A leaked government report has proposed that companies should be able to dismiss unproductive workers without fear of being dragged through the courts.

The report, commissioned by Prime Minister David Cameron and written by venture capitalist Adrian Beecroft, suggests that the right to claim unfair dismissal should be scrapped in order to boost economic growth in companies.

The proposals are expected to have some support from Downing Street but fervent opposition from the Liberal Democrats who say that it will be "swiftly swept away".

A draft of the proposals, seen by the Daily Telegraph, said that the rules on unfair dismissal "both make it difficult to prove that someone deserves to be dismissed, and demand a process for doing so which is so lengthy and complex that it is hard to implement. This makes it too easy for employees to claim they have been unfairly treated and to gain significant compensation."

It says the current rules encourage public bodies to "accept inefficiency that they would not tolerate if dismissal of unsatisfactory employees was easier" and that 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."

Rules preventing dismissal on the grounds of race, gender or sexuality will remain in place.