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Liam Fox urges public spending freeze in speech Budget 2013: Liam Fox urges spending freeze and tax cuts
(about 1 hour later)
  
Former cabinet minister Liam Fox has called on the government to freeze the level of public spending for five years and spend the money saved on cutting taxes and the deficit. Former cabinet minister Liam Fox has urged the government to freeze public spending for five years and use the savings to cut taxes and the deficit.
The ex-defence secretary said such a change in economic policy is needed. Stamp duty and taxes on bank account interest could be reduced to help create a "savings investment culture", the ex-defence secretary said.
He argued it would change the "terms of trade in the political debate".He argued it would change the "terms of trade in the political debate".
Ahead of the Budget, Mr Fox has become the latest senior coalition party figure to urge the government to radically change its economic strategy. But Downing Street said David Cameron would "stick to the course" set out on economic strategy.
His proposed freeze of all public spending - as against the current freeze for Whitehall departmental budgets - would cut spending in real terms by 2.5% a year. The current plan is for a 1% annual cut. And Lib Dem Business Secretary Vince Cable said Mr Fox's plan represented a "jihad" against public spending.
Mr Fox has calculated that this would save a total of £345bn that could be used to cut taxes - starting with the temporary abolition of capital gains tax - at the same time as cutting the deficit. Ahead of the Budget, Mr Fox is the latest of several senior figures among the coalition parties to question economic strategy, including Mr Cable, who has called for more investment in infrastructure projects to boost growth.
'Smart investment' 'Over-regulated'
In a speech he urged an end to the ring-fencing of budgets for the NHS, schools and international development and as well as of universal benefits such as the pensioners' winter fuel allowance. Mr Fox's proposed freeze on all public spending - as against the current freeze for Whitehall departmental budgets - would cut spending in real terms by 2.5% a year. The current plan is for a 1% annual cut.
But football's Premier League and several leading companies, including GlaxoSmithKline and BP, have written to the Financial Times, urging the government to honour its pledge to put 0.7% of the UK's GDP into overseas aid. Mr Fox has calculated that his scheme would save £345bn which could be used to cut taxes, starting with the temporary abolition of capital gains tax, at the same time as reducing the deficit.
In a speech in central London, he said: "We all know that we live in a competitive global economy but how many people are aware that the global economy has grown by 55% in real terms from $32.2 trillion (£21.6 trillion) in 2000 to $69.7 trillion (£46.8 trillion) in 2012?
"The problem is that we are not sharing in this growth because we are over-taxed, over-regulated and we spend and borrow too much. I believe that we should aim to freeze public spending for at least three years and probably more."
Mr Fox suggested the government could scrap taxation on cash savings in banks, which would "directly benefit pensioners... paving the way for the means testing of the winter fuel allowance and other benefits enjoyed by pensioners who have personal wealth that should leave them well clear of the safety net of the welfare state".
This would help many hit by low interest rates in recent years, he argued.
'Iniquity'
Access to housing benefit could be restricted for the under-25s, balanced by a stamp duty discount for those under the age of 30, Mr Fox said.
He called for a "savings investment culture" and an end to "the iniquity of the state taxing the same income on multiple occasions".
Mr Fox urged an end to the ring-fencing of budgets for the NHS, schools and international development.
But football's Premier League and several leading companies, including GlaxoSmithKline and BP, have written to the Financial Times, urging the government to honour its pledge to put 0.7% of the UK's GDP into overseas aid.
The letter states that this is "not only the right thing to do, but is a smart investment".The letter states that this is "not only the right thing to do, but is a smart investment".
BBC political editor Nick Robinson said Mr Fox, a leading representative of the Tory right, was matching one part of the call made last week by Liberal Democrat Business Secretary Vince Cable to think the previously unthinkable on public spending. However, on BBC Radio 4's Today programme, Mr Cable warned that serious damage would be done to industry if only certain government departments were subject to spending cuts.
He said there was no prospect of the chancellor adopting such policy in the Budget but the speech was part of the battle being waged increasingly in public about the pitch the Conservatives should make at the next election if they are to avoid defeat. 'Be quiet'
Tory backbencher Eleanor Laing told BBC Radio 4's Today: "There are some people who are clearly positioning for what might happen after the next general election and there are some people who are openly talking about challenges to the leadership
"They should all be quiet. They should all get their heads down and work together as one Conservative Party for the good of the country."
On the same programme Mr Cable warned that serious damage would be done to industry if only certain government departments were subject to spending cuts.
He questioned whether areas such as health and international development should be protected, saying that he had gone along with 80% of spending being ring-fenced for this parliament, but did not think it would be right "in the long term".He questioned whether areas such as health and international development should be protected, saying that he had gone along with 80% of spending being ring-fenced for this parliament, but did not think it would be right "in the long term".
Mr Cable, who repeated at the weekend his call for more capital spending and for pensioners' benefits to be taxed, said he might back a Labour motion in favour of a "mansion tax" when it is debated in the Commons on Tuesday. Mr Cable, who repeated his weekend call for more capital spending and for pensioners' benefits to be taxed, said he might back a Labour motion in favour of a "mansion tax" when it is debated in the Commons on Tuesday.
But he described Mr Fox's demands as a kind of "jihad" against public spending, saying: "I would simply say that there are certain forms of public expenditure - apprenticeships is a good example, science is another and university training is another - where government expenditure actually improves the economy.
"It doesn't drain the economy at all. It actually necessary for our future growth and our future success."
Tory backbencher Eleanor Laing told Today: "There are some people who are clearly positioning for what might happen after the next general election and there are some people who are openly talking about challenges to the leadership.
"They should all be quiet. They should all get their heads down and work together as one Conservative Party for the good of the country."
'Kick-start'
Chancellor George Osborne's Budget - his fourth - is just over a week away, on 20 March. Speaking in an interview at the at the World Economic Forum summit in Davos in January, he said deficit reduction was necessary to show the UK could "pay its way in the world".Chancellor George Osborne's Budget - his fourth - is just over a week away, on 20 March. Speaking in an interview at the at the World Economic Forum summit in Davos in January, he said deficit reduction was necessary to show the UK could "pay its way in the world".
Business groups have pressed him to take "radical" measures to boost economic growth and lift confidence across industry.Business groups have pressed him to take "radical" measures to boost economic growth and lift confidence across industry.
The CBI said the Budget should be fiscally neutral but said £2.2bn should be shifted from current spending to high-growth areas, including £1.25bn on building 50,000 affordable homes.The CBI said the Budget should be fiscally neutral but said £2.2bn should be shifted from current spending to high-growth areas, including £1.25bn on building 50,000 affordable homes.
Director general John Cridland said: "The government must stick to its fiscal plan but now is the time to kick-start confidence."Director general John Cridland said: "The government must stick to its fiscal plan but now is the time to kick-start confidence."
The British Chambers of Commerce said it continued to support deficit reduction but it warned this might become impossible without sustained economic growth.The British Chambers of Commerce said it continued to support deficit reduction but it warned this might become impossible without sustained economic growth.