Moves to give companies sweeping powers to dismiss under-performing employees are set to be abandoned by David Cameron following a bitter Coalition split over the issue.
The Prime Minister risks a row with the Conservative right by accepting that plans to allow employers to "fire at will" cannot be forced through in the face of Liberal Democrat resistance.
Conservative Cabinet ministers are arguing for the Government to take an axe to employment law which they argue is helping to choke off economic growth and job creation. A report commissioned by Downing Street by the venture capitalist and Tory donor Adrian Beecroft recommended allowing companies to sack staff whose performance it considered to be poor.
But the proposals ran into opposition from Vince Cable, the Business Secretary, and fellow Liberal Democrat ministers. He announced a consultation on whether "no-fault dismissals" could be introduced for small companies but yesterday signalled he had reached his own conclusion after he described supporters of the move as "ideological zealots".
The chances of the measure being implemented were fast fading as Downing Street sources said the Prime Minister was not prepared to "die in a ditch" for the proposal. One aide said: "If anyone thinks tinkering with employment laws will make any significant difference to Britain growing again, they are misguided."
However, a Conservative Cabinet minister told i he believed employment laws had become tilted against employees and he strongly backed the Beecroft proposals to make it easier to dismiss staff. He said: "There is going to be a massive push by us to do something on it."
A copy of Mr Beecroft's report – which is still open to consultation until next month – was released last night ahead of a freedom of information request. Its other proposals include delaying the introduction of rights for parents to ask for extra leave and cutting from 90 to 30 days the consultation period when a company plans redundancy programmes.
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