The government has won a vote on privatising parts of the probation service.
The offender management bill passed its third reading in the Commons last night by 293 to 268, although the government's majority fell from 65 to 25.
Firms and voluntary groups could now be given control of parts of the probation service, in a move the government claims will improve public safety. Critics have, however, argued that it risks increasing re-offending rates.
Home secretary John Reid argued: "We need to open up the reservoir of potential assistance for offenders so that every provider - public, voluntary, charitable and the private sector - can play to their strengths."
Public sector providers will still have the chance to compete against firms and voluntary groups for contracts if they are "good enough".
An amendment tabled by Labour rebel Neil Gerrard, which excluded firms and voluntary groups from carrying out "core" probation tasks, was defeated by a majority of 156.
Mr Reid assured MPs that core tasks will remain in the public sector for the time being.
"The core offender management tasks of the Probation Service, for example offender report writing, offender supervision and breach proceedings, will remain in the public sector for the next three years," he told the House.
Mr Reid further insisted that the bill would improve local control of the probation services and would not undermine accountability.
The Conservatives voted against the bill after shadow home secretary David Davis criticised it as a step towards more centralised government control. It also risked "distracting" attention from issues such as prison overcrowding and re-offending rates, Mr Davis added.
Mr Reid attacked the Conservatives' stance after the vote, claiming that it conflicted with their commitment to the voluntary sector.