John Rentoul: The punk hairdresser is a natural Lib Dem

Changing the law on race and religion is a no-go area for Labour and the Tories – which leaves an opening for Nick Clegg

This may seem odd, but Nick Clegg, the Liberal Democrat leader, should take a special interest in the case of Bushra Noah, the young woman with a headscarf who wanted to be a hairdresser. Bear with me.

Last week, Noah was awarded £4,000 by an employment tribunal for "injury to feelings". The tribunal ruled that she had suffered indirect discrimination when she was rejected for a job at a pink punk hairdresser called Wedge. At a brief interview with Sarah Desrosiers, the sole owner, Noah explained that she would not take her scarf off if she got the job. Desrosiers thanked her for coming and said she would "come back" to her about the vacancy.

"It was not a religious matter," Desrosiers told the Daily Mail. "If she'd come in wearing a baseball cap and saying she wouldn't take it off for work, then she wouldn't have got the job either." Curiously, one detail buried in the avalanche of criticism of the tribunal's ruling was that it agreed with Desrosiers. It found that she was not guilty of religious discrimination. In effect, it accepted the baseball cap argument.

Unfortunately, that was not the end of the matter. Because there is also in law the concept of indirect discrimination, which occurs when an employer may have no intention of discriminating but uses criteria that have the effect in practice of disadvantaging a certain group.

In this case, Desrosiers' intention to use her assistant's hair as an advertisement for her salon's style had the effect of excluding some Muslim women from the job. The tribunal found that this amounted to indirect discrimination. As a point of law, it is probably a finely balanced decision: I do not know enough about what proportion of Muslim women have to be excluded for it to count, and it is possible that Desrosiers will appeal. But as a point of public debate, the argument is overwhelming.

Everyone thinks that the tribunal's decision is absurd, lunatic, political-correctness-gone-mad. Everyone, that is, with the exception of a tiny minority in that strange alliance of political Islamism and revolutionary Marxism, which condemns the popular reaction as Islamophobia. So where, in all this hyperbole, is sanity to be found? And how should politicians respond?

The first task is to clear away the irrelevant clutter that always sticks to a case such as this. Noah has been unfairly criticised for wanting to work in women's hairdressing when her interpretation of her religion does not allow her to display her own hair. There is nothing wrong with that: she had been a hairdresser; and many people don't care what their stylist's hair looks like. You might go to Wedge even if you did not want pink hair like Desrosiers'. Noah's mistake was to want to work in that hairdresser's.

Just as she should be free to be a hairdresser, so hairdressers should be free to choose whom to employ, even on strange criteria, and even on criteria that depend on what people look like, provided they are not discriminating on grounds of race. In fact, the baseball cap defence seems rather narrow. Desrosiers should have been allowed to turn away someone with what, in her opinion, was a bad hair cut. On the principle that you wouldn't want to be treated by a dentist with bad teeth.

Superficially, Desrosiers' choice seems to resemble another choice, made last week in the American presidential election. Two women with headscarves were asked to sit out of view of television cameras at a Barack Obama rally in Detroit on Monday. They were deselected by Obama's campaign team because of how they looked and the message that their appearance conveyed. The difference being that their exclusion was wrong, because it arose directly out of their religious identity, whereas Noah's exclusion was the accidental consequence of a fashion statement.

Obama has paid his price, in the currency of embarrassment and votes, and it is right that he should. But what should have happened to Desrosiers? There are two disturbing aspects of this case, which should never have come to court. One is "injury to feelings". It is a sort of add-on, a monetisation of anti-racist or anti-sexist guilt. If you are burgled, you do not usually go after the burglar (if caught) to sue for injury to feelings, however severe. It would be expensive, and the burglar is unlikely to have any money. So why should a non-violent and debatable offence give rise to such claims, except that the defendant has money?

The other is the question of proportionality in cases of indirect – in this case, unintentional – discrimination involving small employers. In many cases, the potential costs – Desrosiers claims to have lost £40,000 altogether – are out of proportion to the offence.

Here is a ripe case for law reform that could put a political party on the side of the majority of voters that are exercised by political-correctness-gone-mad. This is important because cases such as these undermine respect for the law, as well as being corrosive of trust between us as citizens – an effect that is most felt by Muslim Britons.

Reform would involve some rather difficult legal policy work, although many QCs would do it for free. But the Conservatives can't touch it for the same sort of reason that they could not lead the way on allowing NHS patients to top up their treatments privately. David Cameron did not want to be seen to be favouring the better-off within the NHS. Thus he left the way open for Alan Johnson, the Health Secretary, to announce a review of the cruel policy last week. In this case, the party's history with issues of race is also still in the decontamination unit.

Nor is Labour likely to take the initiative. The Government tends to be overly deferential to the idea of causing "offence" to people's religious sensibilities. This arises from an honourable desire to be nice to people, but is a terrible guide to the making of laws, as the Racial and Religious Hatred Act 2006 showed. (Although Jack Straw was prepared to challenge such assumptions in his willingness to ask women in his constituency surgery to remove their veils.)

There is a confusion here, between causing "offence" to someone because of their religion and "injury to feelings" as a result of discrimination. The state should defend the right to offend people's religious sensibilities with the same vigour that it should oppose unfair discrimination.

Not many people noticed an important change in the law last month. The law of blasphemy was abolished. After a debate in the House of Lords that was animated by the standards of the upper chamber – the bishops demonstrating why they should not be sitting in a law-making assembly – it quietly slipped through the Commons on 6 May. Labour and Liberal Democrat MPs voted for the change, while the Conservatives split, with 37, including Cameron, in favour and 51 against.

A "Bye Bye Blasphemy" party was held by the National Secular Society in London yesterday. Thanks to Evan Harris, a Liberal Democrat MP who proposed the change, it is now lawful to cause offence to Christians – as it should be.

That has two implications. One is that it should now be possible to treat all religions equally, without political Islamists pointing to the hypocrisy of legal protection for Christian sensibilities. The other is that the Liberal Democrats are best placed to lead this great liberal cause: that the law, while protecting people from racism, should have nothing whatsoever to do with the "injury to feelings" sustained by the holding of religious beliefs about clothes and hair. Nick Clegg: over to you.