Ministers were embroiled in a row last night over an extraordinary covert operation to expose racist businesses.

Civil servants have fabricated more than 2,000 job applications and concocted hundreds of false names to try to catch out bigoted managers.

Work and Pensions Secretary Yvette Cooper’s department has secretly applied for 1,000 separate jobs with made-up CVs.

The bizarre operation – condemned as ‘unethical and underhand’ by business leaders – is designed to reveal whether employers turn down applicants simply because of their names.

It could lead to a law banning firms from asking for job applicants’ names until the interview stage, amid claims that such a measure will also help women combat sexism.

A DWP spokesman said the department had responded to 1,000 job vacancies using false identities but with very similar CVs to see if a person’s name was a factor in whether they were given an interview. ‘The names are made up,’ she said.

Typically, officials put in two or three applications per job, with one under a traditional Anglo-Saxon name and others using an ethnic minority-sounding name, The Mail on Sunday understands.

Applications under women’s names were also submitted to ‘keep it realistic’, the spokesman said.

‘We can’t tell you what jobs, what companies, which sectors have been involved. There were 1,000 jobs involved. If someone gets an interview call, it goes through to a mobile phone number which politely declines an interview.’

The research is due to be published later this summer but Vera Baird, the Solicitor General, last week revealed the initial findings. ‘There was quite a strong sense that there is race discrimination going on,’ she said.

‘If you call yourself Patel, as opposed to Smith, then you get less opportunity.’

Ms Baird, now piloting Deputy Labour Leader Harriet Harman’s Equality Bill through the Commons, confirmed the no-names job application rule could be added to the Bill. ‘It could theoretically help, particularly young women. It might help because we are sure there’s a lot of pregnancy discrimination,’ she said.

However, the project was condemned by business leaders.

Gareth Elliott, of the British Chambers of Commerce, said it had strongly advised against the research because it was ‘unethical and a complete waste of time’.

‘We are completely shocked to hear the DWP has gone ahead. Businesses have enough on their plate without having to deal with the underhand tactics of the DWP.’

Theresa May, the Shadow Work and Pensions Secretary, also criticised the operation as a ‘waste of taxpayers’ cash’. She backed moves to clamp down on discrimination but said the idea of banning bosses from initially requiring the names of job applicants was ‘unworkable’.

Challenged to justify the ethics of the operation, Ms Baird said: ‘Well, I don’t know because I wasn’t party to that research. I’ve only discovered it since I have been responsible for the [Equality] Bill. It’s a piece of legitimate research, isn’t it?’

The DWP said it was ‘right to find out if there was an issue regarding people being discriminated against because of their ethnicity when applying for jobs’.

Employers’ organisation the CBI called the proposals ‘unrealistic’. ‘Job applicants are already protected from discrimination when going through the recruitment process and can take legal action if treated differently,’ it said.