Peers today defeated the Government's attempt to overturn a "free speech" defence to the law on homophobic hatred.
The move by Tory former Home Secretary Lord Waddington to uphold the provision was passed by 186 votes to 133, majority 53.
Lord Waddington defeated the Government twice in the Lords on his amendment to the Criminal Justice and Immigration Bill in April and May 2008.
Justice Secretary Jack Straw, who was under pressure to turn the Bill into legislation before a voluntary "no strike" agreement with the Prison Officers' Association ended, eventually accepted the provision.
But the Government is attempting to use the Coroners and Justice Bill, which is in its committee stage in the House of Lords, to remove the clause from the statute book.
Lord Waddington's amendment provided a protection for "discussion or criticism of sexual conduct or practice" to the law on incitement to hatred on the grounds of sexual orientation.
He told peers: "What is needed is what we have now got, a statutory provision that says that one mustn't assume from mere discussion or criticism of a sexual practice that there is an attempt to stir up hatred, one must look at the circumstances and the manner in which the words are spoken to see whether they were in fact threatening and driven by hate."
Tory and Liberal Democrat peers were given a free vote on the issue and the Government was more overwhelmingly defeated than last year. When the issue was first discussed, Lord Waddington's move was backed by 81 to 57 in a late-night vote. And when it was returned to the Lords by the Commons, voting was 178 to 164.
Crossbencher Lord Dear, a former chief constable and inspector of constabulary, a co-sponsor of the move to strike down the Government's plan, argued the "free speech" clause had helped the police.
He told peers: "Prior to this House approving the Waddington amendment a year ago, the police regularly received complaints from homosexual groups that exception was taken to remarks that homosexuality was deplored on religious grounds. They were forced to act."
"With the Waddington amendment the police are released from a virtual strait-jacket that was imposed on them before," he added.
"They can exercise common sense and good judgment on the day and they can police with a light touch."
The Bishop of Winchester, the Right Reverend Michael Scott-Joynt, said: "What is at stake is whether this House and this Parliament intends to outlaw, among not just Christians but others, open discussion and teaching of views that differ from the currently dominant political orthodoxy."
He said the current orthodoxy was that sexual orientation was "more akin to ethnicity than it is to religious belief".
Liberal Democrat Lord Lester of Herne Hill, supporting the Government's position, said that there were already "adequate safeguards".
He said that removing Lord Waddington's provision would not mean "jokes involving gay people being outlawed, it would not prevent expression of opposition to same-sex relationships where the discussion does not amount to threatening language with the intention of stirring up hate".
But he said he feared that if the provision was retained it could create a "legal loophole" that would allow extremists to stir up hatred.
Tory ex-Cabinet minister Lord Tebbit said: "There is no evidence that Lord Waddington's amendment to the Criminal Justice and Immigration Bill has caused any outbreak of homophobic attacks or any of these other nonsenses mentioned. An outbreak of emotionalism is obscuring the facts."
Lord Thomas of Gresford, for Liberal Democrats, said his side would have a free vote but he would oppose Lord Waddington's amendment. Tory Lord Kingsland, for Tories, said that his side would also have a free vote but that he would support Lord Waddington.
Replying to the debate, justice minister Lord Bach said the Commons had previously repeatedly, by large majorities, rejected the Waddington "free speech" amendment.
He said that if it were removed, the Government would be issuing guidance to the police to clarify the nature of the offence of stirring up homophobic hatred.
"We have listened to the concerns about artistic expression, and the rights of people like comedians," he said.
"In formulating the offence, we had no intention of stifling debate about sexual orientation or interfering with the preaching of religious doctrine, or of making it more difficult to portray homosexual characters in comedy.
"The question before us today is whether we need the freedom of expression provision. We have always maintained we do not. It is unnecessary but there will be those who decide to take advantage of it, to the disadvantage of others."
A Ministry of Justice spokesperson said: "It is disappointing that the Lords have voted to retain the 'freedom of expression' section in relation to the offence of inciting hatred on grounds of sexual orientation.
"There is no doubt about the threshold of this offence. No 'freedom of expression' section is needed to explain it. The threshold is a high one. The offence only covers words or behaviour that is threatening and intended to stir up hatred.
"The 'freedom of expression' section only serves to make the offence less clear, and could be used by those attempting to justify stirring up hatred by a 'free speech' argument.
"The Government will seek to reverse this when the Bill returns to the Commons in the autumn."
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