* Britain and Spain in new diplomatic spat over Gibraltar
* Spain mulls border fees, tax probes and airspace ban
* Cameron concerned; Gibraltar attacks "politics of madness"
* Britain says won't compromise on territory's sovereignty (Adds Hague comments)
By Peter Griffiths
LONDON, Aug 5 (Reuters) - Gibraltar's top politician accused Spain on Monday of "sabre-rattling" and behaving like North Korea by saying it could impose border fees and airspace controls on the British territory whose sovereignty it disputes.
British Prime Minister David Cameron was "seriously concerned" about the situation and has demanded an explanation from Madrid about the proposals, his spokesman said.
The rocky outcrop at the southern tip of the Iberian peninsula, which has a population of 30,000 and relies on tourism, the gambling industry and offshore banking, has long been a source of friction between the two countries, despite being NATO allies and European Union partners.
The row over sovereignty - which Britain said on Monday it would not compromise on - flared up last month when Gibraltar's boats dumped concrete blocks into the sea to create a reef for fish at the mouth of the Mediterranean.
Spain said the reef would block its fishing boats and hit back with tougher border checks, causing delays that forced tourists to wait for six hours in the blazing heat.
Foreign Minister Jose Manuel Garcia-Margallo signalled the conservative government would take a tougher stance, saying on Sunday "the party is over", an apparent reference to years of softer Gibraltar policy under the previous Socialist government.
Spain is considering a new 50 euro ($66.42) fee for people crossing the border, tax investigations into Gibraltarians who have property in Spain and a ban on planes using its airspace to reach the territory's airport, he told a paper.
Gibraltar's Chief Minister Fabian Picardo said the proposals were the "politics of madness" and that "hell will freeze over" before it removes the reef from the waters off a territory ceded to Britain in 1713.
"He is sabre-rattling à la North Korea. It almost makes one feel as if you are listening to the politics of Franco in the 1950s and 60s," Picardo told Sky News, referring to the fascist dictator who ruled Spain from 1936 to 1975 and wanted to regain Gibraltar.
In contrast to the chief minister's colourful language, Foreign Secretary William Hague sought to calm simmering tensions during a phone conversation with Picardo.
"We agreed that it was important to respond to actions, not rhetoric, and I confirmed that we would continue to raise our concerns with Spain," Hague said in a statement.
Cameron's spokesman said the Spanish government had not raised its proposals for Gibraltar with Britain. "We are seeking an explanation from them regarding the reports that they might target Gibraltar with further measures," he said.
William Dartmouth, a European Parliament member for the anti-EU UK Independence Party, accused Spanish Prime Minister Mariano Rajoy of engineering a row to distract from a corruption scandal and urged Cameron to send a warship to the territory. ($1 = 0.7528 euros) (Additional reporting by Costas Pitas; Editing by Andrew Osborn and Robin Pomeroy)