Of course the govt don't want to have to act; its a poison chalice. Rather like Brexit: a whopping great stupid government foot stuffed in mouth without forethought accident that should never have been allowed to happen and which a child with a bit of common sense could have spotted the problems with.
There is no way out. Either they publicly throw women's rights back more than a century and declare that a) there's no such thing as biological sex any more and it's punishable by law to say there is BUT one sex has absolute priority and superior status to the other at all times and in all considerations, and b) we don't care about other protected characteristics including faith, culture, disability, female people with any kinds of needs can just be excluded from public life....
and oh look, here come the court cases, the judicial reviews, the compromised Nolan principles and policies and massive popular vote anger as the issues start to bite because no mandate, no public support, all achieved in a highly dodgy way and anti women when half the voters are female.
Or:
They hand the Labour party a huge gift of being able to paint the Conservatives as heartless, uncaring, anti LGBT+ right wing nasties, allows a lot of public figures to denounce the Conservatives while looking very good themselves for doing it, and dealing with the onslaught from a political lobby that is very well funded and has something of a reputation when displeased.
They're painted into the corner and there is no way out without a huge giant mess. Their one way out would be to explain, properly and thoroughly and with a lot of public information the clash with women's rights and the needs of females, and get the general public properly informed and prepared to understand how LGBT+ needs are going to be properly met, and how those needs will not affect or damage the specific needs equally important for women.
But it looks like they just want the whole thing to go away, and in the middle of a pandemic, a very messy Brexit and all the rest of the mess they're standing in, I don't really blame them.
I do blame the twits who were paid to see this coming and should never have allowed this situation to arise in the first place.