Government defeat on banking bill

The government has pumped billions of pounds into banks

Labour has lost a vote in the House of Lords on an amendment to its flagship bill to protect the banking system.

The government was defeated by 35 votes as peers backed a Conservative amendment calling for a quarterly update on the cost of the bank bailout.

Ministers must now decide whether to ask MPs to overturn the amendment when the bill returns to the Commons.

Measures in the bill include increased protection for depositors and enhanced powers to deal with failing banks

Tight deadline

Ministers are working against a tight deadline to pass the legislation as existing legal provisions used to nationalise Northern Rock and Bradford & Bingley expire on 20 February.

The government wants replacement laws on the statute book by 12 February, when Parliament rises for a week-long "half-term" recess.

Many of the proposed measures in the bill, designed to rebuild confidence in the banking system and make it easier to rescue troubled institutions, have cross-party support.

This is a perfectly reasonable amendment which has the needs of parliamentary accountability at its heart Baroness Noakes

However, peers have been pressing for stricter parliamentary scrutiny of the huge sums which have been pumped into the banking system.

In October, the government agreed to inject