The vote - on the method of selection for the United Kingdom's 24-strong representation on the EC's new Committee of the Regions - was lost by 314 votes to 292, an Opposition majority of 22 for a Labour frontbench amendment.
Douglas Hurd, the Foreign Secretary, said afterwards: 'It's always better to win than to lose, but it doesn't affect our ability to ratify the treaty.' Asked if it was a black day for the Government, he put it into diplomatic perspective, saying: 'It is a pale shade of grey.'
Jack Cunningham, Labour's foreign affairs spokesman, said: 'The Prime Minister has walked into yet another lamp-post. He's given himself a bloody nose by staking his credibility on winning this vote when it was always probable that Labour would carry a majority in the House.'
The defeat will delay enactment of the legislation and, in the wake of John Major's warning at Harrogate on Saturday that 'disunity is a luxury we cannot afford', the defiance of 26 Conservative MPs who voted against the Government, and 16 more who abstained, is bound to carry the smack of public humiliation.
That embarrassment will fuel recriminations against the rebels within the Tory backbench 1922 Committee. Terry Dicks, who had left his hospital bed to vote with the Government, said last night: 'I have nothing against Labour. But I have against those bastards, the Tory rebels, who are the cause of the trouble.'
Any witch-hunt in the Tory ranks will be encouraged by the whips, concerned at the possibility of defeat on the more significant and damaging amendment 27 that seeks to exclude the social chapter protocol from the Bill. Although the Attorney General has advised that amendment 27 - if carried - will not block the treaty's ratification, it could open the way for legal challenge in the courts.
The importance to the Government of last night's vote was illustrated by the efforts of ministers to secure victory. During the day, they struck deals with the four Plaid Cymru and three Scottish Nationalist MPs, winning support with signed agreements on the number of Scots and Welsh representatives they could nominate to the EC regional committee.
Bob Hughes, Labour MP for Aberdeen North, said: 'We won the vote despite the lickspittle Nats.'
Sir Teddy Taylor, a leading Conservative rebel, described the behind-the- scenes deals as 'terribly sad' and 'underhand', and Ann Clwyd, a Labour frontbencher, said the 'grubby' deal done between the Plaid Cymru MPs and the Government had forced an early end to the first meeting of the Welsh Grand Committee to be held in Cardiff as MPs rushed to catch the train back to London for the critical vote.
The successful Labour amendment, under which the 24 UK representatives will now have to be chosen from elected local councillors, will also ensure there is a report stage to the Bill. Sir Norman Fowler, the Conservative Party Chairman, said that could delay ratification of the treaty 'by some weeks'.
Mr Hurd said: 'The only immediate effect of this vote is delay; delay for delay's sake, a perverse delay.' He added that the support of Liberal Democrat MPs for the amendment was 'odd' in the light of Paddy Ashdown's recent call for the Government to face down the Tory rebels and speed up progress on the legislation.
Charles Kennedy, the Liberal Democrat President, said: 'The House of Commons has voted in favour of greater democracy in Europe. Government talk of delays is simply scare tactics which they have used in the past.'
Underlining that point, one Conservative rebel said he would be surprised if the Bill's report stage took more than two days, and one senior government source still did not rule out getting the legislation on the statute book by the end of July.
Mr Hurd told ITN's Channel 4 News: 'I don't think there's any confusion among our partners about the will and the ability of the Prime Minister to deliver the Bill and ratify the treaty. As regards the unity of the party, the way to unify the party is to ratify the treaty . . . If we scupper the Maastricht treaty, we scupper also our chances of influencing the way the Community goes in the future.'
But some ministers conceded last night that senior Tories had 'hyped' the impact of rebel efforts. A weekend warning that the rebels were 'jeopardising the Government's legislative programme' was discounted by Mr Major in his interview with the Independent last week.
The defeat triggered selling of the pound on New York's foreign exchange market. Shortly afterwards sterling was trading below the psychological DM2.40 barrier, having closed in London at DM2.4086, writes Robert Chote.
Avinash Persaud, currency analyst at the City firm UBS Phillips & Drew, said the pound could fall towards DM2.35 if the vote made overseas investors worry about political uncertainty in Britain.Reuse content