The provision for secure training centres (STCs) was a key plank of the commitments on law and order spelt out by Mr Howard, the Home Secretary, at last autumn's Tory party conference.
What amounts to a substantial toning down of the pledge came during the Report Stage of the Criminal Justice and Public Order Bill in the Lords and reflects deep all-party unease.
Peers backed by 170 votes to 139 a demand from a former Tory home secretary, Lord Carr of Hadley, that courts be given the power to sentence offenders to secure local authority accommodation as an alternative to a place at one of five new 40- place centres already put out for private- sector tender by the Government.
Peers went on to support by 147 to 128 a second move by Lord Carr to allow courts to switch a child to local authority care if he or she was not benefiting from a secure training unit. Those who behaved badly in local authority accommodation could be sent to complete their sentence within the tougher regime.
News of the setback quickly filtered through to the Commons during the report stage of Mr Howard's other flagship law-and-order measure, the Police and Magistrates' Courts Bill, likewise savaged by the Lords. Tony Blair, Labour spokesman on home affairs, said: 'It is a devastating defeat for the Government and a resounding victory for common sense.'
Mary Honeyball, general secretary of the Association of Chief Officers of Probation, said afterwards that the proposal had been hastily conceived during considerable public hysteria: 'It is well known that regimes like this do not work. They are also extremely expensive.'
Earl Ferrers, Home Office minister, had warned that changes in assumptions about numbers would mean plans for the centres would have to go back to the drawing board, and that the impact of the secure training order would be dissipated.
But expressing his 'extreme distaste of putting 12- to 14-year-olds into custody', Lord Carr insisted his proposal was neither a 'soft option' nor a weakening of the Bill. It would provide a valuable means of measuring the success of the 'unknown territory' of the new centres, while courts could use secure training orders to place offenders in local authority centres while STCs were being set up.
Lord Gisborough, a Tory co-sponsor of the amendments, condemned the units as a 'concentration of the most disruptive 12- to 14-year-olds in the country, without any redeeming influence'.
The defeat is the more embarrassing for Mr Howard because of the behind-the- scenes lengths he has gone to in warning Tory peers off wrecking his plans.
If, as Mr Howard has warned, the Government seeks to overturn the amendments in the Commons, it could pave the way for a re-run of the controversy caused when peers refused to sanction a key plank of the Bill to privatise the railways. That was only resolved in an 11th-hour climb-down by the Lords after the Bill had returned to the Commons.