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No fault dismissal plans face growing opposition

Challenges to the proposal come from Cable, Heseltine, and potentially the courts.

What will kickstart growth in the British economy? Well, apparently making it easier to sack people, if the government's policy moves are anything to go by. But plans to allow no fault dismissal for small companies appears to be a step too far, causing considerable discomfort both within the coalition and amongst the public.

Now, the Business Secretary Vince Cable has said he will work with Lord Heseltine, the Conservative former deputy prime minister, to block the bill.

The plans, proposed in a report by venture capitalist Adam Beecroft, would make it easier for firms to sack people without explanation, on the basis that this will encourage them to hire more people. While the Liberal Democrats are reportedly completely opposed to the idea, under strong pressure from Downing Street, Cable was forced to agree to a consultation on introducing the rule for small companies (of ten people or fewer).

While limiting the measure to micro-companies waters down Beecroft's original proposal, the logic is still flawed -- as self-made millionaire Heseltine argued on the Politics Show on Sunday:

When you start talking about enabling people to sack people, well, I have two observations. The first is this, the sort of companies that I understand don't sit there saying, "by golly, we've got to be able to get rid of people, so therefore we mustn't invest because the risks are too high". If you're really an enterprising business, you invest because you think it's going to be a success. You may have to readjust but you can do that, as quite obviously is happening right through industry as significant numbers of people are being laid off.

This intervention from Heseltine, a Tory party grandee who is currently advising Cameron and Nick Clegg on growth, adds weight to the argument and prevents it from being another Lib Dem/Tory spat -- as Cable has clearly noted. At the launch of the reform to employment law, the Business Secretary said:

There were some very helpful comments from Lord Heseltine, one of my very distinguished conservative predecessors, you know warning about the dangers of creating a fear of dismissal and I'm very responsive to the advice I get from him.

Meanwhile, the Times (£) reports today that yet another challenge to the bill could come through the courts. According to senior lawyers, women are more likely to work for small companies, so there is a case that this would amount to indirect gender discrimination.

While it is clear that this bill will not have an easy passage, it is worth remembering that although this is one of the most extreme, it is not the only move against workers' rights. A series of deregulatory measures are not being consulted on, as they have already been accepted by government. These include increasing the qualifying period for unfair dismissals from one year of employment to two, and requiring those who take their employer to industrial tribunals to pay an initial deposit of £250, and a further £1,000 is a hearing is granted.

It is difficult to see how, in this unstable economic climate, further eroding job security will have any beneficial effect.