Been forever since I've remembered to step foot in here (always on the bus when I remember XD ), but I'd like to point something out about this...
The reason why the government has ANY say on this matter at all, despite seperation of church and state, is that religions recieve tax exemptions and other benefits. If yeu are going to be given benefits by the government such as these, yeu then are therefore required to play by the rules set by the government to earn those benefits.
In short, the government can't FORCE the catholics to allow female priests... but they CAN say if yeu want to get tax breaks for operating here, yeu need to prove yeu're not just a third world hate club locked in the 1600's, for which we're not going to pay yeu to be stupid anymore.
Part of a country is having people of the same views and beliefs in general, not exacting, but in general. If the general populace believes in the rights of women, or other races, and believes them to be equal... then that government authority has every right to state that anyone who can't play by those rules shall not be rewarded for failure to comply; be this government bodies, individuals, corporations, or religions.
As such, if the catholic church insists on their antiquated traditions, and insists that women do not deserve equal recognition (look for the jews to be targeted next due to their own racist and sexist background, though they'll only be targeted later due to people screaming 'zomg anti-seminism!' when it's really an overall general sweeping motion not targeted), then they shall not be afforded equal recognition that other religions may be rewarded with.
I see nothing wrong with this. They're just saying, if yeu want to exempt women, then that's yeur choice, but we won't pay yeu to do it any longer because we don't believe in that as a country. We're not directly asking yeu to change, we're just saying if yeu don't change, then it's yeur loss. If yeu DO change, great, thanks for not being stupid anymore. If yeu don't, then we get more money out of the deal.
I don't see why anyone would find it strange at all that the government would be annoyed at not receiving taxes from someone who broke the most basic of founding principles and laws as part of their traditional beliefs. Yeu don't normally pay someone to effectively be a criminal. If this were a corporation, people would be screaming that it took them this long to do it, except the government CAN force a corporation to change their policies; they can't change a religion's, but they can revoke benefits provided to such.
So all this is regardless of my personal views on the matter, because that would make sense no matter which religion or government was in power at the time.
My personal views hold that "Tradition is no excuse for mediocrity; just because yeu did something wrong for 100 years doesn't provide excuse to do it wrong for another 100." which's been my belief for a long time now. The catholic church in particular holds traditions very high in regard, beyond all common sense, as any changes would mean that they were wrong all this time, and they have an awfully difficult time admitting they were wrong about the "word of God".
The sooner they can admit that the bible was written by humans, and therefore has human error embedded in it from day one, the sooner they can get around to trying to realize that, if there is a god, he's probably a hell of alot smarter than we are, and if he loves everyone so much, he wouldn't discriminate like that either, and that they've been preaching national propaganda for thousands of years of countries that don't even exist anymore, rather than even consider that such may not be absolute truth.
Personally, I view the catholic church as little more than a cult, considering their worshipping of idols, saints, and virtually anything but god. The idea of having to pray through a saint or angel rather than directly to god kind of goes against the whole "god is omnipotent" thing, and in general most of their stuff is either bigoted or just nonsensical. But that's personal views and I can't really hold that against them in this case.
Whot I can hold against them is that they are literally breaking the law of Britain, and should not be afforded benefits by the government of Britain for doing so.