Equality minister Harriet Harman has backed down over an amendment on who churches can employ.
She is thought to have made the climbdown to avoid a continuing dispute with church leaders in the face of the Pope’s visit in September.
Provisions in the Equality Bill, currently passing through parliament, would have clarified the law requiring churches only to discriminate in terms of sexual orientation when hiring those who will teach doctrine or lead worship.
The 2003 Sexual Orientation Regulations mean that staff such as youth workers, janitors and administrative workers cannot be refused employment due to their sexuality.
The House of Lords voted down the amendments last week. Ms Harman was expected to force the changes through but said last night she would not.
This week, the Pope criticised the bill for violating “natural law”. The Archbishop of Westminster Vincent Nichols defended his comments, saying many religious Britons agreed with him.
Archbishop Nichols said: “I think [the Pope's] words will find an echo in many in our country who are uneasy that perhaps one of the unintended consequences of recent legislation is to drive religious belief and practice into the sphere of the private only.”
According to The Times, Ms Harman said last night: “We have never insisted on non-discrimination legislation applying to religious jobs, such as being a vicar, a bishop, an imam or a rabbi.
“Religious organisations can decide themselves how to do that. However, when it comes to non-religious jobs, those organisations must comply with the law. We thought that it would be helpful for everyone involved to clarify the law, and that is what the amendment … aimed to do. That amendment was rejected, so the law remains as it was.”
The gay humanist charity Pink Triangle Trust described the government’s climb-down on the Equality Bill as “pathetic and spineless”.
Secretary George Broadhead said: “This abject climb-down has obviously been prompted by the Pope’s recent criticism of the pro-gay clause in the bill and is a clear indication, if any were needed, of the continuing malign political influence exerted by the Catholic Church.”
The National Secular Society announced this week it is planning protests over the Pontiff’s state-funded visit to the UK in September.
NSS president Terry Sanderson estimated that the cost of his visit to taxpayers would be £20 million.
He said: “If the Catholic Church wishes its leader to come here, it should pay for the visit itself. I am sure many others feel the same resentment as we do at the NSS at funding the presence of someone who wishes to impose a reactionary agenda of social change on us.”
Gay groups, women’s groups and pro-choice campaigners are expected to get involved with the protest.
Almost 7,000 people have signed the NSS’s petition against the state-funded visit.