British finance minister George Osborne unveiled a new round of spending cuts today, but promised to pump some of the savings straight back into the economy to counter charges of excessive austerity.
In a speech to parliament, Mr Osborne spelled out £11.5 billion sterling in cuts for the 2015/16 fiscal year.
Local UK government budgets were among those hardest hit, while £3 billion was earmarked for spending on affordable housing projects. Spending on international aid, health and education was protected.
The debate over the cuts, which will take effect just weeks before a general election, sketches out the economic battle lines for a campaign in which the health of the economy will be decisive.
"While recovery from such a deep recession can never be straightforward, Britain is moving out of intensive care - and from rescue to recovery," Osborne told parliament.
"We’ve always believed that the deficit mattered; that we need to take tough decisions to deal with our debts - and the opposition to that has collapsed into incoherence,'' he added.
Earlier, Labour party leader Ed Miliband had criticised the need for further cuts, highlighting Osborne's 2010 pledge to eliminate the budget deficit by 2015. The latest official forecasts show that by 2017/18 Britain will still be spending 2.3% of its gross economic product (GDP) more than it recoups in tax.
Despite cutting spending aggressively since coming to power in 2010, weak economic growth and a costly welfare system have set back the UK government's original plans to wipe out a budget deficit which it inherited at 11.2% of GDP.
Britain's austerity agenda has been challenged by the loss of its triple-A credit rating and calls from the International Monetary Fund to defer near-term cuts and increase infrastructure investment.
In an effort to stem mounting criticism that continued spending cuts were crimping economic growth, Osborne promised a total of £300 billion of capital spending between now and the end of the decade, a third of which would be detailed in an announcement tomorrow.
Labour said the boost to infrastructure was not enough and called for an extra £10 billion of stimulus spending.