Ashdown leads revolt as peers block Coalition's benefit reforms

'It is my job, as ex-leader to support my successor, but I will not support the benefit cap in its present form' Lord Ashdown (Rex Features)

Liberal Democrat rebels, Labour peers and senior bishops dealt a blow to the Government's welfare reforms last night as they threw out plans for a universal cap on benefits.

Peers voted by 252 to 237, a majority of 15, in favour of an amendment put forward by the Right Rev John Packer, the Bishop of Ripon and Leeds, to exclude child benefit when calculating the £26,000-a-year limit.

Bishop Packer told the Lords the proposed cap "failed to differentiate between households with children and those without". "It cannot be right for that to be the same for a childless couple as for a couple with children," he said. "Child benefit is the most appropriate way to right this unfairness."

The defeat came after charities warned that vulnerable families could lose their homes as a result of the planned cap, with children and single parents disproportionately affected by the measure. The Government estimates 50,000 families will be hit by the reform, losing an average of £93 per week, with 7,500 households losing more than £150 per week.

In a joint statement, four housing charities said: "The cap will make it more difficult for many families to find and keep a roof over their heads. It is a crude measure which ignores the considerable variations in housing costs that exist across the country."

Ministers expressed determination to overturn the amendment when the Welfare Reform Bill goes back to the Commons. The result was embarrassing for the Deputy Prime Minister, Nick Clegg, who was unable to persuade his party's peers to back the cap – proposed by the Work and Pensions Secretary Iain Duncan Smith – the day after he had spoken in its defence. More than 20 Liberal Democrats joined the rebellion, including the former party leader, Lord Ashdown, and former party president, Baroness Williams.

On Sunday, Lord Ashdown said he would vote against the Coalition for the first time on the issue because of the "unacceptable" hardship it would cause children.

The subject is difficult for the Liberal Democrats – as well as Labour – as polls show that the public overwhelmingly supports the idea of a cap. Labour has said it too backs the concept but fears that in its current form it could end up costing more than it saves, and lead to vulnerable families being evicted in more expensive areas.