Conservatives within the Coalition party room fear the conscience vote will wipe out protections for religious schools, raising the question of whether Mr Morrison will keep the idea when the debate on the issue resumes next year.
Finance Minister Mathias Cormann told some Liberal senators of the Prime Minister’s plan for a new government bill at a meeting on Tuesday night, taking some of them by surprise when they were focused on a Labor bill to prevent religious schools discriminating against gay students.
Mr Morrison called a meeting with backbench colleagues on Wednesday to tell them of his plan.
One source said MPs warned against the idea of allowing a conscience vote, but Mr Morrison went ahead with this proposal.
The concerns over the policy include the frustration that the government is yet to release a review of religious freedom led by former Attorney-General Philip Ruddock, setting out the full picture on the issue and explaining how to structure the protections for gay students.
“What we’re angry about is the Ruddock review has still not been released,” said one Liberal.
“We’ve created a rod for our own back by not releasing it.”
The impasse in Parliament sets up another round of intense lobbying from both sides, and means efforts to strip religious schools of their right to discriminate against students will likely be debated as part of the government’s response to Mr Ruddock’s religious freedom review before the end of the year.
Talks hit a wall on Wednesday after the Coalition and Labor were unable to agree on details of legislation both parties agree is necessary to end discrimination on the basis of sexuality and gender identity.
Mr Morrison offered to introduce a private member’s bill if both parties held a conscience vote on the matter – but Opposition Leader Bill Shorten rejected that bid, saying “no one with a conscience supports discrimination”.
Barring an 11th-hour breakthrough, the issue will be delayed until Parliament returns in February – and could be dealt with as part of a broader response to Mr Ruddock’s review.
Attorney-General Christian Porter blamed Mr Shorten for the stand-off, saying the Labor leader should be “ashamed” for playing politics.
The crux of the disagreement involves the government’s bid to include a clause ensuring any “teaching activity” done in good faith with the religious tenets of a school remained lawful.
The government also wants to protect schools’ capacity to initiate “rules” that uphold their religious ethos, such as requiring all students to attend chapel.
LGBTI advocates and Labor are concerned such rules could be used to discriminate against transgender students by preventing them wearing their preferred uniform, for example.
Labor also produced a legal opinion by barrister Mark Gibian, SC, arguing the government’s bill would allow “draconian instructional requirements on particular students for discriminatory reasons”.
In October, Mr Morrison pledged to change the law by the end of the year to remove the right for religious schools to expel gay students, after the issue came to public attention courtesy of the Ruddock review.
Anna Brown, a director of the Human Rights Law Centre, said LGBTI students had the right to feel “incredibly disappointed and heartbroken” about the paralysis in Parliament.
“Once again, [Mr] Morrison has broken his commitment to introduce and pass legislation to protect students in school as soon as possible,” she said.
“That commitment was made in October and now in the final days of Parliament we have this ridiculous discussion.”
Mr Shorten said he understood voters would be frustrated at the outcome but told reporters: “I’d rather get it right than wrong, and if that means taking a little longer than we otherwise wanted to, that’s what we’ve got to do.”
The delay paves the way for another round of lobbying on both sides, with the Catholic church arguing Mr Morrison’s “compromise” bill did not go far enough to protect religious freedom.
“It provides more protection to religious schools than the alternative, but is not an adequate solution to the challenge of how to balance the rights of students and schools,” said Catholic Archbishop of Melbourne Peter Comensoli, who is also the Australian Catholic Bishops’ Conference delegate for religious freedom.
Mark Spencer, executive officer of Christian Schools Australia, said the left’s position on the bill showed “they don’t want us to be able to teach our faith, values and beliefs in religious schools, and that’s pretty frightening, pretty chilling to religious faith bodies”.
Mr Ruddock said it was a “very difficult and very complex” legal issue and that it “may well be wise to wait” until the government was ready to release its response to his entire review.
He said if voters were frustrated about the intransigence, “the frustration is with the legal system the electorate has delivered”, where the government lacks a majority in both houses.
David Crowe is the chief political correspondent for the Sydney Morning Herald and The Age.
Michael Koziol is the immigration and legal affairs reporter for the Sydney Morning Herald and The Age, based in Parliament House