Unions angrily attacked the Government today over a report it commissioned which said companies should be able to sack unproductive staff without explanation, warning that the move would "horrify" workers.
The right to claim unfair dismissal should be scrapped to free up business and boost economic growth, according to the controversial findings of venture capitalist and Tory donor Adrian Beecroft.
He suggested a dramatic overhaul of UK employment laws, claiming that incapable workers were being left to "coast along" and that firms feared expanding because new staff may prove "unknown quantities" who were impossible to sack.
The document, dated October 12, said the first major issue for British enterprise was the "terrible impact of the current unfair dismissal rules on the efficiency and hence competitiveness of our businesses, and on the effectiveness and cost of our public services".
TUC general secretary Brendan Barber said: "Scrapping protection against unfair dismissal, even for people who have given years of loyal service, will do absolutely nothing to boost the economy. Indeed, if people are constantly in fear of losing their jobs, it will lead consumers to spend even less.
"But while this proposal does nothing for growth, it does show the kind of economy those close to the Prime Minister want to create - one in which nasty bosses are given full licence to undermine those trying to maintain decent standards.
"The clue is in the name. Employers already have plenty of powers to make fair dismissals. Giving them the right to act unfairly may go down well on the back benches, but will horrify employees."
Paul Kenny, general secretary of the GMB union, said the report showed the true face of the "nasty" Tory Party.
"That a well-heeled Tory venture capitalist should want the Tories to make it easier for workers to be sacked without comeback does not surprise GMB after what the private equity owners did at AA. There they were brutal in sacking 4,000 of the 10,000 AA workers without mercy when they took over.
"This report shows the true face of the nasty Tory Party who are, in fact, the political wing of the rich and the elite. That is why Tories have yet to make any move to curb the greed of bankers and financiers who had to be bailed out with billions of pounds of public funds."
Mr Beecroft said managers in the public sector had been forced to offer under-performing staff large settlements because they feared costly tribunal rulings.
"A proportion of employees, secure in the knowledge that their employer will be reluctant to dismiss them, work at a level well below their true capacity; they coast along," said the report.
Mr Beecroft argued that there was nothing in European law that would prevent the Government abandoning unfair dismissal laws.
Rules preventing dismissal on the basis of a person's gender, race or sexuality would remain, and he warned that simply abolishing the law would be "politically unacceptable".
Instead he suggested replacing it with Compensated No Fault Dismissal, which would allow employers to sack unproductive staff with basic redundancy pay and notice.
Unite general secretary Len McCluskey said: "It can't be any coincidence that this sop to the right wing of the Tory Party comes just 24 hours after the Prime Minister faced a massive revolt by his backbenchers demanding a referendum on Europe.
"It is despicable that this Government seeks to appease its voracious right wing by promising to crush any powers to defend themselves that workers in this country may have left.
"UK workers are already the cheapest and easiest to sack in the European Union. Now David Cameron plans to take the nation further back to the dark days of 'hire-and-fire'. That is not in any way a plan for growth - it's a pathway to workplace misery and a demoralised and less productive workforce.
"This is a Government in thrall to its vested interests - a rabid business lobby and an out-of-control right wing of the Tory Party. With every day they remain in office, this country becomes a more unhappy and unequal place."