The Government has scrapped plans to force big businesses to disclose the difference in pay for men and women they employ, on the day it emerged that little progress had been made in bringing women into the boardroom.
The equalities minister, Lynne Featherstone, said yesterday she had ditched plans drawn up by the previous government and due to come into force in 2013, calling it a "blueprint for change".
Employers will now be asked to publish gender pay data on a voluntary basis only. A spokesman for the Home Office said the Government would work closely with business to make sure the approach was successful.
This marks a stark U-turn from Ms Featherstone, who said in opposition that a voluntary audit system "is hardly worth the paper it's printed on".
The Government said it would monitor the number of companies releasing pay information each year, to assess whether the voluntary approach had been a success. Mandatory reporting has not been ruled out if the results are unsatisfactory.
Speaking at the launch of the 2010 Female FTSE 100 report, drawn up by the Cranfield School of Management, Ms Featherstone said: "We want to move away from the arrogant notion that government knows best, to one where government empowers individuals, businesses and communities to make change happen."
She criticised Labour's plans as bringing in red tape, adding that it "wasn't just a futile approach, it was a damaging one". She said: "Bucketloads of regulations were being dumped on businesses already struggling to keep their heads above water in the recession."
Ceri Goddard, the chief executive of the Fawcett Society, which campaigns for equal pay, pointed out that women in the UK were paid, on average, one sixth less than men. There were also currently 45,000 women bringing claims against their employers over equal pay. She said the decision was "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".
However the news was welcomed by the Confederation of British Industry. Katja Hall, the CBI's director of employment policy, said the body would work with ministers "to develop a system that works for employers and delivers results".
Miles Templeman, the director general of the Institute of Directors, also welcomed the plan, saying: "While there may be some instances of illegal discrimination still taking place, we believe this is very uncommon."
Ms Featherstone said the Home Office would lead by example, pledging that by the end of this Parliament at least half of new hires to the boards of public bodies would be women.
She added that the Government would push ahead with some Equality Act measures, including allowing employers to choose a candidate from a group that is under-represented in the workforce, where there are two applicants of equal merit.
The latest Female FTSE 100 report showed disappointing results yesterday, as the number of women in the boardroom hardly improved. Of 1,076 directors on the boards of the largest listed companies in the UK, just 135, or 12.5 per cent, were women. This marks a rise from 12.2 per cent last year and 12 per cent the year before. Ms Featherstone called the progress "painfully slow". The report hailed Burberry, where three of eight board members are women. The Government has appointed Lord Davies to work with FTSE 100 companies to improve the representation of women on their boards, Ms Featherstone pointed out.