George Osborne should introduce emergency tax breaks paid for by welfare cuts to "shock" the UK economy back to life, according to the Conservative MP Liam Fox.
Fox called for capital gains tax, currently set at 28%, to be suspended and reintroduced after three years at 10%. These should be paid for by benefit cuts, said Fox, who resigned from the Ministry of Defence last year after questions were asked about his working relationship with his friend and self-styled adviser Adam Werritty.
The move would "ricochet around the world" and signal that Britain was open for business, said Fox in an interview with the Times. He also warned that deficit reduction alone "won't be enough" and that the Tories risked losing the next election unless they did more to stimulate economic growth.
Fox said other measures needed to make Britain more competitive included making it easier for bosses to fire workers.
"We should simply throw down the gauntlet and say that we are cutting our taxes, we are making Britain more competitive, we are going to reform our labour laws, make hiring and firing easier and do what we know works because it's worked before," he said.
Fox made his intervention the day after David Cameron was repeatedly challenged by the Labour leader, Ed Miliband, to promise that his own government's target to ensure debt is falling as a proportion of GDP by the end of the current parliament in 2015-16 would be met.
On ways to pay for suspending capital gains tax, Fox said: "We need to have a look at everything that we have in terms of paternity leave and all the other things that are there."
He added: "With the sort of economic problems that we face in the UK it is irrational and unreasonable to expect that those in work should keep all their social benefits and workplace benefits should be protected, at the cost of making the next generation unemployed. That is not a sustainable generational compact."
Fox, who earlier this week helped launch Conservative Voice, a centre-right group set up with the aim of ensuring the prime minister does not lose sight of Tory values, also said the government should decide "as quickly as we can" on new airport capacity in the south-east and warned of a Tory revolt if ministers tried to look for a cheaper alternative to Trident.
Asked whether Cameron was the right man to lead the party into the next election, Fox said he believed Cameron was "capable of delivering that", but said that the result would depend on the government achieving economic growth.
"If we don't take some risks we'll not get growth and if we don't get growth, we'll not get re-election," he said.
