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Taken together, these two factors deter employers from recruiting new staff and hinder businesses from developing the higher productivity on which sustainable growth depends. And far from making things better, the past decade has seen a steady increase in the level and complexity of employment law. Beecroft’s report would have reduced the amount of regulation in a comprehensive and principled way – and, by doing so, would have introduced new certainty and confidence.

That confidence matters, because businesses are far too short of it at present. British businesses collectively hold about £750 billion in cash. To reach its fiscal targets, the Government needs a steep rise in investment – the rate at which they spend that money. Speaking last week, David Cameron said that he leads “a Government resolutely committed to being on the side of enterprise, entrepreneurs, businesses large and small, wealth creation of all types and descriptions”. To many, that is clearly not the case. A full-blooded Beecroft Review would reassure such people, just as a pale imitation would reinforce their concerns.

Taking a step back, today’s news adds to a sense of unease about what the Coalition is actually trying to achieve. This is a Government that claims to have deregulation at its heart, fired by a Tory belief in free markets and a Lib Dem distrust of central direction. It has a policy to stop the growth in regulation (so-called “One In, One Out”) and to reduce the stock of it (the “Red Tape Challenge”). In general, it is supposed to have rejected an old approach based on more debt and higher state spending, and to be looking for real growth via higher productivity.

Recently, however, we have seen a weakening in the Government’s position. Last autumn, the Chancellor pushed his deficit reduction target from the end of this Parliament into the middle of the next. Last week, the Prime Minister hinted at new borrowing to finance infrastructure – exactly the way that Gordon Brown justified his record spending increases. At the same time, the retreat over the NHS has cast a long shadow over the Coalition’s commitment to public-service reform, and its changes to the planning system are taking much longer than expected.

In recent days, the Prime Minister has urged his European counterparts to take action by saying that the eurozone is “at a crossroads”. He should hold his own Government to account in the same terms. Given the challenges facing the country, it is surprising that he needed an independent report to propose changes to employment law at all. Now that he has it, it will be remarkable if he does not implement it – and then keep up the pressure.

Mr Cameron is right that the country’s basic economic problems are due to poor productivity rather than lack of government action. He will know, however, that the contrary view is growing in popularity (and, indeed, capable of winning elections in other countries). The more his policies focus rigorously and consistently on improving the efficiency of the economy, the more successful they will be.

Andrew Haldenby is director of the independent think tank Reform