I wonder if the row over the Denmark cartoons had anything to do with the defeat.
Washington Post
LONDON -- After protests outside the Houses of Parliament, British lawmakers Tuesday watered down a bill banning religious hate speech, then narrowly
voted it into law.
Prime Minister Tony Blair wanted to make it a criminal offense to incite religious hatred through threatening words or actions, insults and abuse.
Britain's upper chamber Tuesday eliminated the ban on insults and abuse, and inserted a provision allowing proselytizing, discussion, criticism, and
ridicule of religion, belief or religious practice.