It says that British workers should be banned from claiming unfair dismissal so that firms and public sector bodies can find more capable replacements.

Under current regulations, workers are allowed to “coast along” and employers are left fearful of expanding because new staff may prove “unknown quantities” who are impossible to sack, the report says.

The radical recommendation to scrap the concept of unfair dismissal is made by Adrian Beecroft, a venture capitalist, in a report commissioned by David Cameron.

The report is understood to have the support of both the Chancellor and Downing St, although the proposals are likely to meet with strong opposition from some Liberal Democrats and trade unions.