Ministers are ready to outlaw workplace harassment on grounds of religion and belief as well as sexual orientation.

The government is stepping up its drive to protect people against discrimination at work and to ensure equality for all, said Barbara Roche on Wednesday.

She has published two consultation documents on equality proposals and plans to create a single watchdog to police the tough new rules..

"This government is committed to making Britain a fairer place to live and work," said the equality minister.

"Now, for the first time, we propose to outlaw discrimination at work on grounds of religion and belief. We're doing the same on grounds of sexual orientation."

Ministers are warning bosses that the measures will have "a real impact in offices, factories and every other workplace in Britain".

"These proposals will tackle unfair discrimination at work because it's bad for business, and bad for Britain, as the best employers already know."

The crackdown will set in law the idea that harassment amounts to discrimination.

"Legislation is there to set fair standards, but our ambition is wider and will need to be achieved through other means.

"We want to bring about an equal society where cultural, social and racial diversity is respected and celebrated and where discrimination against individuals is tackled robustly," Roche said.

Stonewall's executive director, Angela Mason, said that the plans highlighted the way ahead.

"Getting all the details right, including the helpful proposals for dealing with sexual orientation, will require a lot more discussion but this is a vision that many, many people can buy into," she said.

And Julie Mellor, chair of the Equal Opportunities Commission, also welcomed plans to extend anti-discrimination laws.

"There is no point in creating new institutions if they are forced to treat some groups of people 'more equally' than others.

"All our equality laws need to be brought in line with existing race legislation. This means giving everyone the right not to be discriminated against not only at work, but also when they use everyday facilities and services - when they go to the bank or visit the hospital for example," she said.

The measures are set to open up a lucrative new arena for lawyers.

Roche has not defined what religions will be protected by the legislation, leaving it to employment tribunals to decide whether an individual's religious beliefs are valid.

The consultation document would cover "any religion, religious belief or similar philosophical belief".

"This does not include any philosophical or political belief unless that belief is similar to a religious belief. The courts and tribunals may consider a number of factors when deciding what is a 'religion or belief' (eg. collective worship, clear belief system, profound belief affecting way of life or view of the world)," said the document.

The cost of the plans is estimated at £11 million a year, with an additional one-off cost of £52 million in the first year.

However, the quantifiable benefits are estimated to be between £26 million and £32 million a year, meaning the initial cost would be completely recouped after two to three years.

The consultation process ends in spring 2003.