Sources said the plans for parachute pay had not been formally put to ministers for approval. But Dr Fox has made clear that he will not authorise any cut that affects front-line troops.
"No submission has been put before ministers, but as it stands this idea will not be accepted," a source said. "It won't be implemented."
Friends of Dr Fox said he was furious that his department had allowed morale on the front line to be undermined by "an idea that was not properly thought through".
The MoD is reviewing all forms of "specialist pay" for Armed Forces personnel, in an effort to trim �300 million from the military pay bill.
The Defence Secretary believes reform of specialist pay is essential to balance the defence budget, but he has told his officials to be "more sensitive" about it. A source said: "We need to have another think."
It is understood that pay reforms will try to distinguish between members of the Armed Forces with specialist skills who regularly use them, and those whose current roles do not require such skills.
Under current rules, specialist pay, including supplements for flying combat jets and serving aboard a submarine, is paid to personnel for up to six years after they last carried such front-line activities.
The source said: "You wouldn't expect to pay specialist pay to someone with a desk job in the MoD building in Whitehall. We have to look at lowering the bill over time, but we shouldn't do it by penalising those who quite rightly expect to be rewarded for the skills they have acquired and use on behalf of Her Majesty's Government."
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