THE government was defeated on the Trade Union Bill for the first time yesterday as peers united to oppose party funding changes that could “damage democracy.”

Tory Business Minister and former Tesco boss Baroness Neville Rolfe claimed that imposing an opt-in system on trade union political levy payers would not affect party funding.

But Labour shadow Lords leader Angela Smith said she was “wrong — or at the very least, in denial” over the consequences of the changes, which Labour believes would cost it £6 million a year.