The Australian-style approach has emerged as the favourite of several options being drawn up as part of a Ministry of Defence review of thepolicy. Britain has been forced to reassess its stance after the European Court of Human Rights ruled last month that the MoD had acted illegally in dismissing gay servicemen and women.
Gay rights groups celebrated the judgment as grounds for a complete lifting of the ban, but it is understood that its lawyers have advised that the ruling is more complex. The MoD accepts that its treatment of homosexual personnel, using military police to investigate them, breached the European Convention on Human Rights, but does not believe that the policy itself is illegal.
However, with Tony Blair known to be a strong supporter of reform, the Secretary of State for Defence, Geoff Hoon, is likely to oversee a solution that attempts to change the policy without upsetting military chiefs.
The Australian model would involve a new code of conduct that extends the ban on heterosexual sex between serving officers to include homosexual sex. While explicitly acknowledging the existence of gay servicemen and women, the rule would meet some of the concerns of staff worried about a complete lifting of the current ban.
Some military chiefs fear that a complete liberalisation of the law would undermine morale, because staff would be worried about homosexual advances in living quarters. They are also determined to ensure that younger staff are not placed in situations where a homosexual instructor or senior officer could take advantage of rank.
The scheme's supporterssay that a simple lifting of the ban would be impractical in barrack rooms or officers' messes across the country. Integral to the changes will be a much tougher code on sexual harassment for both gay and heterosexual staff.
"Imagine the harassment they would get if they did come out. You have to try and protect people from the possible violence that may follow," an MoD source said. "But it is extremely unfair to say that armed services chiefs are dead against change of any kind. They simply want a policy that works."
Among the countries that have been studied by the MoD are Australia, the United States, Israel and the Netherlands. The study's conclusions are likely to be completed before the end of this year and a new policy will be announced next year.
Mr Hoon admitted yesterday that Britain's forces were suffering from "overstretch" and hinted that their work in the world's troublespots might have to be scaled back. He said the Government should "not ask more of our armed forces" than it envisaged in last year's strategic defence review, and said he would try to "get back to the levels of commitment we anticipated."
Iain Duncan Smith, the Tory defence spokesman, said that the "devastating admission" showed that Labour had put the defence of Britain at risk.Reuse content