Cameron warns of Government cuts

David Cameron has warned of "pain" to come as the Government curbs welfare and public sector pay bills to bring down Britain's massive debts.

In an interview with the Sunday Times, the Prime Minister said the new administration would be trying to "take people with us" as it embarks on its programme of cuts. He said: "Proper statesmanship is taking the right action, explaining to people the purpose behind the pain."

Ahead of the Tory-Liberal Democrat coalition's emergency budget on 22 June, Mr Cameron said: "There is a huge amount of debt that has got to be dealt with. Crossing our fingers, waiting for growth and hoping it will go away is simply not an answer.

"The country has got an overdraft. The interest on that overdraft is swallowing up things that the nation should otherwise be spending money on. We have got to take people with us on this difficult journey."

It is expected that Sir Alan Budd, the head of the new Office of Budgetary Responsibility, will downgrade Labour's forecast of 3% growth next year.

Mr Cameron said areas that need to be addressed include "massive welfare bills", public sector pay and "the bureaucracy that has built up over the past decade". He added: "Otherwise you will have to make reductions across the board which you don't want to do. We need to address the areas where we have been living beyond our means."

According to the Sunday Times, the Government is considering freezing benefits and cutting child tax credits as it grapples with the £156 billion deficit. The Government is also planning to raise capital gains tax in a move that has proven controversial within the Conservative Party. But there was speculation that exemptions could be "generous".

Deputy Prime Minister Nick Clegg insisted 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 echoed Mr Cameron's comments, saying that the Government wants to engage with voters about the need for the measures it is taking.