The government has been defeated for the third time over provisions in the Equality Bill, which the churches claim would restrict their ability to deny jobs to gay people and transsexuals.
The law currently allows religious organisations to rule out some applicants on conscientious grounds, but the government had attempted to amend this, so that exemptions applied only to those whose jobs “wholly or mainly” involved taking part in services or rituals, or explaining the doctrines of religion.
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Peers voted by majorities of 38, 21 and seven against the amendments, reports the BBC.
Archbishop of York John Sentamu told peers: “If religious freedom means anything it must mean that those are matters for the churches and other religious organisations to determine for themselves in accordance with their own convictions.”
