The controversial so-called "exemption clause" was previously removed from the legislation in November following a defeat for the government in the House of Lords.
But members of a committee scrutinising the bill have effectively overturned that decision by voting through amended proposals by 10 to five, despite opposition from Labour MPs.
Speaking during the committee meeting, children's minister Edward Timpson said a range of safeguards have been introduced to the proposals in a bid to allay concerns that they could lead to an erosion of vulnerable children's rights.
He said local authorities would only be granted freedoms if an application has demonstrated clearly it will benefit children or young people in at least one of six ways such as promoting their physical and mental health or wellbeing, promoting high aspirations, or helping them gain access to, or make the best use of services.
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