Conservative activists today fired a warning shot across the bows of the Lib Dem-Tory coalition when Matthew Elliott, combative chief executive of the TaxPayers' Alliance, was appointed to lead the no campaign against the adoption of the alternative vote in next May's referendum.

Elliott, who will stand down as the TPA's spokesman in October, has always denied charges that the alliance – which takes a vocal, populist stance against higher taxes, state activity and the EU – is a "Tory front organisation". But both he and key TPA colleagues have close personal links with the party and with the Tory tabloids.

"The key democratic principles of accountability and transparency have always been at the heart of my work at the TaxPayers' Alliance, and I feel very strongly that the 'alternative vote' system would make politicians less accountable and make elections less transparent. Ditching our electoral system is not only of interest to political anoraks, it is a fundamental change that would affect the major policy decisions on tax, public spending, schools and hospitals for decades to come," Elliott said in a statement.

On the TPA's website he assured supporters: "Like the TPA, the no campaign is above tribal party politics – it is about fighting for the good of the country and our democratic way of life." Not everyone will see it that way, not least because Elliott and some of the TPA's financial backers have not always been UK taxpayers.

Well aware that the big money and the media are lining up on the other side – and that some Lib Dem colleagues are restless – Nick Clegg took the precaution on Friday of telling supporters that he will not allow a win for the noes to break the coalition. He is determined to sustain it until 2015.

An early yes vote to AV, which would modify Westminster's traditional first-past-the-post voting system in the Lib Dems favour was the most tangible prize which Clegg obtained in the hasty negotiations to set up the coalition on 11 May. David Cameron has signalled that he will not let his own coolness towards AV – which requires a winning candidate to get 50% of the votes cast on first or second preference – translate into active campaigning.

But AV's critics on both left and right, who will now be able to point to the first hung parliament in Australia since 1945 as a result of this weekend's inconclusive election, are determined both to defeat reform and to give the coalition a bloody nose.

Disaffected grassroots Tories, as cross about coalition compromises as left-leaning Lib Dems, are especially keen to show their strength. Labour is split on AV despite offering it at the last election.

Elliott's appointment came as the Lib Dems shrugged off a wobbly week which saw Simon Hughes MP demanding a backbench vote on contentious policies and Charles Kennedy – the only man to vote against the deal at a special conference - being forced to deny internet rumours, fuelled by Labour, that he might be poised to defect. "I am not joining the Labour party and have not had any discussions about it with anyone from the Labour party," he told the Sunday Mail in Scotland. "I will go out of this world feet first with my Lib Dem membership card in my pocket."

But few deny that some MPs and activists are unhappy with many policies now emerging from the coalition, not least what they regard as the success of Elliott's drive to educate a new generation of Tory MPs and ministers in the benefits of a smaller state and lower tax bill. Gordon Leishman, a veteran Lib Dem and former head of Help the Aged, is preparing a strategy paper for the party's Liverpool conference which seems to promote a more attractive alliance with Labour once it has a new leader.

Ed Miliband has been the most vocal leadership candidate seeking to woo disaffected Lib Dems and render the rump "extinct." But all runners know they are well placed to get back votes which went to the Lib Dems over Iraq and may return over public spending cuts. Elliott's appointment makes it personal and his TPA campaign manager, Susie Squire, has now become a special adviser to Iain Duncan Smith, the works and pensions secretary.

Rodney Leach, chairman of the No Euro Campaign, said: "What I like about Matthew is that he's not a gun for hire. He's that rare combination of someone who not only believes passionately in what he's fighting for, but is also an extremely successful campaigner. Campaigning against the 'alternative vote' system is a natural extension of his fight for greater accountability and transparency in politics."