Clegg to blame big cuts in spending on 'bankrupt' Labour

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Nick Clegg will defend the Government's plans for deep spending cuts today as its independent forecaster prepares to paint a grim picture of the state of the economy.

In a speech in London, Mr Clegg will prepare the ground for a big squeeze on spending and some tax rises to be announced in next week's Budget – and seek to pin the blame on Labour. He will accuse Labour of being "in denial" about the public finances and taking the country to the brink of bankruptcy.

In its first report, the Office of Budget Responsibility (OBR) is expected to downgrade the former Labour chancellor Alistair Darling's forecast that the economy will grow by between 3 and 3.25 per cent next year. Its figure is likely to be closer to the 2.1 per cent average prediction by City experts. If there were a similar downgrading for 2012, the public finances could be £26bn a year worse off, the accountancy firm Grant Thornton said yesterday.

The OBR, the chaired by Sir Alan Budd, is likely to provide a gloomy backdrop to the emergency Budget to be unveiled by the Chancellor, George Osborne, tomorrow week. Although borrowing may be lower than forecast by Mr Darling, the OBR may revise downwards Labour's prediction that the economy's long-term or trend growth will be 2.75 per cent a year because of the damage caused by the recession.

The Deputy Prime Minister will say: "This is not a task we relish. Nor was it our choice. This is the legacy that we ... were left. Left by a government very nearly bankrupt and certainly bankrupt of ideas. It is the only way we can get our public finances on a sound footing. And to do anything else would not only be irresponsible, it would be a betrayal of our progressive values."

Mr Clegg will say: "There is nothing progressive about denial. There is nothing progressive about condemning ourselves and our children to decades of debt, higher interest rates, fewer jobs. How will we pursue social justice with billions of pounds of taxpayers' money disappearing down a black hole every year, just to pay the interest on our debt while our schools and hospitals fall apart?" He will argue that the coalition Government can deliver "progressive cuts" – a claim disputed by many Labour politicians who accuse the Liberal Democrats of making a U-turn after opposing immediate cuts during the election campaign.

The Liberal Democrat leader will insist that circumstances have changed because of the problems in the 16-nation eurozone. "The choices that were available to us just two months ago are no longer available," he will say. "We have to take action now so that we can still be in control of our future. By taking action, by being responsible, by not denying the reality we now face, there is still room for manoeuvre in how we tackle the deficit."

The TUC warned that raising VAT in the Budget, a move many City forecasters expect, would hit the poor more than the rich, threaten jobs and lead to more expensive mortgages. The poorest fifth of households spend twice as much of their disposable income on VAT as the richest fifth.