Mr Clegg says measures like the VAT cut will not work
The Lib Dems are offering a "sense of hope and direction" for people suffering in the current economic climate, Nick Clegg has said.
On the first anniversary of his election as leader, Mr Clegg said his party had taken the lead on the economy and other key issues affecting the UK.
He is outlining plans to scrap Labour's 2.5% cut in VAT and spend the £12.5bn it will cost on green measures.
Creating "sustainable" jobs was vital to future economic growth, he added.
Year in charge
As he marks a year in the job, Mr Clegg is setting out his vision for dealing with the downturn and preparing the UK for future recovery.
He told the BBC that his party was focused on practical help for people most at need rather than squabbling over questions such as how much the government should borrow to support the economy.
"Gordon Brown and David Cameron are like two dogs fighting over the wrong bone," he said.
The Lib Dem proposals would include a five-year plan to insulate every school and hospital, subsidies for home energy efficiency, 40,000 new zero-carbon homes, improvements to rail lines and 700 new train carriages.
Mr Clegg accused the government of "tinkering" with ineffectual measures such as the VAT cut when what was needed was "fresh, bold thinking".
On Wednesday a Lib Dem move to annul the temporary cut was defeated in the Commons by 303 votes to 223.
Lib Dem policies sent a "message of hope and fair values which I believe are very attractive to many people in the country," he said.
The Lib Dems were the first party to "identify" the risk of a recession and campaign against "astronomical" rises in energy bills.
Mr Clegg added: "Instead of a meaningless VAT cut that people won't notice, we will insulate every school and hospital in the country and the homes of a million people languishing in fuel poverty.
"We will build thousands of desperately needed social houses, install money-saving smart meters, re-open rail lines and build new trains."
'Leading the way'
Mr Clegg defended his performance over the last year, saying the party had led the way on the major issues affecting the British people such as Iraq and the defence of civil liberties.
He added that he was "proud" of the party's performance in May's local elections.
The Lib Dems back government plans to inject money into the economy to support jobs but argue the VAT cut - which came into force on 1 December - is the wrong solution.
In a Commons debate on Wednesday, the Liberal Democrat Treasury spokesman Vince Cable described it as "seriously defective".
The Conservatives also criticised the cut, saying it is "unaffordable and ineffective" and would lead to a massive increase in taxation.
But Treasury Minister Stephen Timms said it was a fair way to put money into the economy because low income households spent a larger share of their income on VAT than richer households.
Labour has accused the Lib Dems of wanting to cut public spending at a time when investment in public services should be maintained.