Harman facing fight against diversity bill

The Equality Bill will receive its first reading in Parliament and businesses are bracing themselves for a raft of measures which they fear will place unwelcome financial and bureaucratic burdens on enterprise at a time when many firms are struggling to stay afloat.

The bill is intended to improve opportunities for female, disabled and ethnic minority employees with obligations that are likely to include forcing companies to carry out regular audits into the gender and ethnic background of their staff. It is understood the audit, which will apply to companies employing more than 250 people, will also include reporting salary differences between male and female staff, although this is not expected to be made compulsory until after 2013.

The bill is also likely to dictate that firms discriminate in favour of a woman, disabled person or an applicant from an ethnically diverse background where companies have to choose between two equally qualified candidates.

While not opposed to many of the principles behind the bill, business organisations such as the British Chambers of Commerce (BCC) have vowed to delay the legislation, which they say the Equality Minister could not have introduced at a worse time.

They argue that not only are companies fighting one of the worst recessions in recent memory, but the blow also follows hot on the heels of the 50p tax rate, which the private sector fears will lead to an exodus of talent from the UK and discourage entrepreneurship. The new "tax on the rich" was unveiled in last week's Budget.

David Frost, director general of the BCC, said the Equality Bill could potentially cost firms many thousands of pounds in consultancy fees at a time when cash is extremely tight.

He added: "What sort of message is this sending potential investors around the world about the UK as a destination for inward investment?"

John Cridland, CBI deputy director-general, said: "If compulsory reporting of pay stats found its way into the bill we would strongly oppose it."

According to statistics released to Scotland on Sunday by the law firm DLA Piper, Scots firms are likely to face the greatest challenge in meeting the equality requirements. In a survey conducted by the firm, 63% of Scottish companies admitted that women and ethnic minorities are under-represented among their ranks, compared with 54% for the whole of the UK. More than half of Scottish firms have also never conducted any research into gender pay differences.

Russell Bradley, head of employment law at DLA Piper in Scotland, said positive discrimination measures could lead to lawsuits from other candidates who feel they've lost out unfairly. Bradley said: "The chances that managers could misapply positive discrimination could lead to disgruntled candidates suing and this may strongly discourage many organisations from applying it. On top of this, there are risks that colleagues may think someone got their job due to their race, sex or disability, which could cause significant friction at work."

It is understood the bill has already caused division within the Cabinet. Business Secretary Lord Peter Mandelson is thought to be sympathetic to the business community's case for delaying the legislation until after the recession, but Harman is determined to see it through Parliament as quickly as possible.

Frost of the BCC said he will lobby senior politicians including shadow business secretary Kenneth Clarke at the group's annual convention in Birmingham tomorrow.