Gordon Brown will today urge voters not to risk the economic recovery with the Tories, as he seeks to shape the debate on public spending ahead of the next general election.
In a speech to the TUC conference in Liverpool, the Prime Minister will claim that the British economy is on the road to recovery - but warn there is no room for complacency.
While continuing to insist that public services are safer in the hands of Labour than the Tories, it was reported last night that he would for the first time admit the need for spending "cuts".
His use of the word is expected to be seized on by the Tories, who have taunted Mr Brown over his refusal so far to acknowledge what many independent forecasters regard as inevitable.
Business Secretary Lord Mandelson said yesterday that Labour would reduce the country's massive debts by being "wise spenders".
He said the Conservatives, by contrast, would impose "savage" cuts on services and were "foaming at the mouth" at the prospect of spending less on the NHS and schools.
Lord Mandelson insisted that it was too early to start reducing the £175 billion deficit now, warning that Tory plans to rein in spending immediately risked "triggering an economic relapse" before Britain has recovered from recession.
"While the freefall in the economy may have been brought to an end, the effects of the recession are not yet behind us," he warned.
"This is why maintaining Government spending and investment is vital."
Mr Brown is expected to send a similar message to union leaders in Liverpool as he embarks on his last conference season before the next general election.
According to extracts from his speech that emerged at the weekend, he was to say: "Today we are on a road towards recovery - but things are still fragile, not automatic, and the recovery needs to be nurtured.
"People's livelihoods and homes and savings are still hanging in the balance, and so today I say to you: don't put the recovery at risk.
"Don't risk it with the Tories whose obsessive anti-state ideology means they can't see a role for government in either recession or recovery."
He will add: "We have to make tough choices in public spending and we will need the support of the labour movement in protecting the front line first.
"Our opponents have one approach to reducing the deficit: slashing jobs and abandoning national pay bargaining. We have another - taking tough choices and empowering those who deliver services to innovate and secure greater value for money."
The BBC reported last night, however, that he was also preparing to admit the need for "cuts" for the first time, in what may alarm union leaders.
On Friday the PM entertained union leaders at Chequers, where he reportedly told them that public sector jobs would not be lost under a future Labour government.
Union leaders warned yesterday that they would fight any attempt to cut public services or pensions of workers.
Unions are also pressing the Government to do more to create jobs and tackle the effects of the recession.
TUC general secretary Brendan Barber said in his keynote address today that the UK economy had "fallen off a cliff" and will only start recovering when unemployment comes down and decent jobs are created.
"Green shoots mean little when thousands of people a day are joining the dole queue," said Mr Barber.
"Bumper bonuses are an obscene joke when it was our money that rescued the banks and it is our public services that are now being told they will have to face the consequences.
"It is only when unemployment starts coming down, only when we create decent jobs that pay decent wages and only when vital public services are safe from cuts that we will be able to talk about a real recovery."
The Prime Minister last night warned the City he was "appalled" by the return of excessive bonuses that fuelled the financial crisis.
In an interview with the BBC, he accused some institutions of returning to, and even extending, the bonus culture which pre-dated the turmoil.
In an interview to mark the first anniversary of the collapse of investment bank Lehman Brothers, he warned that next week's G20 gathering would be taking global action against the problem.
He said: "I'm appalled that some institutions are already wanting to return to the old ways.Reuse content