Cable says sacking plan is wrong

The “compensated no-fault dismissal” scheme is part of a Government report by venture capitalist Adrian Beecrofts.

Mr Cable dismissed the idea as “complete nonsense”, while close Liberal Democrat ally Lord Oakeshott denounced it as “the economics of the madhouse”, saying it would be “bonkers” to undermine demand in the economy by making workers fear for their jobs.

Tory MPs spoke out in favour of the change, which they said would encourage businesses to hire workers by removing the worry that they may not be able to afford to get rid of them if they do not perform.

But Mr Cable made clear he regarded the hire-and-fire plan as “counter-productive”.

He said: “At a time when workers are proving to be flexible in difficult economic conditions, it would almost certainly be counter-productive to increase fear of dismissal.

“In my daily conversations with businesses, this has very rarely been raised with me as a barrier to growth. Businesses are much more concerned about access to finance or weak demand than they are about this issue.”

The report, published ahead of schedule after being leaked, follows David Cameron’s call for British industry to be freed from “red tape”.