Under new plans announced by the equalities minister, Lynne Featherstone, businesses will be expected to reduce the pay gap by voluntary means. Photograph: Simon James/Alamy
Plans to force businesses to disclose the pay gap between male and female employees in Britain have been abandoned by the coalition government, in a reversal of a Liberal Democrat manifesto pledge.
Instead, businesses will be expected to reduce the pay gap, which is one of the biggest in Europe, by voluntary means. This will be part of a new strategy under which the government department dedicated to equalities will lose its independence and be brought into the Home Office.
The decision was criticised by equalities campaigners, who called it a huge disappointment and accused the government of watering down an already weak proposal on tackling equal pay.
In an interview with the Guardian to unveil the strategy, equalities minister Lynne Featherstone explained her own change of heart on the issue by saying: "Right at this moment of financial peril to the nation is perhaps not the moment to introduce mandatory pay audits."
Just two years ago, the Liberal Democrat MP backed mandatory measures, saying: "A voluntary audit system for private industry is hardly worth the paper it's printed on. We need to know when the government actually plans to step in if progress isn't made."
The Liberal Democrat manifesto pledged to introduce fair-pay audits for all but the smallest companies.
Today Featherstone said: "It was a different world two years ago – financially and in terms of pressures on business. We are in a completely new landscape now … Much more of partnership working, no longer government dictates, this is absolutely the time to make voluntary pay-reporting work."
Asked whether the U-turn compared with the government's controversial decision to abandon the Lib Dems' manifesto pledge on tuition fees, she said: "You can go back to everything pre-election and say, Liberal Democrats said this and Liberal Democrats said that. Of course, had we won the election there might be a slightly different angle on this. In coalition we agreed this is the way forward."
Section 78 of the Equalities Act gave the government powers to make companies disclose pay differences if, by 2013, they continued to show no evidence of tackling them. Businesses welcomed the abandonment of this threat, after lobbying vociferously for voluntary measures.
Instead, under the new proposals, the government will work with the private sector to increase the amount of equality data that is reported.
Featherstone denied that the change marked a weakening of existing legislation, saying an annual review by the government would check to see whether any changes were being made. "We expect them to do it voluntarily because it's the right thing to do and a good thing to do and it will improve business. We know that businesses that are more diverse, have more women in them, do better. It is in their own interest."
However, campaigners warn that in the 40 years since the introduction of the Equal Pay Act, voluntary measures have failed and women are still paid 16% less than men on average. There is also concern that companies will not choose voluntarily to pay for the cost of gathering and disseminating the information, especially in the current climate.
Ceri Goddard, chief executive of the Fawcett Society, which campaigns for equality between the sexes, said: "The persistent gap in pay between men and women is one of the starkest examples of inequality in the UK today. The government's decision not to bring into force section 78 is a huge disappointment and means this injustice will continue for a long time to come. The government has today consigned another generation of women to lower pay.
"Their proposal to rely only on voluntary business action on pay isn't just naive, it sends a dangerous signal that tackling discrimination against women is a choice, not a requirement."
Yvette Cooper, the shadow minister for women and equalities, said: "This is another broken promise from the government.
"Whatever happened to the Lib Dem pledge to introduce mandatory pay audits? Scrapping Labour's plan to increase transparency in pay is a backwards step for women's equality."The new strategy keeps a provision encouraging positive action in recruitment, although this too is voluntary. In contrast to positive discrimination, the illegality of which was marked in capital letters in today's press release, positive action means that an employer can choose an equally qualified candidate who is "disproportionately underrepresented". The example given was a primary school choosing a man when faced with two candidates with the same merits when all other staff are women.
The government set an "aspiration" that half of all new appointments to public boards should be women by 2015.
Featherstone said that the decision to cease having a government equalities office as a separate department did not represent a downgrading. "I'm hoping that it's an upgrading, in that it's being brought into the heart of government. It will be mainstream, not added on to departments. It has to work integrally."
Katja Hall, CBI director of employment policy, said: "We welcome the government's commitment to working with businesses to develop a voluntary framework to improve gender diversity. Greater transparency could help companies identify areas of the business where women are underrepresented and take steps to redress the balance."
The British  has scrapped plans by the previous government to change the rules on .
Equalities Minister Lynne Featherstone
The previous Labour government included a provision in the —Section 78—to allow the government the option to introduce regulations that would require companies to publish details of the difference in pay between male and female employees. If the government had activated such regulations, they would have come into force in 2013. The current government have decided not to activate this requirement and instead will only ask businesses to provide this data voluntarily and will set an "aspiration" to dramatically increase the number of women in senior positions in business.

, the Liberal Democrat MP and coalition Equalities Minister, in announcing the plans stated that the government wishes "to move away from the arrogant notion that government knows best, to one where government empowers individuals, businesses and communities to make change happen."

Featherstone announced the policy at the School of Management at , who have conducted research finding that only 12.5% of directors of FTSE 100 companies are women, up from 12.2% last year—"glacially slow" progress according to business commentator David Prosser.

Featherstone justified not implementing the pay audits due to the economic costs: "Right at this moment of financial peril to the nation is perhaps not the moment to introduce mandatory pay audits."

This breaks with a Liberal Democrat manifesto commitment, as well as contradicting Featherstone's own words two years ago in support of the audit: "A voluntary audit system for private industry is hardly worth the paper it's printed on. We need to know when the government actually plans to step in if progress isn't made."

Women's groups and trade unions have condemned this move. Dave Prentis, the general secretary of , Britain's second largest trade union, said that this is an example of the government "stripping down its commitment to equality".

Prentis continued: "It is a disgrace that women are still getting paid less than men. This move threatens to turn the clock back on all the progress already made with equal pay."

Ceri Goddard, the chief executive of the feminist campaigning group the , condemned the plans: "The persistent gap in pay between men and women is one of the starkest examples of inequality in the UK today. The government's decision not to bring into force section 78 is a huge disappointment and means this injustice will continue for a long time to come. The government has today consigned another generation of women to lower pay. Their proposal to rely only on voluntary business action on pay isn't just naive, it sends a dangerous signal that tackling discrimination against women is a choice, not a requirement."

, Featherstone's shadow minister on the Labour benches, called the news "another broken promise from the government" and said that "scrapping Labour's plan to increase transparency in pay is a backwards step for women's equality."


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