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Ministers will propose homosexuals should get the same tax, pension and property rights as married couples provided they register their relationships in a new-style civil ceremony.
The government is, however, expected to provoke controversy by denying the same rights to unmarried heterosexual couples in long-term relationships. It will fuel claims that the government is pandering to the gay lobby.
Ministers will try to head off the criticism by claiming that extending the rights to unmarried couples could undermine marriage by discouraging them from tying the knot.
The changes, which will be implemented in a civil partnerships bill, are being introduced following the European Union's equal treatment directive, which bans discrimination against gays.
Under the plans — to be presented to parliament as a "consultation" document — gay couples would give a written undertaking in an official register that they had lived together for a minimum period, possibly as little as six months or a year. They would then be eligible for the same tax and other perks as married couples.
Like married couples, they would be exempt from inheritance tax when they inherited from a dead partner. In the past, some gay people have been evicted from their homes or forced to sell the property after their partner's death.
Gay couples would also benefit from the same pension breaks as married couples. All occupational pension schemes allow a surviving wife or husband to benefit from their dead spouse's pension. However, only about a third of British companies currently grant such rights to gay employees.
The new law would also give gay couples the legal right to act as next of kin, enabling them to be consulted on hospital treatment if their partner was seriously ill. They would also have a right to dictate funeral arrangements.
Other benefits would allow them to apply to a court for alimony if their relationship broke down. They would also have improved rights to an interest in a shared home if they separated.
Foreigners who came from abroad to live with their gay partners would be given the same rights to live in Britain as a wife or husband who joined their spouse from abroad.
The changes are likely to be contentious, even among some of those who have supported reform. Lord Lester of Herne Hill, who introduced a private member's bill on civil partnerships last year, said he would be disappointed if the government resisted moves to extend the rights to unmarried couples.
He said: "The government appears to have given in to people who say it would undermine marriage if straight couples got the protection, so they are saying they can only do it for gay couples who can't marry. That's ridiculous."
A recent survey found that almost 30% of adults in Britain are cohabiting. Many unmarried couples believe they are entitled to 50% of their partner's assets. But this is a myth: in the eyes of the law they have few rights.
Traditionalists such as Colin Hart, director of the Christian Institute, say the bill is "wrong and misconceived".
Hart said: "These plans are promoting counterfeit marriage. Two old ladies who had lived together for 40 years, for example, would have to pretend to be lesbians to benefit from the changes."
The Bishop of Winchester, Michael Scott-Joynt, also believes such proposals would undermine marriage and appeared to give official backing to the idea that lifelong, exclusive commitments were no longer possible.
"Most marriages do work and 60% last till death us do part," he said.
A spokesman for the Catholic Church said: "To suggest same-sex couples should have the same rights as married couples is a step in the wrong direction."
However, Sacha Deshmukh, director of parliamentary affairs for Stonewall, the gay and lesbian group, said the plans should be welcomed.
"We are aware of thousands of couples around the country who face all sorts of practical problems in their lives because they don't have any method of pointing to recognition of their partnership," she said.
The move, which was disclosed to party whips at a private meeting last week, is being spearheaded by the government minister Barbara Roche.
A spokesman for the Cabinet Office, which initiated the bill, said: "She is in favour of a civil partnership registration scheme for same sex couples with a package of rights and responsibilities for those that register."
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