Deputy prime minister says there is no evidence that allowing staff to be fired at will would be a good way of creating jobs

Nick Clegg has made a significant intervention in the row over proposals for "no fault dismissal", which are awaiting the results of a government consultation.

Speaking on Tuesday at a conference in London, the deputy prime minister appeared to hammer a decisive nail in the coffin of the plan, which has already been dismissed as "bonkers" by the Liberal Democrat business secretary Vince Cable.

Conservatives have also indicated that Downing Street will drop the policy, which would allow employers to fire workers at will. However, some Tories are pushing strongly for the measure, saying it will encourage employers to start hiring.

"I don't support [the proposal] and I never have, for the simple reason I have not seen any evidence that creating industrial-level insecurity for workers is a good way of creating new jobs," said Clegg.

The Lib Dem leader said he would take seriously any evidence that emerged from the consultation, due to end in June, but continued to sound sceptical. "So far there just is no evidence," he added.

On Tuesday, Cable all but confirmed that the controversial proposals were to be ditched by the government. As Tory sources said that David Cameron was preparing to shelve the plans, Cable attacked the proposals from the Tory party donor Adrian Beecroft.

"British workers are very co-operative and they are very flexible," the business secretary told the BBC. "So we don't need to scare the wits out of workers with threats to dismiss them. It is completely the wrong approach."

It is understood No 10 is planning to ditch the proposal when a "call for evidence" ends next month on Beecroft's most controversial recommendation – that employers should be allowed to sack unproductive staff without explanation in a scheme known as no fault dismissal.

Under a compromise between the coalition parties, Cable agreed to a six-month "call for evidence" last year to see whether companies employing fewer than 10 people favoured the idea. One source said: "The no fault dismissal idea is unlikely to see the light. It will be rather a relief when we never have to talk about it again."

Cable spoke out after Mark Prisk, the Conservative business minister, was forced to answer an emergency question in the Commons granted to the shadow business secretary Chuka Umunna. John Bercow, the Speaker, summoned Prisk after a copy of the report was leaked to the Daily Telegraph, and the Sunday Telegraph reported that Downing Street was preparing to endorse the Beecroft report.