Former defence secretary Liam Fox is leading backbench Tory demands for Chancellor George Osborne to cut taxes on business.
In his first major political intervention since he was forced to resign last year, Dr Fox urged Mr Osborne to use next month’s budget to cut employers’ national insurance contributions.
Writing in the Financial Times, he also called for sweeping deregulation of the labour market, making it easier for firms to hire and fire staff.
“The budget must confidently assert that capitalism works,” he said.
His call came as the CBI urged the chancellor to give a £500m budget boost to business through a series of changes to the tax system aimed at stimulating growth.
Dr Fox argued that cuts to business tax should take precedence over Liberal Democrat calls for the government to raise personal tax allowances, taking more people on low incomes out of tax altogether.
“Although the coalition agreement may require the Chancellor to raise personal tax allowances (which should be paid for with spending restraint not new taxes) he should use the proceeds of spending reductions to cut employers’ national insurance contributions across the board,” he said.
“If that is deemed impossible, he should consider targeting such tax cuts on the employment of 16 to 24-year-olds, making them more attractive to employers.”
Dr Fox was last year accused by an investigation led by cabinet secretary Sir Gus O’Donnell accused of a “failure of judgement” and of breaching the ministerial code, regarding his close ties with Adam Werrity.
His “close and visible association” with Mr Werritty and his misleading use of business cards describing himself as Dr Fox’s adviser gave the impression that Mr Werritty spoke on behalf of the government, said Sir Gus.
He added that Dr Fox had “an inappropriate blurring of lines between official and personal relationships”. This was “not appropriate and not acceptable”.