A senior Liberal Democrat has described a proposal to scrap unfair dismissal and allow managers the right to sack unproductive staff without explanation as "madness". In a report seen by the Daily Telegraph and commissioned by Downing Street, the venture capitalist Adrian Beecroft suggests British workers should be banned from claiming unfair dismissal so companies can sack them and find more capable replacements, saying this would boost economic growth.
The document has generated a furious response from trade unions. Downing Street declined to comment on the contents of the report other than to say it was not "a final document". But Norman Lamb, the chief parliamentary and political adviser and parliamentary private secretary to the deputy prime minister, Nick Clegg, said taking away protection from unfair dismissal would damage the economy because it would increase workers' fears that they could be arbitrarily sacked.
"I think it would be madness to throw away all employment protection in the way that's proposed, and it could be very damaging to consumer confidence," Lamb said. "What we are talking about here is every single employee in the land being in a position where their employer could arbitrarily terminate their employment – and the impact that could have on consumer confidence, fear of losing your job, would potentially be very damaging. I just think it's also not right to throw away that sort of scheme of protection."
He warned that the "law of unintended consequences" could mean staff who criticise or challenge their employers could be dismissed as a result, pointing out that existing laws already enable employers to get rid of staff where there is clear evidence of underperformance. "The existing law gives employers far more rights than many actually recognise, and it's easing the way to use those existing rights much more easily that I think is the right way forward," he added.
David Cameron's official spokeswoman said the government was committed to reforming employment law as set out in the coalition agreement. "We are going to review it so that employers and employees can ensure they have maximum flexibility whilst protecting fairness and providing a competitive environment that we need for enterprise and growth," she said.
Unions hit out at the Beecroft proposal. Paul Kenny, the general secretary of the GMB, said the leaked report showed the true face of the "nasty" Tory party, while the Chartered Institute of Personnel and Development (CIPD) said the proposal was based on an "ideological prejudice in favour of removing employee rights" and disputed his suggestion that the British economy suffered from a significant problem with slacking.
Beecroft claims that, under current legislation, workers are allowed to coast and employers are fearful of expanding their businesses because new staff could prove unknown quantities who are impossible to sack. He suggests the introduction of "compensated no fault dismissal", which would allow employers to sack staff with basic redundancy and notice, but admits that a problem with the proposal is that employers could fire staff because they "did not like them".
The document, dated 12 October, says 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" was a major issue for British enterprise. According to the Telegraph, Beecroft writes: "While this is sad, I believe it is a price worth paying for all the benefits that would result from the change." He claims making it easier to sack underperforming staff would boost employment rather than increasing unemployment because businesses would be likely to grow as a result of becoming more competitive.
But Kenny responded: "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 the GMB after what the private equity owners did at the 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."
Sarah Veale, the TUC's head of equality and employment, told the BBC Radio 4 Today programme that Cameron should throw the report straight in the bin. "I really do wish the government would stop going on about how if you reduced employment protection laws somehow that would make the economy boom again and create growth – it is absolute rubbish," she said, adding that it was not fair for employers to get rid of workers on a "whim". "This is just trying to reinvent history and make up myths about employers being dragged through the tribunals all the time," she added. "There is very, very low litigation in this country."
The CIPD said there was no evidence that watering down workers' rights would create more jobs. John Philpott, the organisation's chief economist, told BBC Radio 5 Live Breakfast: "I think actually what we're hearing on this issue is largely based on prejudice rather than any evidence – ideological prejudice in favour of removing employee rights. "If you look at our productivity problem, it's due to poor investment, poor training and poor management. And if anybody can actually find me chapter and verse evidence that there's a big problem of slacking in the UK economy, I'd be very interested to see it."
The Unite general secretary, Len McCluskey, accused the government of being "in thrall" to the business lobby and the right wing of the Conservative party. "With every day they remain in office, this country becomes a more unhappy and unequal place," he said. “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."