ranks, Euro MP Chris Davies promised to financially back any legal action Rennard could take against the party over his treatment. "I have pledged a sum of money towards the costs of any high court action that Chris Rennard may take against the Lib Dems," he said on Twitter.

Harris said the party's reputation was in tatters. "They didn't have a vote on Wednesday over Rennard's reinstatement; they had a unilateral announcement by the chief whip that Rennard was being brought back, and those peers cheered.

"The women and men who cheered in that group have no concept of how that looks to the outside world, in ordinary workplaces. Nick Clegg had a duty to show moral leadership. He hasn't."

She admitted Clegg's sanctions were fairly limited. "But there's no reason he can't let it be known that Chris Rennard is still persona non grata, and if anyone wants to disagree with that they can go and sit on the cross-benches with him. But he won't risk that kind of split."

The business secretary, Vince Cable, said on Friday that there was "frustration" that the party's rules meant Rennard could not be thrown out. Cable told the BBC that Clegg and the party's president, Tim Farron, were discussing "how we can proceed and whether our rules need revisiting".

Rennard, 53, has said he is pleased to have seen an end to the investigations. "The Metropolitan police also investigated the allegations thoroughly and over several months and found that there was no case to proceed," he said. "I now look forward to resuming my roles within the Liberal Democrats."

Harris said Clegg called her after the Webster report was made public. "He's eating humble pie and it's 'I'm sorry, I'm sorry'. I gave him a bit of a bollocking and he said: 'There's nothing I can do, you can't imagine how frustrating it is.' He's the party leader, for god's sake. If he can't do anything, who can? But he doesn't want to go up against his peers, he doesn't want a big barney.

"He knew about all of these allegations, he knew about all of the women. But they made a calculation back when it all first surfaced that, if they said very little, then the allegations against Chris Rennard would go away. If they kept managing the women. But the women weren't the ones they should have been managing.

"The problem has not gone away, it has escalated. Buying him a one-way ticket to Australia and telling him to get out of the party would have been a start. They seem to be incapable of doing anything to stop this becoming a ludicrous soap opera. No one gives a flying monkey about the internal mechanisms of the party, they care what they do.

"People do care about seeing a group that's cheering back into their midst a man with sexual harassment complaints flooding out of his ears.

"The House of Lords have always seen themselves as on the side of civil liberties and the law. It's stuffed full of QCs and so they are quite comfortable being the final arbitrators of what's wrong and what's right without giving a fig for public opinion. But they don't see everyone outside looking aghast at them.

"They won't be told, like ageing parents set in their ways. Nick Clegg can say to them: 'Can't you see this is killing the Lib Dems, we're being slaughtered by the press and public' until he is blue in the face. I believe in change. But after over a decade in politics I don't believe that parliament is the place for change any more … I'm now running a technology start-up company and I believe that's they way people will change lives and empower themselves now.

"You go into politics and you accept the notion of a collective agreement for the greater good. After 15 years working in the Lib Dems I realised there's no greater good, just everyone doing a shit job.

"Parliament is a place of blind ignorance, stuffed with racists and sexists and they are all idiots and they are accepted. And that's why I walked away. I was actually wasting my time."

She attacked the "intellectual sexist culture and endemic sleazy culture of Westminster". She said: "When I worked in the whips' office I had 10 male MPs who behaved completely inappropriately to me. It's far from unusual for researchers to have their bottoms pinched and to be kissed on the lips.

"It's not good enough to say you'd better avoid that person. If there is a man who is unpleasant, who is a creep and a groper, then it's generally an abuse of power. I'm not advocating we are not entitled to flirty interactions, I'm not even saying we can't be tactile. But a sex pest, a menace, is not something we should be tolerating."

The Lib Dem peers "are all saying: 'Oh, it's generational, hand on the knee stuff, what's the problem?' Well, if the people in the House of Lords think it's acceptable it says very little about them. When someone is a bigot or a racist, it's zero tolerance, but there is clearly a high level of tolerance around being a groper.

"The main body of the party are very supportive of myself and the other women. Quite a few were unsurprised by the allegations. There are plenty of male MPs who are disgusted. The core question is: has he brought the party into disrepute? After this I think all of the leading figures here are all responsible for bringing the party into disrepute.

"I know there are colleagues in the Labour and Conservative parties who are very worried about what they've seen go on here. There are plenty of sexual sleazebags going around parliament in all parties.

"But to all these young women coming into workplaces now I just want to say: please don't think you have to put up with that, with sexual harassment or bullying by men. Shout as loud as you can."