The coalition’s first anniversary in power has been marred by a shock defeat on a flagship law and order policy.
Peers set the stage for a damaging parliamentary showdown by rejecting plans for elected police commissioners by 188 votes to 176 - a majority of 12.
Many had expected Liberal Democrat rebels to win amendments insisting that the controversial measures were piloted before full introduction. Deputy Prime Minister Nick Clegg had already indicated he supported slowing the process down.
But shadow home secretary Yvette Cooper said the Lords had “ripped the heart out” of the legislation by going further and deciding police chiefs should be appointed rather than elected.
“David Cameron and (Home Secretary) Theresa May need to now recognise the strength of hostility and ditch the plans now,” Ms Cooper said.
“The government’s policy would concentrate considerable power in the hands of one politician but with no proper checks and balances in place.”
Under the Police and Social Responsibility Bill as it stood, police and crime commissioners (PCCs) were due to be elected from May next year to replace police authorities in England and Wales.
They would have the power to hire and fire chief constables and would set the police force’s budget and “strategic direction”.
But the amendment successfully tabled by Lib Dem Baroness Harris of Richmond states that the commissioners will be chosen by a local police and crime panel.
Lady Harris, vice president of the Association of Police Authorities, said the plan for elected PCCs could do “irreparable damage” to the police service.
“Yes, the electorate can throw out PCCs after four years but that’s a very long time in policing, as well as politics, and irreparable damage might by then have been done to this precious and world-recognised jewel that is British policing,” she said.
Thirteen Lib Dem rebels backed the rebel amendment, including Lord Oakeshott of Seagrove Bay and former Liberal leader Lord Steel of Aikwood, while a number of others are believed to have abstained.
The government’s position was supported by 36 Lib Dems, 128 Tories, 11 crossbenchers and one non-affiliated peer.
But Lady Harris secured victory by winning over 37 crossbenchers, five non-affiliated peers and four bishops, along with 129 Labour peers. Backers included ex-police chiefs Lord Blair and Lord Condon.
The result raises the prospect of a major parliamentary battle, with the government pledging to overturn the change when the bill returns to the Commons.
A Home Office spokesman said: “The election of police and crime commissioners is a clear Coalition Agreement policy.
“So while we will consider the debate in the Lords, we will look to redress this in the Commons.”