Harman and Darling row over business equality plans

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Ms Harman, Commons Leader and Minister for Women, is pressing for new rules to promote gender and racial equality in companies bidding for government work. Each would have to disclose salary figures for men and women to expose any gender gap. In addition they would have to reveal the proportion of ethnic minority and disabled employees.

The information would be used to help make a decision on which company won a contract in cases where two rivals appeared to offer similar value.

If accepted, the moves would affect a huge sweep of industry. Roughly a third of companies sell goods and services to the state.

But the Chancellor is fighting the plans on the grounds that they would involve too much red tape and would load costs on firms struggling during the credit crunch.

"Value for money is our key objective," a Treasury insider told today's FT. "We don't want to put on regulatory burdens and increase costs, and we don't want to discourage small business."

Ms Harman's plans would not need legislation but could fall foul of European laws forbidding " disproportionate" demands on state contractors.