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No-one will escape spending cuts, warns Cameron

David Cameron will today spell out the impact of the Government's plans for reducing the deficit which he describes as "enormous" - and even worse than he had feared.

In a major speech on the economy, the Prime Minister will say that the proposed cuts programme will affect "our whole way of life" and could be felt for decades, such is the scale of the debt problem.

The warning comes just days after Northern Ireland's Finance Minister Sammy Wilson said the public sector faces its biggest cuts in a generation.

Mr Cameron's comments come as ministers prepare the ground for the emergency Budget on June 22, when Chancellor George Osborne will try to make serious inroads into the £156 billion annual deficit.

Mr Osborne and Danny Alexander, the new Chief Secretary to the Treasury, will tomorrow publish the principles meant to underpin both the Budget and the spending review which will come later in the year.

The Government is desperate to persuade people of the need for what they call the "difficult decisions" they are set to take and will hold a public consultation on its plans.

Mr Cameron will warn today that nobody will escape the effects of the Tory-Liberal Democrat coalition's strategy to address the deficit and growing public debt.

"How we deal with these things will affect our economy, our society - indeed our whole way of life," he will say at an event in Milton Keynes.

"The decisions we make will affect every single person in our country. And the effects of those decisions will stay with us for years, perhaps decades to come.

"It is precisely because these decisions are so momentous, because they will have such enormous implications, and because we cannot afford either to duck them or to get them wrong that I want to make sure we go about the urgent task of cutting our deficit in a way that is open, responsible and fair," he said.

"I want this Government to carry out Britain's unavoidable deficit reduction plan in a way that strengthens and unites the country.

"I have said before that as we deal with the debt crisis we must take the whole country with us - and I mean it.

"George Osborne has said that our plans to cut the deficit must be based on the belief that we are all in this together - and he means it."

Mr Osborne and Mr Alexander will tomorrow announce the timetable for the spending review, as well as a public consultation on it via the internet and public meetings.

It is intended as an examination of the role of Government in the round, rather than just a budget-setting exercise.

A Treasury source said the new coalition Government wanted to get away from Labour's "assumption that central government always knows best" and "throw open the doors of Whitehall and encourage new thinking".

"That's the only way to revolutionise government and provide the high-quality public services people deserve," the source said.

"Anyone who thinks the spending review is just about saving money is missing the point. This is a once in a generation opportunity to transform the way that government works. That will come through loud and clear later this week."

The Prime Minister himself will set out why the Government needs to tackle Britain's debt now, saying the problem is "even worse than we thought" and the implications could be "more critical than we feared".

Mr Cameron suggested at the weekend that high welfare and public sector pay bills were high on the Government's list for cuts.

Child tax credits for better-off families are expected to be curbed.

Capital gains tax is likely to rise, although there is speculation that there could be generous exemptions for certain groups of people, including entrepreneurs and pensioners, after opposition from Tory right-wingers.

Ministers have steadfastly refused to rule out a rise in VAT, from its current level of 17.5%.

However, the Government wants the bulk of its savings to be made by reducing current expenditure rather than raising taxes.

Nick Clegg, the Liberal Democrat Deputy Prime Minister, insisted yesterday that the Government's plans would not mark a return to Thatcherism.

"It is important that people understand that fiscal retrenchment does not mean a repeat of the 1980s. We're going to do this differently," he said in an interview with The Observer.

Mr Clegg also spoke of "a level of public engagement in this that you've never seen in this country before".

The Prime Minister will say today the Government must deal with the country's debts now or confidence in the UK economy will take a hit and interest rates will rise.

"Higher interest rates hurt every family and every business in the land," he will say.

"They mean higher mortgages and lower employment. They mean that instead of your taxes going to pay for things we want, like schools, hospitals and policing, your money, the money you work so hard for, is going on paying the interest on our national debt."

A Labour Party spokesman said: "Everyone agrees that the deficit needs to be reduced. But it has to be done fairly, and in a way which does not undermine the recovery.

"On both fronts the Coalition's made a poor start, cutting support from young people out of work at a time when the recovery is still fragile.

"David Cameron has warm words today about wanting to take the country with him, but it's the decisions that matter."

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