The Liberal Democrats have called for the Department of Trade and Industry (DTI) to be abolished and its workload distributed to other Government agencies.
Dr Vincent Cable, the shadow trade and industry minister, accused the DTI of creating unnecessary bureaucracy and said it no longer had a place in modern business.
"The DTI should be wound up because it doesn't perform a function. It has no real role anymore and only exists as a contact point for industry without delivering what [industry] actually wants - which is less regulation," he argued.
In an exclusive interview with Personnel Today, Cable said the DTI actually adds to the regulatory burden with over-complex legislation and a multitude of red tape, often pushing government administration onto employers.
"The Government wants companies to do its administration free of charge through things like family tax credits and student loans collection," he said.
His solution would be to split the DTI's duties between other government departments, such as Work and Pensions and Education and Skills, and to set-up a new 'red tape busting' agency.
Cable also claims the Government is mishandling EU legislation, comparing the ease with which The Netherlands dealt with working time rules to the UK's 80-page document.
He went on to criticise the DTI's decision in October last year to appoint US management guru Michael Porter to produce a report on productivity in the UK, claiming he was already something of a cliché in the private sector six years ago.
He also rejects trade and industry secretary Patricia Hewitt's criticism of managers as a key reason for the UK's poor productivity compared to its major competitors. Instead of poor management, Cable blames the UK's disappointing productivity on ageing capital stock and a chronic lack of investment in education.
By Ross Wigham