The government has seen off an attempt by Labour to regionalise plans for an annual cap on housing benefits.
Ministers want to limit the amount a family can receive in housing benefits to £26,000 a year, arguing it is "unfair" for families to earn more on benefits than in work.
But Labour proposed that the cap is set locally, as peers considered Commons amendments to the Welfare Reform Bill on 14 February 2012.
This stage in a bill's journey is known as parliamentary "ping pong" - as the legislation is batted between the two Houses of Parliament until an agreement is reached on the final contents of the bill.
Earlier this month, the Commons overturned all Lords amendments to the bill, and the government announced it would use parliamentary rules known as "financial privilege" to ensure peers could not reinstate their amendments.
This prompted widespread criticism from peers on all sides of the House of Lords, who feared the move would prevent parliamentary ping pong on certain aspects of the legislation.
Responding to Labour's amendment in the Lords, Welfare Minister Lord Freud warned the proposal was "really, really complex", adding: "You don't want to do this."
He told peers the government had made a number of concessions to make the cap fairer, including a nine-month grace period if an earner in a household loses their job.
Defending the benefits cap, Lord Freud added: "There is an important principle here. It is not fair families can earn more on benefits than the average working family, it's [unfair] to taxpayers and indeed it's not fair to benefit recipients trapped in a cycle of welfare dependency."
The Labour amendment was later defeated by 223 votes to 134, a majority of 89.
The bishops backed down on their proposal, overturned in the Commons, to exempt child benefit from the housing benefit cap.
But the Bishop of Ripon and Leeds said that, although he was "grateful" for the transitional arrangements announced by the government, he was "regretful at the loss of the principle of child benefit for all, especially from those in most need".
Later on, crossbencher Baroness Butler-Sloss also agreed to drop her amendment to alter plans to charge parents to use the Child Support Agency.
Earlier that day,
the government suffered a defeat when peers backed an amendment imposing new restrictions on its plans for a "bedroom tax" on council tenants with spare rooms.
The bill must now return to the Commons for MPs to consider the new changes to the legislation.