At a time of high unemployment, the British government should do all it can to encourage businesses to create jobs. And yet, the labour market remains over-regulated. Excessive employment protection places a particularly heavy burden on small businesses, which would like to employ workers but are afraid of the consequences if things go wrong.

George Osborne, chancellor of the exchequer, has announced a new type of contract that should address some of these fears. Companies will be allowed to give new hires between ￡2,000 and ￡50,000 of shares that would be exempt from capital gains tax when sold. In return, the workers would renounce several rights, including the ability to claim unfair dismissal after two years in a job.

Mr Osborne’s aim may be to make life easier for start-ups. True, these companies yearn for greater flexibility because their future is more uncertain. But the chancellor should not expect them to sign up en masse. Owners may be reluctant to dilute their equity by giving out shares to people who they may then want to fire.