Peers ambush BR sell-off: Legislation bogged down by Labour delaying tactics and constitutional confusion between two chambers

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THE GOVERNMENT is faced today with the task of reversing a humiliating defeat inflicted last night when the Lords threatened the privatisation of British Rail and took the rare step of defying the House of Commons for a second time.

The Lords passed three amendments to ensure that BR could compete on equal terms for franchises after privatisation and sent the Bill back to the Commons, provoking angry scenes in the Upper House and disorder among MPs.

Despite protests by Opposition peers and after frantic attempts by whips to stop government supporters going home, ministers secured a 81-70 majority for keeping the Lords in session last night so that the Bill could return once again, freshly amended by the Government, from the Commons.

But its return was delayed so long by Labour guerrilla tactics that an increasingly restive Lords was forced after a wait of several hours to adjourn until today.

The Government's unexpected failure to complete the Bill could mean postponement of a Privy Council session which parliamentary sources suggested had been set for this afternoon, at which the procedures for proroguing Parliament tomorrow are due to be set in motion. The Privy Council would normally be presided over by the Queen Mother and the Prince of Wales in the absence of the Queen, who is due in Germany today.

The toing and froing between the Lords and Commons - the first of its kind over a central element of manifesto-endorsed government policy since the 1970s - generated a stormy end to one of the most difficult parliamentary sessions the Conservatives have faced since coming to power in 1979.

All the signs had been that the Lords were ready to pull back from a full scale constitutional crisis and decline to send the Bill back to the Commons for a third time. Lord Peyton, leader of the Tory rebels in the Lords and a former transport minister, said he did not think the Lords should reject a Commons vote again. He told Channel Four News: 'As an unelected House we are a revising chamber.' Lord Peyton said that if the Lords used its 'powers to excess' it could 'endanger the whole institution'.

The government decision to keep the peers in session - taken because of fears that the Bill could run out of time when the Commons has its last full session today - threatened an unprecedented breakdown of the 'usual channels' in the Lords.

The Lords had agreed to adjourn at 11.30pm unless the Bill had returned. But the delay was forced in an operation mounted by the Labour whips in which their MPs prolonged divisions by loitering in voting lobbies and disrupting the counts. At one point Tony Newton, Leader of the House, donned a top hat - required procedure to raise a point of order in a division - and said: 'I think it should be registered that what we are experiencing is a constitional outrage.'

The final factor was a debate protracted by Labour on the cross- party Committee of Reasons, which drafts the explanation of why the Commons has rejected Lords amendments. John Prescott, Labour transport spokesman, who described the delaying tactics as a 'brilliant operation', earlier resigned from the committee to be replaced by his deputy, Brian wilson.

Government proposals, agreed by the Commons on Tuesday night, would have limited BR's right to bid for franchises to cases where the franchise director felt there was inadequate private competition.

Lord Caithness, Minister of State for Transport, insisted the proposals were a compromise reflecting the result of the earlier defeat of the Government by an amendment moved by Lord Peyton.

But Lord Marsh, a former BR chairman and Labour minister who sits on the crossbenches, said that government proposals would mean that BR could bid only in cases where nobody else's bid was regarded as sensible or acceptable.

Inside Parliament, page 8