LONDON (Reuters):

Britain will not exempt Catholic adoption agencies from new anti-discrimination laws which the Church fears could force them to place children with gay couples, Prime Minister Tony Blair said yesterday.

The adoption agencies will be granted a transition period, until the end of next year, to adjust to the new law, he said.

"Everyone is agreed that, above all, the interests of the child and particularly the most vulnerable children, must come first," Blair said in a statement.

"I believe we have now found a way through that achieves this and which all reasonable people will be able to support."

Church and state have been locked in confrontation since Cardinal Cormac Murphy-O'Connor, head of the Catholic Church in England and Wales, called for Catholic adoption agencies to be exempted from a new anti-discrimination law.

The Cardinal said after Blair's decision: "We are of course deeply disappointed that no exemption will be granted to our agencies on the grounds of widely held religious conviction and conscience."

But he did appreciate the decision to impose a transition period. "This debate has raised crucial issues for the common good of our society," he said in a statement.

The Equality Act outlaws discrimination on grounds of sexual orientation in the provision of goods, facilities and services.

CHURCH'S TEACHINGS

Murphy-O'Connor argued that to force Catholic agencies to place children with gay or lesbian couples went against the Church's teachings.

He said the law could force the agencies to close, putting 4,000 children awaiting adoption at a disadvantage.

The leader of the world's 77 million Anglicans, Archbishop of Canterbury Rowan Williams, and the Muslim Council of Britain supported the Catholic Church, forcing Blair to choose between backing gay rights and offending religious groups.

Blair concluded he would not excuse Catholic adoption agencies that receive public funds from the new anti-discrimination law.