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The government has hinted it may compromise over its opposition to bringing deaths in custody under proposed corporate manslaughter legislation, following an overwhelming parliamentary defeat on the issue this week.

After peers voted by 223 to 127 to amend the Corporate Manslaughter and Corporate Homicide Bill to include custodial settings, the Home Office said the home secretary would “consult with the attorney general on a way forward”.

The government had been steadfastly opposed to including deaths in custody under the legislation, under which organisations could be prosecuted for breaching their duty of care to an individual in a way that caused their death.

Speaking in favour of the amendment, former chief inspector of prisons Lord Ramsbotham said many people who had died in custody, such as Zahid Mubarek, Sarah Campbell, Joseph Scholes and Gareth Myatt, may have lived had prisons been covered by such a law.

He added: “Had there been a risk that a charge of corporate manslaughter would have been brought against them, managers at all levels would have taken a great deal more care over the detailed exercise of their responsibilities.”

In the debate, attorney general Lord Goldsmith reiterated the government’s position: that public policy decisions should not be subject to corporate manslaughter law, and that already mechanisms exist to scrutinise deaths in custody, such as investigation by the Prisons and Probation Ombudsman.