Prominent members of Israel's ruling Likud party have proposed the annexation of part of the West Bank as the battle for rightwing votes intensifies before the general election in less than three weeks.

Government minister Yuli Edelstein told a conference in Jerusalem that the lack of Israeli sovereignty over Area C – the 60% of the West Bank under full Israeli military control in which all settlements are situated – "strengthens the international community's demand for a withdrawal to the pre-1967 lines".

Ze'ev Elkin, the chairman of the governing coalition, said Israel should adopt a "salami" approach to annexation: "We will try to apply sovereignty over as much as we can at any given moment."

A third Likud member, extreme rightwing settler Moshe Feiglin, proposed that the state of Israel should pay Palestinian families to leave the West Bank, using funds earmarked for security measures. "We can give every family in Judea and Samaria [the biblical term for the West Bank] $500,000 [£300,000] to encourage [them] to emigrate … This is the perfect solution for us," he said.

The comments, delivered at a conference organised by a radical settlers' organisation, "removed the masks" of the Likud-Beiteinu electoral alliance, said Tzipi Livni, former foreign minister and leader of a new centrist party, Hatnua. "Likud-Beiteinu is extreme right wing, and will lead to the destruction of Zionism and the establishment of a binational state," she said. The right "will make Israel into a boycotted, isolated and ostracised state".

The Likud-Beiteinu alliance, led by the prime minister, Binyamin Netanyahu, and Avigdor Lieberman, who recently resigned as foreign minister prior to a trial on fraud and breach-of-trust charges, is facing an unexpectedly strong challenge from Jewish Home, a party further to the right led by Netanyahu's former chief of staff Naftali Bennett.

A series of polls over recent weeks has indicated that Jewish Home is gaining votes at the expense of Likud-Beiteinu. The latest survey,published in Haaretz on Wednesday, gave the alliance 34 out of 120 parliamentary seats, compared with 42 currently held by its two constituent parties. Jewish Home, whose policy is to annex Area C of the West Bank, is predicted to take 14 seats, and could overtake Labor to become the second-biggest party.

Despite Likud-Beiteinu's drop in the polls, Netanyahu is still on course to form the next coalition government, but the strength of Jewish Home's vote is likely to give it leverage in the coalition horse-trading after the election on 22 January.

Many observers believe a string of recent announcements by Netanyahu about an expansion of settlements in the West Bank and East Jerusalem is an attempt to contain the loss of votes to Jewish Home.

Following the comments on annexation of the West Bank, Likud sources told the Israeli newspaper Yedioth Ahronoth: "These extreme statements are actually good for Netanyahu, electorally. They serve him in the battle for the rightwing votes that have shifted from the Likud to Jewish Home."

Bennett, 40, who served in the elite Sayeret Matkal unit of the Israeli military and is still a reservist, recently said he would go to jail rather than obey orders to evacuate settlements or outposts in the West Bank.

"If I receive an order to evict a Jew from his house and expel him, personally my conscience wouldn't allow it," he said. "Expelling people from this land is a terrible thing. I will work with all my soul and all my might not to let this happen."

However, he stopped short of encouraging soldiers to disobey orders.

According to the Haaretz poll, the rightwing bloc of parties is likely to win 67 seats in the election, while the centre-left bloc, including Israeli-Arab parties, is on course to take 53 seats.