Justin Trudeau has expelled from his caucus every single Liberal member of the upper house and has declared there is no longer any such thing as a Liberal senator.

The Liberal leader said the former members of the Liberal Senate caucus will sit as Independents, and they will have no formal ties to the Liberal parliamentary machinery apart from through their friendships.

Trudeau's decision will see some lifelong Liberals and key party operators and fundraisers removed from the party's caucus and forced outside its inner circles – a foundation-shaking decision in a business where power is derived from membership in a political club and the ability to access its best back rooms. 

"The only way to be a part of the Liberal caucus is to be put there by the people of Canada," Trudeau said.

The move stunned both Liberal senators and senior Liberal Senate staffers, who had not been formally advised of the decision. It also blindsided veteran insiders and political observers who had no inkling about the change.

Trudeau's surprise move came as all parties held their caucus meetings in Ottawa. 

Those meetings typically include both MPs and senators.

'The Senate is broken and needs to be fixed.'—Justin Trudeau, Liberal Party leader

But sources told CBC News that Liberal MPs and senators were separated and sent to meet in different rooms.

Trudeau advised senators of his decision just after 9 a.m.

Sources said the senators listened and did not ask many questions.

"The Senate is broken and needs to be fixed," Trudeau told them.

At a news conference just a few minutes later, Trudeau explained why he had made the decision.

"The Senate was once referred to as a place of sober, second thought. A place that allows for reflective deliberation on legislation, in-depth studies into issues of import to the country, and, to a certain extent, provide a check and balance on the politically driven House of Commons.

"It has become obvious that the party structure within the Senate interferes with these responsibilities."

Trudeau proposed the Senate should be made non-partisan, to better serve Canadians. He suggested an "open, transparent, non-partisan process" that would see all senators named to the Red Chamber sit as Independents.

"Instead of being separate from political, or electoral concerns, senators now must consider not just what’s best for their country, or their regions, but what’s best for their party," Trudeau said.

"At best, this renders the Senate redundant. At worst — and under Mr. Harper, we have seen it at its worst — it amplifies the prime minister’s power."

Conservatives call it a 'smokescreen'

As Trudeau gave his address, some Conservative MPs and senators observed from a balcony overlooking the Commons foyer.

The government dispatched its lead on democratic reform, Minister of State Pierre Poilievre, to respond.

"Today, Mr. Trudeau announced a smokescreen to distance himself from the auditor general's report," Poilievre told reporters.

"In reality, not only would his senators continue to be unelected and unaccountable, the only change is that they wouldn't attend one caucus meeting per week."

Poilievre said Trudeau's proposal for a non-partisan, independent Senate would make the institution worse.

"We are the one party that supports a democratically elected Senate that is accountable to Canadians," he said. "Not only has the prime minister named to the upper chamber four citizens who were previously elected by citizens in the province of Alberta, the prime minister has also asked the Supreme Court for a legal instruction manual on how we can make all Canadian senators elected. That has to be our goal."

Depth of change questioned

Liberal Senate Leader James Cowan admitted Trudeau's decision was a surprise for senators, who he said were not consulted in advance.

Cowan said senators were becoming increasingly comfortable with the decision, the longer they had to think about it.

"What Mr. Trudeau has courageously done today is to set us free and allow us to do the job we're here to do – without any interference or direction from colleagues in other place," Cowan said.

But Cowan then went on to cast doubt on the depth of change suggested by his leader. There will still be a Liberal Senate caucus, he said, and it will be populated by the same group of Liberal senators, who will each remain a member of the Liberal Party of Canada, though, they may call themselves something different.

Harper jumps in

In question period, Prime Minister Stephen Harper mocked Trudeau's Senate announcement.

"I gather the change announced by the leader today is that unelected Liberal senators will become unelected senators who happen to be Liberal," Harper said, to cheers from Conservative backbenchers.

"What the Liberal Party doesn't seem to understand is that Canadians are not looking for a better unelected Senate. Canadians believe, for the Senate to be meaningful in the 21st century, it must be elected."

New Democrat Leader Tom Mulcair also raised an eyebrow in response to Trudeau's surprise announcement.

"It's quite interesting to see today that Justin Trudeau sees the merits of something we put on the table on Oct. 23," Mulcair said.

Last fall, the New Democrats had put forth a motion to end partisan activities in the Senate, including participation in caucus meetings. Trudeau voted against it.

Ultimately, Mulcair returned to the party's long-held position that the Upper Chamber should be abolished.

"The way to deal with the Senate is to eliminate it," he said.

Long-running scandal

There are currently 32 Liberal senators who sit in the upper house as official members of the Liberal Party and represent the party's positions and political interests. 

Trudeau Senate 20140129

Liberal Leader Justin Trudeau stunned both Liberal senators and senior Liberal Senate staffers by announcing senators would be removed from the Liberal caucus. (Adrian Wyld/Canadian Press)

Trudeau said his decision Wednesday will effectively remove his party formally from all of the Senate's institutions — including its committees.

"These proposals, while bold and concrete, are not the final word. They represent our judgment of how far we can go without guidance from the Supreme Court," Trudeau said.

"If the Supreme Court says more can be done, we are open to doing more."

Audits and investigations

The Senate scandal that has dominated political news in Ottawa for more than a year has had political implications for both the Liberal and Conservative parties.

Although most of those senators under investigation are former Conservatives, the Liberals have not escaped being tarred by the scandal's politically sticky brush.

Former Liberal senator Mac Harb has been accused by the RCMP of committing fraud by filing inappropriate expense claims, according to documents filed in Ottawa court.

A Senate committee investigating senators' expenses ordered Harb to repay more than $230,000. 

'We are all poorly served by the way in which senators are appointed.'- Justin Trudeau, Liberal leader

He retired in August after paying the money back.

Canada's auditor general has been called to audit the Senate's spending — including the expenses of all senators.

That review is currently taking place. 

Trudeau's move could serve to isolate the party from criticism if any of its — now former — senators are found to have had spending trouble.

Trudeau told reporters he has not been made aware of any early results of the auditor general's investigations.

Mobile users, read the Trudeau letter here.​

with a file from Theresa Do