Top Tory in challenge on austerity (From Salisbury Journal)

Top Tory in challenge on austerity

3:39am Monday 11th March 2013 in National News © Press Association 2013

Senior Conservative Liam Fox is expected to bring Tory austerity divisions to the fore with a direct call for the Chancellor to drop protected spending for schools, aid and the NHS.

The former defence secretary will also urge a wholesale rethink of earnings and savings taxation, including a capital gains tax holiday, to breathe life into the ailing economy, according to The Times.

His intervention, which comes less than a fortnight before George Osborne's Budget, echoes concerns raised by many of the party's backbenchers over the way funding has been ring-fenced for three Whitehall departments while others, like the Ministry of Defence, have been hit hard.

According to The Times, Dr Fox will say: "I believe that in leaving money in people's pockets, economic activity will follow. People will buy houses, invest for their future or just go shopping. Whichever is the case, it's creating a society that it sustainable for the future in the way that our current - welfare dependent and debt-ridden - economy is not. We should gradually move towards the reduction - or even abolition - of the taxes where the state not only taxes the same money on multiple occasions but discourages the very behaviour that would lead to a more responsible society."

It comes after a weekend of dire poll ratings for the party and increasing pressure on David Cameron's leadership. Conservative MP Sarah Wollaston warned the Prime Minister he was "running out of time" to tackle problems with his "posh" top team. In a series of tweets she wrote: "Inner circle still look far too posh, male & white & Cameron is running out of time to fix it. "I consider myself a Cameron loyalist; he is the best person for the job but should listen to critical friends. I am a Cameron loyalist but he needs to change his inner circle which just seems to be telling him what he wants to hear."

Home Secretary Theresa May fuelled speculation that she harbours future leadership ambitions after giving a detailed speech that roved across a number of government briefs and included plenty of proposals to appeal to the right of the party.

Baroness Warsi said the Prime Minister commands the support of "large parts" of his party and insisted she, and Mrs May, had "full confidence" in his leadership. "He is doing a very difficult job in very difficult circumstances and he commands the support of large parts of his party," the Foreign Office Minister told Sky News.

Lib Dem Business Secretary Vince Cable also criticised ring-fencing - warning that it led to an "unbalanced" approach to public spending. "It means that all future pressures then come on things like the Army, the police, local government, skills and universities. So you get a very unbalanced approach to public spending," he told the BBC Radio 4 Today programme. "I went along with the overall ring-fencing approach in this parliament - as part of the coalition we have had to work as a team. But I think as a long-term approach to government spending it isn't very sensible."

Responding to reports of Dr Fox's speech, Mr Cameron's official spokesman said: "The Government receives many Budget representations. The Prime Minister has set out the approach that the Government will be taking in his speech last week, which is best summarised as 'sticking to the course'. There will be a 2015/16 budget-setting exercise later this year consistent with the fiscal plans we have set out." Mr Cameron's view remains that spending on the NHS, schools and international aid should be "ring-fenced" from cuts, and that defence equipment budgets should enjoy a real-terms increase of 1% a year from 2015/16 onwards, said the spokesman.

Asked whether Mr Cameron expects Government ministers to vote against Labour proposals for a mansion tax in the House of Commons on Tuesday, the spokesman said: "The Prime Minister will expect, as always, Government ministers to support the Government in all votes. The Prime Minister's view (on a mansion tax) is the same as the Chancellor's, which he set out at the end of last year. The Chancellor said then that it was intrusive, expensive to levy and raises little and that the temptation for future chancellors to bring ever more homes into its net would be irresistible."