Workers are to be given a chance to receive shares in their company in return for giving up some of their employment rights, Chancellor George Osborne has announced.
The voluntary employee-ownership scheme was unveiled at the Conservative conference in Birmingham as part of an "enterprise strategy" which Mr Osborne said was needed to save the UK from "sinking" in the face of competition from emerging economies in the globalised world.
It was welcomed by venture capitalist Adrian Beecroft - author of a controversial review of employment law which recommended the right for bosses to sack at will - as "a real shot in the arm for Britain's entrepreneurs".
And Simon Walker, director-general of the Institute of Directors, said it had "the potential to reduce the employment law burden on companies and make employees better off at the same time".
But unions condemned the proposal, which will see employees give up their rights to statutory redundancy pay and protection from unfair dismissal as well as the ability to request flexible working, in return for between £2,000 and £50,000 worth of shares, which would be exempt from capital gains tax when sold.
GMB boss Paul Kenny said that slashing rights "won't create jobs and won't create growth", while TUC general secretary Brendan Barber said that few firms would choose to "tie themselves up in the tangle of red tape necessary to trigger these exemptions".
The Treasury aims to fast-track the scheme through Parliament for introduction in April 2013, and expects hundreds of thousands of employees to sign up within the next few years, at a cost of around £100 million annually in lost capital gains tax payments.
Meanwhile, the scene was set for an autumn of wrangling over cuts within the coalition Government, as Mr Osborne confirmed his intention to slice a further £10 billion from welfare by 2016/17, on top of the £18 billion already announced.
Liberal Democrat Deputy Prime Minister Nick Clegg said the Chancellor was setting out the Conservative stall for a negotiation over the months to come.
"Nothing in detail has been agreed on further cuts or savings to welfare," Mr Clegg told the BBC. "You need to have a combination of... asking people at the top to make a greater contribution and also the contribution from public spending cuts. Exactly how you strike the balance between the two is exactly the kind of thing that the Conservatives and the Liberal Democrats will be thrashing out within Government in the months ahead."