Conflict of interest: MPs demand inquiry into race chief paid to advise on Big Brother row

MPs called for an inquiry into how Trevor Phillips, £110,000-a-year chairman of the Equality and Human Rights Commission, could make money from private clients while holding down his taxpayer-funded post.

Mr Phillips was hired by the broadcaster after the furore over the abuse of Indian actress Shilpa Shetty on the controversial show in 2007.

Commissioned: Equality watchdog chief Trevor Phillips

'Bullying victim': Indian actress Shilpa Shetty

He was approached through a private consultancy, which he part-owns, and commissioned to write a report tackling 'cultural diversity in the UK' that also looked at Channel 4's editorial content.

Senior sources at Channel 4 said this type of consultancy can cost as much as £10,000.

John Whittingdale, Tory chairman of the media select committee, said: 'This is a conflict of interests. It seems very odd that a government-appointed figure, who is paid well to chair what is effectively a watchdog for equality and human rights issues, is able to make money by advising clients in the same area.

'It doesn't really matter how much he is being paid, it is the fact he is being paid for these services and that is something for the government to look at.'

Norman Baker, Liberal Democrat MP for Lewes, said: 'I think unfortunately he has created what appears to be a conflict of interest, and it would be much cleaner for the Commission if such outside interests did not exist. It's the sort of thing you do when you've left your job, not when you're still in it.'

Mr Phillips founded the consultancy, the Equate Organisation, with media entrepreneur Charles Armitage two years ago, and owns 70 per cent of the shares.

The firm charges corporate clients a fee for a 'discreet, customised service' on how to handle the sort of equality issues that are investigated by the Commission.

Under the 2006 Equality Act, the Commission can launch official inquiries and formal investigations into companies or public bodies and, in extreme cases, support court action against them.

Deep in thought: Shilpa Shetty while in the Big Brother house

It is this potential conflict between Mr Phillips's two roles that is causing concern.

Michael Rubenstein, publisher of the Equal Opportunities Review, wrote recently: 'It is not all that uncommon for those in senior positions in regulatory bodies to profit from this by going into consultancy once their term of office has finished.

'To act for part of the time as the regulator, and also to run a profit-making business advising the regulated, is very different.'

A former TV presenter and producer. Mr Phillips is now a key public figure. He headed the Commission for Racial Equality, which was amalgamated with the Disability Rights Commission and the Equal Opportunities Commission to form the new body last October.

His appointment was initially on a full-time basis but he now works three and a half days a week for the watchdog, which he is contracted to chair until at least September 2009.

As well as Equate, he runs the TV production company Pepper, which has made programmes such as the BBC documentary Windrush.

Last night his spokesman denied any conflict of interest. He said Mr Phillips had taken payment from only one organisation and that part of his fee would go to charity.

Channel 4 was forced to broadcast three public apologies after Celebrity Big Brother attracted 54,000 complaints over the alleged racist bullying of Miss Shetty by fellow contestants Jade Goody, Jo O'Meara and Danielle Lloyd.

A spokesman for the channel said: 'Channel 4 commissioned Trevor Phillips in his private capacity as a former broadcaster and someone with considerable expertise of racial diversity issues'.