Osborne to give details of £6bn spending cuts next week
Mr Osborne said he was in no doubt that now was the time to cut waste
George Osborne has warned failure to tackle the UK's record deficit could be "disastrous" and said plans for £6bn cuts would be announced next week.
The new chancellor also set the date for an "emergency Budget" for 22 June.
And he pledged to hand responsibility for economic forecasts to a new body to make it harder for governments to "fiddle the figures".
But his Labour predecessor Alistair Darling said cutting too soon risked tipping the UK "back into recession".
Labour and the Lib Dems opposed the Conservatives' plans to make £6bn cuts this financial year during the election campaign. But under the coalition deal the Lib Dems signed up to immediate spending cuts.
'Lack of willingness'
In his first speech since becoming chancellor, Mr Osborne said he and his Lib Dem colleague - Chief Secretary to the Treasury David Laws - agreed that it was achievable without hitting frontline services.
He said the debt crisis in Greece was "a reminder of what happens when governments lack the willingness to act decisively and quickly".
Dear Chief Secretary, I'm afraid there is no money. Kind regards - and good luck! Liam
"If we fail to tackle the deficit we inherited from the previous government the consequences could be disastrous."
If the debt was not tackled, mortgage interest would rise, businesses would go bust and debt interest would become one of the largest items of government spending, he argued.
Mr Osborne said the newly formed independent Office for Budget Responsibility would publish economic and fiscal forecasts, rather than the government - the first of which would come out before the Budget.
He predicted it would create a "rod for my back down the line and for future chancellors" but said the current system did not produce "good Budgets", and Labour's economic forecasts had mostly been wrong and "almost always in the wrong direction".
Mr Laws said every new spending commitment and pilot project signed off by Labour ministers since the turn of the year would be individually reviewed in a bid to find savings "in addition" to the target.
Defending his party's decision to back the £6bn of cuts, he said it was not just about compromising for the coalition but also "the clear advice we have received from the Bank of England and the Treasury itself that it would be responsible and safe to make these adjustments without risking the economic recovery".
He said he had already rejected some suggestions for cuts which he felt would "damage key services or put at risk those on lower incomes".
Alistair Darling: "They're looking for cover, they're blaming somebody else"
Mr Laws said the task ahead was "colossal". He said his predecessor, Liam Byrne, had left him a letter, which he assumed had been some advice.
"Unfortunately, when I opened it, it was a one-sentence letter which simply said 'Dear Chief Secretary, I'm afraid to tell you there's no money left', which was honest but slightly less helpful advice than I had been expecting," he said.
Mr Byrne told the BBC saying there was no money left was "a phrase that chief secretaries have to get used to using I'm afraid. Chief secretaries have to be tough - they are the unpopular ones in government.
"I'm sure it won't be too long before Mr Laws is using it with his colleagues," he added.
Mr Darling told BBC Radio 4's World at One the government was "playing the oldest trick on the book" by blaming its predecessor for the state of the economy.
He said: "The suggestion that Treasury officials colluded with us in perverting figures is just wrong...
"There's a huge difference between publishing things you know are not right and publishing forecasts in the most turbulent period in recent history."
He said there should be a plan to get borrowing down "over a sensible period" and if it was done too quickly "there is a risk you tip the country back into recession".
TUC general secretary Brendan Barber said: "With the economy so fragile and thousands still losing jobs, the government needs to avoid rushing into a round of cuts.
"If the economy suffers as a result of decisions taken ahead of the emergency Budget, tax revenues will fall and the deficit will only get worse. This is not a time to wield the axe without very careful consideration of the wider consequences."
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