The Government has been defeated in the Lords over changes to the system of paying council tax benefit amid warnings of a "poll tax mark two".
Labour, with support from the Liberal Democrat and independent benches, demanded an independent review of the changes to be carried out within three years of them being introduced. The amendment to the Local Government Finance Bill was carried by 203 votes to 165, majority 38, during third reading debate.
Former work and pensions minister Baroness Hollis of Heigham led the call, warning of a "lot of loose ends and a lot of unknowns" with the changes. She said an independent review would allow Parliament to see if the reforms were "sturdy and robust" or not.
The Labour peer said: "Council tax benefit is being removed from the national social security system, where now it is fully funded to meet individual need, to, in five months' time, a rebate scheme with 10% less money in it based on local discretion, with each local authority inventing its own version."
Baroness Hollis warned this risked creating a "poll tax mark two" with up to two million families paying towards their council tax for the first time. "If set too high, families cannot pay. If set too low, the council cannot collect," she said.
In a bid to appease critics of the new system, the Government last week announced an additional £100 million to support councils moving to it. But Liberal Democrat Lord Shipley said this transitional relief would not solve the problem for all and was only available for one year.
Backing Lady Hollis's amendment, he said politicians needed to better understand the impact of a number of changes being implemented in the coming months.
Independent crossbencher Lord Best also backed the demand, warning about the possible impact on those "living on the breadline" at a time when the gap between rich and poor was widening.
For the opposition, Lord McKenzie of Luton said there was the danger of "a poll tax mark two with horrendous collection problems" for local authorities. He said: "Councils have been left with impossible choices. The Government hopes this will all settle down but we think they are wrong. An independent review within three years will test this matter."
Communities and local government minister Baroness Hanham said an independent review was not needed because it was for councils to keep their schemes under review. The Bill already required each billing authority "to do just that and consider whether or not to revise or replace their scheme".