What happens now

Bill returns to Commons- concession offered on religious hatred? Bill returns to Lords - peers to accept concessions?

In the first defeat, peers rejected government proposals to create a new offence of incitement to religious hatred.

In the second, peers voted to strictly limit the powers of transport and defence police to matters connected with terrorism and national security.

In the third, peers voted to restrict the retention of data held by telephone companies and internet service providers to cases where national security is thought to be at risk.

The bill is due to return to the Commons at 2130 GMT, when Home Secretary David Blunkett is expected to reveal whether he will back down on any of these issues or seek a further confrontation with peers.

The legislation must clear both the Upper and Lower chambers on Thursday if it is to become law by Christmas, as the government has pledged.

Some observers are predicting an all night sitting in the Lords when the bill returns there later.

Ping pong

The proposed new law on incitement to religious hatred is likely to be the major sticking point as the bill 'ping pongs' between the two chambers during the course of Thursday evening.

Blunkett: expected to offer a compromise

The government was earlier rumoured to be prepared to offer a compromise on the issue.

But the Attorney General, Lord Goldsmith, showed little sign of compromise as he tried to convince Conservative, Liberal Democrat and some crossbench peers that new guidelines brought forward by the government to accompany the clause would be sufficient.

Lord Goldsmith told peers the new law was needed because attacks on some parts of the community had increased since 11 September.

But peers opposed to the clause want it to be included in a separate bill in the New Year, allowing more time for consultation with religious leaders.

'Soft soap'

Peers have also accepted a government concession on the disclosure of confidential information such as tax or medical records.

New powers to investigate such records will now be granted in 'proportion' to the strength of the alleged crime.

Lord Rooker: making concessions

Home Office Minister Lord Rooker said he could not limit the disclosure of records to terrorist investigations alone, because it was not always clear that terrorism was involved at the early stage of an investigation.

But he said the police and other authorities were not in the business of "trawling" records "for fun", as some peers had suggested.

'Illusory concession'

Peers also accepted a compromise, passed by the Commons on Wednesday night, on the government's refusal to allow judicial review of ministers' decisions to detain without trial suspected foreign terrorists who cannot be charged or deported.

Instead of a judicial review, appeals will be heard by the Special Immigration Appeals Commission (SIAC).

In an attempt to placate critics, Mr Blunkett has proposed elevating SIAC to the stature of a "superior court of record", with its decisions a "matter of public record" that can only be reviewed by the Court of Appeal.

But Lib Dem peer Lord Goodhart said the move would make little difference in practice and Conservative front bench peers had been taken in by an "entirely illusory concession."