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Birmingham Labour MP Khalid Mahmood has come to the defence of anti-racism campaigner Trevor Phillips, after Mr Phillips was suspended from the Labour Party over allegations of Islamophobia.

Mr Mahmood (Lab Perry Barr), the first Muslim to be elected as an MP in England, called the suspension “a sad – and frankly embarrassing – episode for my party”.

Mr Phillips, the former chair of the Equality and Human Rights Commission, faces an investigation and could be expelled from the party. Labour has not publicly confirmed what he is accused of doing, but a report in the Times newspaper said the inquiry follows comments he made about Pakistani Muslim men sexually abusing children in northern British towns. Many of his statements date back years.

He has also been a critic of the Labour leadership's failure to take action against anti-Semitism, and Mr Mahmood suggested Mr Phillips had in fact been suspended because he was a "difficult voice".

Writing in a pamphlet published by think tank Policy Exchange, Mr Mahmood said: “It was with no small measure of astonishment that I learnt that my own party, the Labour Party, had initiated proceedings against Trevor Phillips on grounds of ‘racism’ and ‘Islamophobia’. The charges are so outlandish as to bring disrepute on all involved in making them; and I fear they further add to the sense that we, as a party, have badly lost our way.”

He said Labour had adopted a definition of Islamophobia and “seems to be intent on wielding it as a weapon for rooting out ‘difficult’ voices.”

The All-Party Parliamentary Group on British Muslims has defined Islamophobia as “a type of racism that targets expressions of Muslimness or perceived Muslimness.” The group includes politicians from all parties, including Conservative peer Baroness Warsi as well as Labour politicians such as Mr Mahmood. It also includes MPs from a range of religions and ethnic backgrounds.

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Labour has officially adopted the definition. However, Mr Mahmood has criticised it, saying that it is “fundamentally flawed”.

He said: “It’s time for new thinking that allows us to get past endless debates about language and instead to focus on what really matters: improving the lives of millions of British Muslims who want to live as successful, prosperous and equal members of our society.”

Mr Phillips has defended himself and accused Labour of attempting to restrict members from having a “healthy debate” about how British society could “address differences of values”.

Speaking to the BBC, he argued that society had to learn to deal with Islamic differences rather than hope Muslims would assimilate to a British way of life.

Answering allegations of Islamophobia, Mr Phillips told the Times there was no suggestion that he had done anything unlawful and “no-one inside or outside the Labour Party has ever suggested that I have broken any rules”.

He said the party had sent him an 11-page letter and told him he was forbidden from publishing the details of his suspension.

He told BBC Radio 4’s Today programme: “I’m surprised about what is and always has been an open and democratic party deciding that its members cannot have healthy debate about how we address differences of values and outlooks.

“Let us be clear about this. They say I’m accusing Muslims of being different.

“Well, actually, that’s true. Muslims are different and, in many ways, I think that’s admirable.”

The 66-year-old said it was “nonsense” to define being anti-Islam as racist, arguing that Muslims do not identify as a race.

Asked about his assertion that British Muslims are “becoming a nation within a nation” being adopted by far-right campaigner Tommy Robinson, Mr Phillips replied: “As my grandmother says, just because the devil picks up a tune doesn’t mean it is a bad tune.”

In the run-up to the general election, Mr Phillips was among 24 public figures who last year declared their refusal to vote for the Labour Party because of its association with anti-Semitism.

In a letter to the Guardian in November, the group said the path to a more tolerant society “must encompass Britain’s Jews with unwavering solidarity” and said Jeremy Corbyn has “a long record of embracing anti-Semites as comrades”.

A Labour Party spokeswoman said: “The Labour Party takes all complaints about Islamophobia extremely seriously and they are fully investigated in line with our rules and procedures, and any appropriate disciplinary action is taken.”