“Companies will be legally obliged to reveal whether their white workers are paid more than their ethnic minority peers under plans unveiled by ministers.

In a move designed to reduce pay disparities, companies with more than 250 employees will have to set out annual figures on their ethnicity and disability pay gap…

But Reem Ibrahim, from the free market think tank the Institute of Economic Affairs, said if the government was serious about achieving economic growth they should not be imposing “yet more burdens on businesses”.

She said: “Pay is decided by a whole host of factors, including experience, qualifications and type of work.

“Mandatory pay gap reporting fails to take into account these key differentials, leading to the assumption that any ‘pay gap’ is caused by discrimination.

“Firms will then attempt to manipulate the published figures to cast themselves in a better light, resulting in a whole host of negative consequences on the very people the government intend to protect.”