The government has been defeated in the House of Lords in a key part of its attempts to reduce the benefits available to unemployed people and part-time workers.
Peers passed an amendment proposed by Church of England bishops to government plans to introduce a household cap on total state benefits. The amendment removes child benefit from the calculation, meaning that it can be paid in addition to the capped figure.
The proposal was carried by 252 to 237 after a number of Liberal Democrat peers joined with Labour and crossbench peers and bishops.
While the news was welcomed by anti-poverty and children's rights groups, they emphasised that only one aspect of the government's plans has been defeated. The government is expected to attempt to overturn the amendment by bringing the legislation back to the Commons and seeking to force it through.
Work and Pensions Secretary Iain Duncan Smith wants to limit total benefits to a maximum of £26,000 per year per household. Speaking in the Lords today (23 January), government minister David Freud argued that the figure is fair because it equates to the average household income. Freud insisted that an unemployed family should not receive more than a working family.
But critics pointed out that a family earning this wage would still be able to apply for child benefit. The Rt Rev John Packer, the Bishop of Ripon and Leeds, argued that it should therefore not be included in the benefit cap.
Bishop Packer said that child benefit is a “universal benefit” that is “there for all children”.
He added, “To say that the only people who cannot have child benefit are those whose welfare benefits have been capped seems to me to be a quite extraordinary argument”.
Housing benefit is often paid directly to landlords, making it difficult for the government to argue that unemployed people are better off than those in work. Packer drew attention to recent rises in private rents.
"This cap is not simply targeted at wealthy families living in large houses," he said. "It will damage those who have to pay high rents because often that rent has increased substantially in the course of their occupancy of that house”.
He was backed by other bishops, including the Bishop of Leicester, the Rt Rev Tim Stevens, who heads up the bishops in the unelected second chamber.
Former Liberal Democrat leader Paddy Ashdown, who is now a peer, voted against the coalition government for the first time. He spoke in the debate to ask why a household on £26,000 should not receive child benefit when a working family on £80,000 are able to do so.
This morning, the Child Poverty Action Group (CPAG) drew attention to an admission by ministers that part-time workers will also be affected by the cap. It will apply to households doing less than 24 paid hours of work each week.
Equality groups and children's charities called on the government to accept the Lords' decision. Enver Solomon of the Children's Society said ministers should “not ignore the fact that the Lords have spoken out to defend the plight of some of the country's most disadvantaged children”.
Another attempt to amend the government's motion was earlier defeated by 250 to 222. This was a motion proposed by Labour that would have seen the risk of homelessness taken into consideration.
This marks the fourth defeat for the government on their Welfare Reform Bill. Earlier this month, peers rejected three elements of the coalition's plans for disability benefits, following an extensive online Spartcus Report campaign by disabled activists.