In its final assessment of the state of race relations in Britain before it is folded into a new super-equality watchdog, the Commission for Racial Equality (CRE) launched a stinging criticism of central government.

Its three-year assessment of standards in Whitehall found 15 departments were failing to meet their obligations under race equality laws, and urged ministers to make racial equality a "national priority". The Olympic Delivery Authority was also targeted for criticism.

The report's author, CRE director Nick Johnson, said the results were "very troubling". He said: "While some public bodies such as the criminal justice agencies have made huge strides in the area of race relations, others have fallen down.

"It is shocking that Whitehall Departments and those leading our Olympic delivery, rather than leading by example are in fact failing us time and time again."

Lawyers for the authority were preparing legal action against 15 departments and agencies, including education, health, local government, agriculture, and the Home and Foreign offices, he said.

On the broader state of Britain's race relations, the report warned: "Britain, despite its status as the fifth largest economy in the world, is still a place of inequality, exclusion and isolation. Segregation - residentially, socially and in the workplace - is growing. Extremism, both political and religious, is on the rise as people become disillusioned and disconnected from each other.

"The simple fact is despite the progress that has been made, if you are an ethnic minority Briton, you are still more likely to be stopped by the police, be excluded from school, suffer poorer health treatment and live in poor housing. The language may have changed but the reality is racial inequality is alive and kicking."

"Additionally, people increasingly live 'parallel lives', risking division and conflict. To achieve an integrated Britain, we need to achieve equality for all sections of society, interaction between all sections of society and participation by all sections of society."

The report found local authorities and some agencies were fulfilling their legal obligations, in some cases on much lower budgets than departments which were failing. In a parting shot, the report said the CRE's agenda "has not been supported well by Government".