Former defence secretary Liam Fox today challenged David Cameron to take on his Liberal Democrat coalition partners and push through reforms making it easier for employers to fire and hire staff.

His comments come as Tories agonise over fears the government is perceived as anti-business, and George Osborne mulls over his 2012 Budget, due on the 21st of March.

In his first major television interview since he was forced to quit the Cabinet four months ago, Dr Fox said the Prime Minister needed to remember Tory MPs made up the majority of the coalition and they wanted to see their agenda implemented in full.

However he was very coy about whether he might make a return to frontline politics.

Fox warned that unless Mr Cameron was prepared to override the Lib Dems over the issue of labour market reforms, he would be consigning Britain to a future of "managed decline".

"The objections inside government and outside government - but, yes, including some of the arguments put forward by our coalition partners - they need to be taken on and overridden otherwise we become about managed decline for Britain," he told BBC1's Sunday Politics.

"The whole Government needs to understand the importance of this. This case is vital to our national economic survival."

Dr Fox said Mr Cameron needed to reassure his own political base that he understood their concerns in the face of "a great deal of public lobbying" by the Lib Dems for their agenda.

"The Lib Dems have certainly been quite vocal in saying what they want. I don't think it is necessarily the best way to be running a coalition," he said.

"Certainly amongst Conservative activists there is the perception that the Liberal Democrats are far more free to voice what they want than some of the Conservatives are.

"The Conservatives, who make up five-sixths of the coalition - not half the coalition - need to be also reassured that the Conservative agenda is being fully implemented."

Although the proposals to reform employment laws were outlined by Lib Dem business secretary Vince Cable, many of his party's backbenchers are uneasy about the planned changes.

Lib Dem deputy leader Simon Hughes made clear that his party would not be silenced and would continue to fight their corner in the coalition.

"We are a coalition. Why? Because no party had a majority at the last election," he told the Sunday Politics. "The Liberal Democrats are entitled to put their case to the country and we do that."

He said the priority in the Budget should be to raise personal tax allowances, in line with the coalition agreement.

"We are determined that the ordinary households get a better deal and are paying less tax so they have more to spend," he said.

"We want the normal family, the millions of people - not the few people with high incomes - to have more in their pockets. That is why we are making the case to go further and faster lifting the personal allowance up to £10,000.

"I don't think reducing the top rate is the right thing to do now."