Peers voted by 227 to 166 to reject the plans, which would force anyone applying for or renewing their passport from 2008 to also have to pay for an identity card.
Ministers had argued that because the amendment was being discussed at a second reading and it concerned legislation that was the subject of a manifesto pledge by the Government, the Lords should not, by convention, oppose it. The pledge in question said:
"We will introduce ID cards, including biometric data like fingerprints, backed up by a national register and rolling out initially on a voluntary basis as people renew their passports."
Critics responded that the Government amendment made the scheme far from voluntary.
"What we have here is a Bill that is compulsory, will require 40 million plus citizens to be interviewed for the purposes of taking out an ID card ... that carries heavy penalties for citizen failure and, above all, which has attached to it a major database of our private information,” said Liberal Democrat Home Affairs spokesman Lord Phillips of Sudbury, according to reports.
According to rebel Labour peer Lady Kennedy the amendment amounts to "compulsion introduced by the back door", reports The Guardian.
The Government has said in the past that it will not introduce legislation making the scheme compulsory until a critical mass of the people have voluntarily received identity cards – predicted to be around 2012 or 2013.
MPs are due to reconsider the amendment when it comes back before the House next week and, if approved by MPs, the Government may then use the Parliament Acts to force it through.
The Parliament Acts took away the House of Lords’ power to veto a bill unless it is one to prolong the life of a parliament – leaving it with power only to delay the bill for a year. The Acts were last used to force through the Hunting Act in 2004.
Coincidentally, the first biometric passport was issued by the UK Passport Service this week.
The new passports will have a new design with additional security features, including a chip with the holder's facial biometric. They will be introduced gradually throughout 2006 and will be issued to all applicants by the end of August.
All passports issued on or after 26th October 2006 will need to be biometric to benefit from visa-free travel to the US.