From April a positive legal duty to promote good race relations and equality of opportunity will be imposed on every public body, including ministries, Whitehall departments and local government.

They will have to monitor the ethnic composition of their workforce to ensure it reflects the minority ethnic make-up of their local community.

Public bodies will have a duty to assess the impact on racial equality of proposed policies and new services. For example, if an NHS trust proposes to close, or open, a hospital it would have to publish an assessment of what impact it would have on local minority ethnic communities.

The announcement is being made by Mr Straw in a 60-page consultation paper as part of his attempt to maintain the momentum behind the government's anti-racist campaign. This weekend marks the second anniversary of the official inquiry report into the murder of the black teenager Stephen Lawrence. Mr Straw will tomorrow announce the latest progress report on the 70 recommendations by Sir William Macpherson.

Attempts by the police to tackle institutional racism have already provoked a backlash from some officers who have received the backing of William Hague and some newspapers. The decision to extend the fight right across the public sector, backed by "legal teeth", is likely to intensify the debate.

The statutory duty to combat institutional racism will mean public organisations will have to monitor the impact of existing policies on race equality. So far public debate on this has centred on such questions as the use by police of stop and search tactics, or practices inside the prison service.

The way councils or housing associations allocate homes, or the way schools operate their exclusion policies towards troublesome pupils, will also come under scrutiny.

The new duty will mean that an education authority or a university will have to publish an annual assessment which would not only detail the minority ethnic composition of teaching staff and others but specify levels of achievement by different ethnic groups and incidents of racial harassment.

The measures will be legally enforceable by the commission for racial equality. Official inspection bodies such as Ofsted, HM inspector of police, the chief inspector of prisons, the audit commission and the national audit office will also beable to order compliance.