Former defence secretary Dr Liam Fox, who is emerging as an ‘outrider’ for Chancellor George Osborne, is now heading up new economic reforms to try to recover the country's finances before we falter into a crisis. Other senior figures are asking for cut to welfare, shelving plans to force companies into organising pension schemes. Furthermore, it has been reported that the double dip has blown a £170bn 'black hole' into Osborne's recent Budget.
A bitter power struggle is now predicted within the Coalition over the economy. There has already been allegation that Lib Dems suspect the Chancellor of using his allies to increase the pressure on the Government to change course.
Dr Fox told the Daily Mail that the figures showing a 0.2 per cent contraction of the economy in the first three months of the year following a 0.3 per cent slump in the last quarter, mean urgent action is needed.
‘We should be seeing bigger reductions in public expenditure to reduce taxes on employers and get young people into work,’ he said.
‘Savings must be used to make it cheaper to employ people. We need to get economic activity up.’
In recent months, the Coalition has been riven by behind-the-scenes rows over proposals to revive the economy by tearing up workplace rules and limiting the employment tribunal bonanza costing firms £1billion a year.
The Chancellor has announced that workers must be in a job for two years, rather than the current 12 months, before they can claim unfair dismissal, and proposed fees for tribunal cases to deter vexatious claims.
But a report by Conservative donor and venture capitalist Adrian Beecroft, commissioned by the Prime Minister’s recently departed policy guru Steve Hilton, recommended that the Treasury go far further.
It suggested workplace rights are stifling enterprise, allowing employees to ‘coast along’ and deterring businesses from taking on staff in case they prove unsuitable but impossible to sack.
Unfair dismissal laws, it said, should be scrapped and workers instead offered a pay-off calculated using the length of time they have been in the job, a system which operates in some parts of Europe.
Lib Dems, led by Business Secretary Vince Cable, reacted with horror, insisting a dilution of workers’ rights on such a scale is unthinkable and arguing that it would hit consumer confidence by making workers more worried about their job security.
Mr Cable grudgingly agreed to hold a consultation on whether to implement reforms for firms with ten or fewer employees, but is said to be reluctant to proceed.
Former Tory leadership contender David Davis said he agreed with Dr Fox that the Treasury should kickstart economic growth.
He said Mr Osborne ‘must not flinch’ on his austerity measures, but needed to take emergency steps to boost the recovery.
‘Without growth, deficit reduction becomes a politically impossible task,’ Mr Davis said.
Growth: Mayor of London Boris Johnson said spending on transport infrastructure was key to boosting the economy
‘We need major deregulation for small companies, particularly those with between five to 50 employees, which are the real job creators.
'We have to make it much easier for them to take on employees and reduce the risk.
‘We need tax reductions in several areas – particularly in National Insurance, which is basically a tax on jobs.
'We need to bring down the costs of energy by abandoning some of these green ideas that are pushing up prices and driving jobs abroad.’
Another Tory ‘big beast’, London Mayor Boris Johnson, said spending on infrastructure such as roads and railway lines was key to promoting growth.
‘This is common sense for the UK economy,’ he said in an interview with The House magazine.
This week it emerged that government departments are being asked to identify £16billion in further savings which could be made if needed to pay for new policies or spending demands.
Ministers were told by the Treasury that they must identify 5 per cent more of their budgets which could be slashed as part of ‘contingency’ planning.
The Chancellor signalled in last month’s Budget that he was considering billions of pounds of further welfare cuts – with ministers considering regionalising benefits to enable a lower benefit cap to be introduced outside London.
SOURCE: DAILY MAIL