Anti-racist campaigners and asylum seekers' rights groups marched from the Embankment to Trafalgar Square where speakers claimed that the government's Asylum and Immigration Bill will be unfair and oppressive.
The proposals include measures to spread refugees around the country and replace benefits with vouchers for food and prepaid accommodation.
'Vulnerable to racist attack'
The Labour MP Diane Abbott, who will sit on a House of Commons committee to review the legislation, told the demonstration that amendments were needed to secure the rights and safety of Britain's asylum seekers.
Standing in front of Nelson's Column she said: "My real concern is that by sending asylum seekers around the country you will make them more isolated and more vulnerable to racist attack."
The government's planned radical shake-up of the immigration and asylum system comes as the authorities struggle to cope with a surge in the number of people applying for refugee status.
It is hoped the new support system will discourage economic migrants and lead to faster decisions with an improved applications procedure.
Kurds join demonstrators
Among the protestors were hundreds of Kurds protesting at the arrest earlier this month by Turkish authorities of rebel leader Abdullah Ocalan.
Brief scuffles broke out in the early afternoon after one man shouted at the crowd.
The man, who was not arrested, was led away by officers.
The Liberal Democrat MP Dr Evan Harris, whose Oxford West constituency includes the controversial Campsfield House detention centre, said the government was enshrining the sort of "institutional racism" it had vowed to eradicate.
Speaking after the rally, Dr Harris said: "In the week following the Stephen Lawrence report, the government has introduced a Bill to institutionalise racism.
"It is significant that a government which came in to fight to end social exclusion is introducing it instead by legislating to disperse asylum seekers across the country and away from their communities."
The MP said his party had opposed the new Bill from the beginning and would continue to do so.
Northern Ireland
Scotland
Wales
England
Fingerprint checks for immigrants
(23 Feb 99 | UK Politics)
Asylum-seekers 'could starve'
(17 Feb 99 | UK Politics)
Immigration bill for 'faster' system
(09 Feb 99 | UK Politics)
Immigration White Paper
The Home Office
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