The amendment, which was put forward by Lord Phillips of Sudbury, stated that the Charity Commission "consider the effect on public benefit of the charging policy of any charity”.

This would have meant that when the regulator was consulting on any guidance, they would have had to question the impact of the high fees on public benefit.

Lord Phillips said that the amendment was necessary in order to allay confusion in the existing common law relating to public benefit. “If we leave this Bill on the basis of the decision in Re Resch case [the 1967 case cited in the concordat signed at the end of last year between the Home Office and the Charity Commission] we are not implementing the government’s own stated intentions for this Bill and the intentions with which we, on this side of the House, firmly agree.”

However, following Lord Bassam’s argument that the Charity Commission already has adequate legal provision to take fees into account, the amendment was voted against by 139 to 60.

The NCVO, which supported the amendment, expressed its disappointment at the news. Stuart Etherington said: “The importance of public benefit has been raised repeatedly by the voluntary sector and we have sought assurances from the government over it. Despite this the government has failed to properly consider the case for the amendment and has not provided the reasons for its rejection.

"We now believe it is important the Charity Commission take up the responsibility for this as we believe that the Charities Bill does not address the impact of fees on public benefit. The government has said that the Commission already has the necessary powers; we believe it is now incumbent on the Commission to demonstrate that this is the case and to use them.”