Baroness Scotland, of Asthal, QC, admitted that "there are issues which we found difficult" and pleaded with peers to give her time to try to bring forward amendments at its report stage.

Opposition to the Bill, which has been led by an eclectic alliance including evangelical Christian groups and the comedian Rowan Atkinson, is likely to intensify after her admission of doubts within the Government over the Bill.

Lady Scotland told peers: "We are thinking very hard indeed about how the gap that seems to have arisen, which divides us, could or should be bridged. If your lordships ask today, I am not able to bridge that gap. If your lordships ask (whether) I can bridge it by report (stage), that may or may not be the case but I am certainly going to look at it and I am going to try."

The Minister did not specify what any amendments she brought forward would seek to address but the debate centred on confining the powers to the most serious cases of incitement, proof of criminal intent and protection of free speech.

Lord Hunt of Wirral, the Tory peer who led the debate, insisted on pressing ahead with a vote nonetheless after accusing ministers of reneging on a previous pledge to consult opposition parties over the Bill.

But he offered talks to seek a compromise before its return to the Lords next month, saying a redrawn Bill with narrower powers would still allow Labour to meet a manifesto pledge for such legislation.

Lord Hunt led the attack on the measure on behalf of a cross-party coalition that included Lord Lester of Herne Hill, for the Liberal Democrats, the Labour peer Lord Plant of Highfield, and Lord Carey of Clifton, the former Archbishop of Canterbury. Their amendments struck out original proposals to extend the new offence to words, behaviour or material that were abusive or insulting and likely to stir up religious hatred, and instead restricted it to things that were judged threatening.

They required that the prosecution must prove in each case that the defendant acted with criminal intent, going further than the existing offence of incitement to racial hatred, and added a broadly defined protection of freedom of expression that defended the right to ridicule, insult or abuse religions or their adherents, and specifically allowed proselytising.

The new clauses fundamentally alter the structure of the Bill. Instead of amending the Public Order Act 1986, as ministers proposed and which was used to outlaw incitement to racial hatred, peers voted for an entirely new schedule setting out the new offence of incitement to religious hatred.

Lord Hunt, opening the debate during the Bill's committee stage, said: "You cannot promote tolerance by limiting freedom of expression. Tolerance and freedom of expression buttress one another. They are inseparable siblings. This Bill just goes too far, far too far."

Lord Lester accused the Government of trying to introduce sweeping new speech crimes to deal with what ministers admitted was a minute gap in existing public order powers. He claimed ministers were "playing politics with religion" and using the Bill to try to persuade Muslims to vote Labour.

Terror Bill back in the Commons

Liberal Democrats will vote against the Government's counter-terrorism proposals in the House of Commons today (Helen Rumbelow writes).

The Conservatives are expected to vote with the Government on the Terrorism Bill's second reading but with a view to challenging some of its most controversial aspects in committee, particularly the move to increase the length of detention of suspects without trial to 90 days

http://www.timesonline.co.uk/article/0,,17129-1843546,00.html