Coalition to use rare strategy to force its welfare reforms through the Lords

The Government is ready to force its controversial £26,000-a-year benefits cap through Parliament through a rarely-used device allowing it to override opposition in the House of Lords.

Ministers sparked further anger over the Welfare Reform Bill by making clear they will ask the Commons Speaker John Bercow to designate it a financial measure. Traditionally, such Bills are not opposed by peers.

Lord Bassam, Labour's Chief Whip in the Lords, said the move "fundamentally undermines the constitutional role of the Lords as a revising chamber". Lord Mackay, a Tory former Lord Chancellor, added: "The time we have spent coming here and taking part seem to be somewhat of a waste of taxpayers' money at a time of considerable austerity if the whole procedure is useless."

Last night MPs overturned a string of government defeats during the Bill's passage through the Lords in recent weeks –including an amendment backed by Church of England bishops saying that child benefit should not count towards the £500-a-week benefit ceiling. The Commons voted 334 to 251 to reject the Lords' decision.

The Bill now returns to the second chamber, where many peers are still unhappy about key elements of the reforms despite some concessions announced yesterday at a cost of up to £130m. People who lose their job will be given a nine-month grace period to find work before the cap is imposed. Workless families currently receiving payments at a level above the cap will be given support to make them understand the need to find jobs before the April 2013 start date.

David Cameron said he would battle "all the way" to ensure the ceiling is introduced.

Liam Byrne, the shadow Work and Pensions Secretary, proposed a cap on a regionalised basis but Labour's amendment was not called.

The Commons voted down Lords changes to reduce entitlements to employment and support allowance. MPs rejected by 328 to 265 a Lords amendment that would have exempted some cancer patients from means-testing.

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