Even those proposals that go in the right direction have too often been watered down so we have a green investment bank that is not a real bank and executive pay curbs that lack teeth.

What is worst is that ministers are wrapping up a real attack on rights at work as good for growth and employment. Those who opposed the minimum wage and rights for paid holidays are using the recession as a cover to introduce policies that they know have little support and that will be seen as nasty by most. There is no actual evidence that making work insecure does anything for the economy – easy fire will not lead to new hires.

This is no more than a bad boss’s charter that will make people insecure at work and will feed straight into lower consumer confidence.

Even where legal protections remain, the government is to undermine them by reducing inspections or making it far more difficult to take tribunal cases – which have been falling over the past year, contrary to claims from some business organisations.

The UK already has the second lowest level of worker protection among the 36 rich countries in the OECD, and the government has made it possible for employers to sack staff for no reason for up to two years from when they start. The government’s own surveys show that excess regulation is cited by only six per cent of small and medium sized businesses as a big barrier to growth. Their real problems are the depressed economy and difficulties with bank lending. 

This agenda is likely to be controversial within government. The lack of evidence that it will help the economy shows that this is driven by the hard-right agenda set out in the secret report by Wonga owner and Tory donor Adrian Beecroft. Those who opposed the minimum wage are using the economic crisis as an excuse to roll back modest employee protection.

In particular we will oppose lump-sum benefits in lieu of maternity pay and cuts to maternity rights that will particularly hit poorer mothers. ‘Protected conversations’ in which employers are free from legal constraints are deeply unfair to employees and likely to be unworkable in practice. Removing rights from staff in small businesses will turn them into second class citizens at work, and make it harder for smaller firms to recruit good staff.

Of course any modest increase in rights to request flexible working is welcome, but this should not obscure the fact that this government is taking the workplace backwards

LOCOG had gone further than any previous Games’ organisers in adopting an ethical code and complaints mechanism, but as our research shows this hasn’t been nearly enough to prevent abuses from taking place. However it’s not too late to make a difference for workers producing goods for London. I welcome LOCOG’s acknowledgement that further action is necessary and its commitment to act immediately to ensure that factory owners can no longer exploit workers in the name of the Olympics.

I’m also hopeful that a marker has now been set for all future Games and that the International Olympic Committee will play a leading role in taking this work forward so that the exploitation of workers in Olympic supply chains can become a thing of the past. LOCOG and the TUC – and our campaign partners like Labour Behind the Label – will be working to make sure the lessons are learnt. Indeed, this groundbreaking agreement may also help lead to better working conditions throughout the sporting goods industry.

We want the veil of secrecy lifted from the factories where this work is carried out, because we know that when consumers find out about the conditions under which their goods have been made, they want action taken. And we also want to make sure that the workers themselves know their rights, because they will be the best inspectors, the best auditors and the best champions for better working conditions.

This is what LOCOG Chair Lord Coe had to say about the agreement:

“We place a high priority on environmental, social and ethical issues when securing goods and services. As soon as we were made aware of the Playfair 2012 report, we instructed our independent monitor to carry out a comprehensive investigation and review. The outcome of this will be made public as soon as it is concluded.

“We have taken a lead in ethical sourcing and supply chain management but there is always more to do and we are committed to making a real difference to workers’ lives and creating a valuable legacy that we can share.”

With a new Treaty in prospect, Europe is headed down a very dangerous path. The treaty’s collective suicide pact of tight fiscal straightjackets, labour market deregulation, and diminished welfare states could put at risk the social model that is one of Europe’s crowning achievements.

More than ever, we need an EU run in the interests of its citizens and workers, not the bankers and bond market vigilantes.

Europe needs to retain and enhance its social protections – not just to deliver the higher living standards crucial to recovery; nor just to rebuild its economy around wages rather than debt; but also to safeguard the legitimacy of the whole European project itself.

If ordinary Europeans feel that the EU is about little more than open markets, tight controls on public spending and privatisation, then support for the European ideal will collapse. A Europe without a strong social dimension is doomed to fail.

The EU has begun to drift away from one of its founding principles: solidarity.

Back in 2005, despite some misgivings, the European trade union movement was broadly supportive of the Lisbon Treaty – focused on the need to make Europe more competitive, but within the context of strong social protections.

Fast forward to 2012 and the proposed EU Treaty – which is unanimously opposed by the national member organisations of the European TUC.

Not only does it effectively outlaw any kind of Keynesian economic stimulus, not only does it undermine long-term prospects for jobs and growth, but it is also profoundly undemocratic. It is an attempt to impose European-wide austerity measures to which no national electorates have given their consent.

What has happened in Greece and Italy could now happen across the continent.

A key part of this fiscal fundamentalism is an attack on workers’ rights: challenging established industrial relations practices and seeking to slash unit-wage costs.

Of course, our leaders are talking about the need to reduce unit-wage costs on the shopfloor, not in the boardroom.

Is it any wonder that the EU has managed to lose the trust of the trade union movement and the 60 million workers we represent when it is pursuing this kind of deflationary, deregulatory agenda?

Given the scale of the economic challenges we face, there are sadly no easy answers. But it’s the TUC’s firm belief that we need to reinvent the European social model for a new age. Showing that far from being part of it the problem, it is in fact an integral part of the solution when it comes to economic renewal.

First, we need to level the playing field for all European workers to ensure that there is no undercutting, that people are paid the rate for the job in the country in which they work, and that we keep rules up to date to stop workers falling through legal loopholes. As the pamphlet published today by the TUC and the Foreign Policy Centre argues, if you have a single market, then you need a single set of labour rules, laying down minimum standards such as the UK’s national minimum wage.

Second, we need to ensure that social protection is at the heart of EU policy. EU Treaties need to include a social protocol to guarantee respect for welfare and labour rights.

And third, we need to change the collective mindset on how we get out of the current crisis. Rather than the self-defeating, job slashing, growth destroying madness of austerity, we need to think about solutions for the long term.

One of the most important of these could be a strategy to raise the wages of ordinary workers. Rather than the debt-fuelled growth of the recent past (a direct consequence of the diminishing share of GDP ending up in people’s pay packets) we need stable, sustainable growth based on workers having money in their pockets to spend.

It seems obvious, but few people are saying it in the corridors of power: when workers do well (as during the long Keynesian ascendency in the generation after 1945) business does well, the economy does well, and Europe does well.

Europe has historically balanced the interests of free trade and open markets with those of workers and their unions. It’s a bargain that has served our continent well for decades. But it’s one that we abandon at our peril.

The Chancellor’s stubborn determination to stick to his plan despite the evidence that it is not working and won’t work in the future means that we are locked into permanent austerity.

Of course there were some welcome moves in the statement as the Chancellor tries to reinvent infrastructure spending, youth employment and regional assistance programmes.

But the catch is that they are being paid for by freezing tax credits, holding back public sector pay and steeping up public sector job losses to 710,000 by 2017 according to the OBR. Those with the broadest backs who caused the crash have escaped once again.

His refusal to back a Robin Hood tax and make nurses pay instead speaks volumes about his values. Public servants are no longer being asked to make a temporary sacrifice, but accept a permanent deep cut in their living standards that will add up to 16.5% by 2014 when you include pay and pension contributions.

It is no wonder that the government has alienated its entire workforce who are coming together in unprecedented unity tomorrow to take a stand against such unfair treatment.

Tonight, I simply say to the Chancellor: Plan A isn’t working. We can’t go on like this. We need an alternative. And we need it now.

Let me set out the TUC’s vision for an alternative, a five-point plan to help get our economy on track and help get Britain back to work.

First, we need a more sensible timetable for deficit reduction. Not a kamikaze four-year plan as at present – but a more realistic and achievable 10-year plan. That way we wouldn’t choke off growth, and we’d still have a credible strategy to put to the bond markets – meaning yields on our debt would remain low.

Let’s remember that economic opinion is firmly against fiscal consolidation of the speed practised by our government. Not just among the usual suspects like Keynes biographer Lord Skidelsky, former Monetary Policy Committee member Danny Blanchflower and Nobel prize winners Paul Krugman and Joseph Stiglitz – but also pro-market voices such as FT commentators Martin Wolf and Sam Brittan, Anatole Kaletsky at the Times and even London Mayor Boris Johnson.

There’s no rule that says we need clear our deficit in a single parliament – indeed the impression I get that policy is being driven not by necessity but by ideology and by the electoral timetable. And that’s just bad economics.

Second, we need to prioritise fair taxation. Rather than cuts that disproportionately hit the poorest and most vulnerable, we need a fairer balance between spending reductions and tax rises – so that those with the broadest shoulders, the people who did best from the long boom, pay a fair share.

Let me read you a quote: ‘If, in the short term, a case was made for me to pay more than 50 per cent tax, which would help UK plc, I personally would be prepared to pay more tax.’ The words not of a Labour politician or union leader, but former Marks & Spencer chief executive Stuart Rose.

So when City traders or hedge fund managers warn they will leave Britain if taxes rise, I say: let’s call their bluff. On tax, it’s time for radical thinking. Let’s have a permanent tax on bankers’ bonuses. Let’s have a stronger banking levy. Let’s clamp down on the tax havens and avoidance scams that cost us £25 billion a year. And let’s end the scandal of £10 billion of pensions tax relief for the richest one per cent of the population who earn over £150,000 a year.

Above all, let’s have a Robin Hood Tax on financial transactions. A simple sales tax on the vast capital flows in the markets that could yield tens of billions of pounds if implemented here in the UK and many times more if implemented internationally.

It’s great news that the European Commission has now proposed such a tax at EU level – and the UK government needs to look beyond the inevitable special interest pleading from the City and focus on the potentially huge revenues such a levy could generate for the Treasury.

Third, we need a proper strategy for growth. The Chancellor has argued that ‘unless we deal with our debts, there will be no growth’. But it’s the reverse that is surely true. Without growth, we won’t be able to deal with our debts.

Let’s give demand a spurt by giving a helping hand to people on low incomes most likely to spend, whether it’s a temporary cut in VAT or an increase in tax credits.

Let’s fast track infrastructure projects that would have an immediate economic benefit, like house-building, road improvements and better public transport.

Let’s follow the example of our competitors and develop an intelligent industrial strategy to help nurture success stories like aerospace and pharmaceuticals and aid our transition to a low-carbon economy.

“Let’s have a smarter procurement strategy so that the vast sums the government spends on private sector goods and services deliver the maximum economic and social benefit, so scandals like Bombardier never happen again.

Let’s create a new state investment bank that can provide the capital for small and medium-sized businesses for projects to green our economy, and for transport, energy and housing schemes. And we could explore the potential to capitalise such a bank through a new round of quantitative easing.

And let’s go beyond the Vickers agenda and reform the existing banks so they act as utilities that serve us rather casinos that enrich themselves. And let’s begin by making sure the banks part-owned by us the taxpayer start lending to people and businesses who need credit.

Fourth, as we focus on growth, we also need policies to get Britain back to work. Following the crash of 2008, our labour market performed better than expected, with job losses kept in check. But the employment situation is now deteriorating fast as growth disappears and confidence plummets.

If the government was serious about preventing mass unemployment, the obvious place to start would be to rethink the public sector job cuts that are now coming thick and fast. As official figures show, for every job created by the private sector, we are losing nearly three in the public sector. So it was no surprise earlier this month when the Chartered Institute of Personnel and Development warned the coalition its public sector job cuts – in education, the NHS and local authorities – were doing immense harm and called for a halt.

Just as urgently, we need measures to tackle the terrible scourge of youth unemployment, which threatens to create another 1980s-style lost generation – with all the attendant social costs.

So let’s think about a proper replacement for the Future Jobs Fund which helped find four in ten people work.  Let’s reinstate the EMA which allowed young people to spend time in college rather than on the dole. Let’s increase university places because the capacity is already there. And let’s introduce intelligent, well-funded welfare-to-work schemes – open to people of any age – that would pay for themselves many times over.

And fifth – perhaps most fundamentally – we need a more even distribution of wealth. It’s abundantly clear that the free-market financial capitalism of the past three decades has enriched too few and failed far too many – and this inequality came to have catastrophic consequences.

Since the late 1970s, the share of GDP going to workers’ wages has fallen from 65 to 53 per cent, with those in the middle and at the bottom hit hardest. At the same time, the proportion going to profits and to the wealthy has risen sharply.

As wages have stagnated, debt has soared. As incomes are squeezed further, the Office for Budget Responsibility expects household debt in this country to reach over £2 trillion by 2015 – an albatross around the neck of our economic future. Unless workers see their pay packets growing, we won’t be able to build sustainable consumer demand.

It’s absolutely true that a tiny elite have creamed off the spoils of growth. According to a study by the Credit Suisse Research Institute last October, the richest half per cent of global adults now own over one third of the world’s wealth. And this has created a vast pool of footloose global capital looking for the quickest returns – a factor behind the explosive growth of financial markets, securitisation, and speculative trading over the past few decades.

So we need action to address these destabilising inequalities of wealth. Whether it’s a living wage, worker representatives on company boards, new models of corporate governance, greater shareholder activism, new systems of ownership or a bigger role for unions and collective bargaining, we are not powerless to act.

One thing’s for sure: we cannot continue as we are. The current model of capitalism – deregulated, unequal, unstable – is facing a crisis of legitimacy. The economic predicament we face is dire and people are rightly getting angry. Unless we get to grips with some of the root causes of the current turmoil – debt-fuelled growth; stagnant wages for the majority; financial speculation – then who knows what the future may hold. These really are profoundly volatile and turbulent times.

And the most urgent task we face is surely to avoid the perils of austerity. This is the trap we must avoid at all costs. Britain really is at a historically important turning point. The decisions the government is taking now will shape our lives for a generation to come. But it’s clear that austerity is failing us all. I hope ministers find the courage to admit they’ve got it wrong and change course before it’s too late. Because in place of austerity, we urgently need something better, fairer and more effective in delivering a real recovery.

Last month, as our cities burned amidst the worst rioting in decades, social divisions in modern Britain were laid bare. The violence and the criminality that we saw shocked us all, and none of us would seek to justify or condone it in any way.

And the victims were overwhelmingly frightened ordinary people in working class communities – with the police and emergency service workers called on to put their safety on the line to restore order.

The Prime Minister chose to describe these events as ‘criminality pure and simple’. But it isn’t so simple and what happened in August actually revealed deep fractures within our society.

A society that ranks among the most unequal anywhere in the developed world; where a super rich elite have been allowed to float free from the rest of us; where a generation of young people are growing up without work, without prospects, without hope. None harder hit than the black youngsters held back by an unemployment rate approaching 50 per cent.

The government’s response to the riots has been profoundly wrong. Rather than addressing the complex long-term factors that lie behind the alienation – the poverty, the lack of social mobility, young lives stunted by hope denied – they have instead reached for simplistic clichés about moral decay.

And yet as they have retreated to Victorian language about the undeserving poor, they have said nothing about moral disintegration among the rich: the financiers with huge assets sneakily channelled through the tax havens; the out-of-control traders and speculators who razed our economy to the ground; and the super rich tax cheats whose greed impoverishes our schools and hospitals.

Let’s be clear about this: high moral standards, yes of course, but not just for the poor and the ordinary, they must be for the rich and the privileged too.

And let’s also resist blatant double standards, so that someone who steals a bottle of water goes to jail while there are second chances aplenty in the corridors of power.

What happened in our cities last month has not just raised alarming questions about the country we have become, it has not just exposed the pernicious inequality bequeathed by neoliberalism, but it has also underlined the folly of coalition policy.

Withdrawing EMA help from disadvantaged teenagers. Cutting youth services by two thirds and more. Abolishing the Future Jobs Fund and the Youth Guarantee that gave new chances to young people previously in utter despair.

Of course I accept the riots were not caused by the cuts – but as any fair-minded person must see the cuts will undoubtedly make the underlying problems much worse.

Tougher capital requirements and ring-fencing will be bitterly opposed by the banks, who will now lobby hard to water them down. They should be resisted.

But while we need to avoid another finance-driven crash, safer banking on its own will not help drive the investment and create the jobs we need. Indeed, unless we take other action tougher capital controls could even limit credit at a time when businesses complain they cannot get affordable loans.

Real reform of banking would start with setting out what we need our banks to do. Banking should be a utility just like energy and water – supplying credit and the other services that our productive industries and services need.

The spectre of a double dip is raising its head. We desperately need an economic stimulus. Unless we move to a low-carbon economy, we face climate chaos. The real challenge therefore is how to raise investment – not just by companies but in infrastructure and the public works that can provide jobs, restore confidence and kick start growth.

And while the political classes seem rather embarrassed and can’t wait to get rid of them, the public has big stakes in two major banks. It’s time we put them to work on behalf of the public.

So let’s talk about a proper Green Investment Bank set free from Treasury restriction. Other countries have them, so why shouldn’t we set up a national investment bank with the long-term horizons that can meet the investment gap? What about regional banks who don’t have remote head offices to say no?

I regularly meet business people who are as critical of our short-termist speculation driven banks as we are. We should campaign together for a banking system that works for us, rather than one that has everybody working for the banks.

A year ago we were being told that everything was set for recovery. Yet here we are 12 months later facing a real prospect of a double-dip recession.  Trying to eliminate the deficit in just four years can now be seen as nothing more than a national programme of self-harm.

It has killed both consumer and business confidence. With the cuts already putting the brake on government investment, the net result is that almost no-one is investing. Yet without growth there is no prospect of closing the deficit gap in the short, medium or long term.

The desperate position that the government now finds itself in is shown by the sheer irrelevance of its ideas for growth. Scrapping the 50p tax rate as many Conservatives want, or tearing up a planning system that has not stopped growth when the economy was functioning well shows just how far away from the real economy and real people they are.

The problem is that the government has not just produced the wrong answer, they don’t even understand the question. Our economic problems lie in the collapse of an economic model that started in the 1980s and ended with the collapse of Lehman Brothers in 2008.

Its central flaw was that it encouraged the rich to get richer, while those in the middle and bottom had their living standards held back. Instead they were sold credit. The result was not sustainable economic growth, but what has now been cruelly exposed as a huge debt bubble.

Debt and the deficit are very real issues, but they are symptoms of what went wrong, not the cause. But you cannot cure the patient by treating symptoms alone, especially when the treatment’s side effects make the root illness worse.

It is hardly surprising that consumer confidence has collapsed. The study we’ve published today reveals that in two years time a typical middle Britain family will be suffering a living standards gap of £4,600 by April 2013 or 6%.

A single parent also with middle earnings is the biggest loser in our four families. She is hit by 10% – more than £6,200 by 2013. And as for us all being in this together, it’s the single parent and the low paid worker’s family who lose the most, and the well paid couple who suffer the least in percentage terms. We’ve not bothered to model anyone right at the top as we know they will be hardly touched.

When even the IMF says that a root cause of the crisis was the growth in the gap between ordinary people and those at the top, making it even bigger is like trying to put out a fire with paraffin.

In the past year the TUC has led the campaign against the cuts, with half a million on our March for the Alternative. We can now see that the cuts are not just hurting, they are not even working. The challenge to this year’s TUC is to step up our campaign for an economic alternative.

We need fair tax that asks those with the broadest backs to pay the most – not special cuts for the wealthy, and a national investment bank and a green investment bank to drive investment.

If companies and individuals are not spending the state must fill the gap. And it is a lack of demand and investment – not a lack of land – that is holding back building the houses we need at least at the moment.

Above all we need this government – and others – to put the brake on austerity. This is the only way to restore confidence and get the economy growing again. And that means boosting the living standards of those who did least to cause the crash.

The world looked over a financial abyss in 2008. Bold action to rescue banks and ensure liquidity meant that we did not repeat the mistakes of the 1920s and 30s.

Recent economic events show that we have yet to fix what is really wrong. Yet now we are faced with prolonged and damaging stagnation rather than a precipice, world leaders are sitting on their hands.

That’s why next week is such an important week for the TUC. Now the government’s strategy is so clearly not working it is up to us – and anyone who wants to join us – to campaign for that alternative.

The Chief Secretary to the Treasury’s inflammatory public intervention is a clumsy mix of announcements apparently designed to pre-empt the talks, coupled with crude threats that even worse terms might be imposed if unions refuse to acquiesce to this assault on their pensions.

Many of the detailed proposals set out by Danny Alexander today have not even been put to the TUC negotiators yet, and the government has yet to give a response to specific proposals tabled by the trade union side.

I have found over many years that if you’re seriously trying to build trust to settle a difficult dispute you should talk honestly and openly inside the negotiating room and exercise self restraint outside. This speech, and the media-spinning operation around it, has dealt a serious blow to union confidence in the government’s good faith in these talks.

For those on middle and low incomes who were experiencing a wage squeeze before the recession even started, a return to business as usual is unlikely to bring any significant rewards. On the contrary, as stagnating wages are accompanied by tax rises and cuts in the benefits and tax credits available to working families life is set to become even more of a struggle.

The wages of middle income Britain have grown by an average of just 56% since 1978, despite GDP increasing by 108% over the same period. For workers in some skilled trades incomes actually fell in real terms between 1978 and 2008.

For those out of work the picture is also grim. While unemployment levels remain below those of the 80s and 90s recessions, close to 2.5 million working age adults are unemployed and several million more are out of work and want a job. With growth rates held down by Government austerity, those without work are facing a highly uncertain future.

The crisis isn’t just happening in Britain’s workplaces. Services and support for children and young people, from Sure Start centres to universities, is being cut back. People are finding it harder than ever to own their homes. And as the retirement age rises tomorrow’s pensioners are faced with paying more for their care with far less generous workplace pensions. For the first time in many years, we are facing the very real prospect of a sustained cut in our living standards.

These problems are not simply a consequence of the global downturn. The fact is that while a few at the top have seen great benefits the UK’s move from welfare to market capitalism has not brought rewards for the majority.

Levels of investment in productive business are low, average growth rates have declined and economic shocks are now more frequent and severe. Before the recession began Britain was a low wage, high debt and increasingly unequal nation. Government austerity is now simply set to make things worse. Without a radical re-think Britain’s livelihood crisis is set to become a permanent way of life.

Of course we don’t want to go back to the 1970s – but we do urgently need to think about how Government, business and unions can work together to make markets work better. We know that simply tinkering won’t create the inclusive, productive and high quality new economy we need.

Our new Touchstone Pamphlet, “Britain’s Livelihood Crisis”, authored by Stewart Lansley, sets out some of the changes that could start to take us there.

I always admire the way the IoD doesn’t pussy-foot around. They’re very clear that they don’t just back the spending cuts, but want more of them – and want them more quickly. But in their desire to see the deficit tackled in this way, they should be very careful what they’re wishing for.

The deep and rapid spending cuts are not just slicing away at the public sector, but doing big damage to the private sector too. The medicine doesn’t just taste nasty, its side-effects are making the disease worse too.

Public sector workers and their families are the IoD’s customers too. With incomes frozen and fears for their jobs they’re cutting back. It’s no wonder consumer confidence is collapsing – Just look at how the retail sector sees its prospects.

And we shouldn’t forget that one of the biggest customers for Britain’s private sector is the public sector itself. The state spends £236 billion on goods and services from British business – more than the entire public sector wage bill. As this is slashed, good companies in every part of the economy are suffering the consequences. In turn their staff feel the squeeze, and this does even more damage to consumer confidence.

For the government’s plans to work, the private sector needs to generate jobs faster than it has done in living memory to absorb the million or so jobs likely to be lost from the direct effects of spending cuts.

Yet one good thing about this recession was that fewer jobs were lost than might have been expected from the GDP figures. This is because many companies – often working closely with their unions – decided to try and hold on to skilled staff to make recovery quicker and easier. That was undoubtedly good news, but it means that many companies can grow without taking on much in the way of new staff.

If we look at the small print of the Office for Budget Responsibility’s report on the budget its figures for employment growth depend on households taking on more debt and borrowing more. Frankly I simply don’t see that happening. But it also says something rather profound about the direction of government policy. I don’t see large scale debt as a good thing in itself. But simply transferring it from state to household is a conjuring trick, not an economic reform.

What’s worse is that the net result of all this pain looks less and less like a cure for the deficit. The National Institute now say that weak growth will hit the tax take and public sector net borrowing will fall only to 3.6% of GDP in 2015-16, rather than the 1.5% the government has pledged.

So it’s beginning to look very much like the government has taken a kill or cure gamble with the odds increasingly against recovery.

Instead we all need to talk about how we get our economy moving again. Sometimes we in the trade union movement don’t say it often enough or loud enough, but Britain needs a thriving, successful private sector. What the IoD’s member companies do creates the wealth that pays for our public services – an economic fact of life we forget at our peril.

So what’s the alternative? I want to make one thing perfectly clear – the TUC aren’t ‘deficit deniers’. We know that borrowing £400 million a day is not sustainable. For us, what matters is what works. That’s why we need a Plan B based on jobs and growth, keeping people in work and keeping tax revenues flowing. As economic history has shown, that’s the best way to get deficits down in the long run.

First, we need a more sensible timetable for deficit reduction, because Britain can currently finance its debt at affordable rates. Second, we need a greater role for fair taxes, because those who caused this mess should make a proper contribution to clearing it up. And third, we need a new financial transactions tax on the banks, because we need to curb excessive speculation in the City.

None of this will hinder our competitiveness. It’s not about putting burdens on ordinary businesses or raising costs for UK plc. It’s about fairness. Ensuring the banks and bankers who caused this crisis cannot escape its consequences.

And there’s one key change that the IoD probably won’t immediately identify with. It may sound counter-intuitive to company directors, but I believe it is in the long-term interests of their businesses. And that’s to pay their workers more.

Over the past three decades, the share of GDP going to workers’ wages has fallen from 65% to 53%, with those in the middle and at the bottom hit hardest. At the same time, the proportion going to profits has risen sharply.

So what, directors might well say – that’s what every business leader would want. But think about it this way. As wages have stagnated, debt has soared. And that’s bad for all of us.

In Britain, household debt more than trebled between 1980 and 2005. As incomes are squeezed further, household debt in this country is predicted to reach over £2 trillion by 2015 – an albatross around the neck of our economic future. Unless workers see their pay packets growing, we won’t be able to build sustainable consumer demand.

And it’s not just unions who are sounding the alarm. Ben Bernanke, the chairman of the Federal Reserve, has urged corporations “to meet demands for higher wages from workers”. And former IMF chief economist Raghuran Rajan has said the primary cause of the global financial crisis was the growing wealth gap between a tiny financial elite and everybody else – with ordinary workers forced to borrow dangerous amounts to maintain living standards.

So rather than wishing for sharp spending cuts, now is surely the time for a fundamental change of direction. To build a fairer, stronger economy, to nurture demand based on wages not debt and to get the incomes of ordinary workers rising again. Only that will let us make the decisive break we need from the catastrophic failures of the recent past.

The TUC is no deficit denier. We know that borrowing one pound in every four we spend is unsustainable, and we agree that spending more on servicing debt interest than on educating our children is just plain wrong. What we need is a Plan B.

My concern is that the government’s answer – to slash public spending with reckless speed – is based not on a sound reading of the evidence, but on an ideological zeal to shrink the size of the state. The so-called reforms in the NHS and education threaten the fundamental character of our public realm.

This brutal austerity is being implemented on the back of a series of myths – half truths and distortions that have poisoned our public debate:

Myth one: the deficit was caused by out of control public spending.

Not true. Now I accept that after 2001, Labour began running larger deficits – though these fell during 2006 and 2007. Indeed when the credit crunch began in 2007, overall UK debt as a proportion of GDP was 37%, the lowest of any G7 country.

Myth two: without drastic cuts, Britain would become the next Greece.

This is a familiar ministerial refrain, often heard just after the coalition came to power, and it is completely wrong. Britain can finance its debt at affordable rates: 10-year bold yields are around 3.5%, compared to over 12% in Greece. With two-thirds of our sovereign debt underwritten by UK investors and an average maturation period of 14 years, refinancing is far less of a problem than even for the likes of France or Germany.

Overall, we spend just over 3% of our annual GDP servicing our debt – compared to 12% in Greece. To quote the distinguished FT columnist Sir Sam Brittan: “Don’t talk to me about Greece or Ireland. We can disregard the bogey of the government not being able to sell its securities at an acceptable price”.

Myth three: Britain is like a household that has “maxed out” on its credit card.

It’s a great soundbite, and one that the public can easily relate to. But again, it has one simple flaw: it is just not accurate. Unlike households, sovereign nations can print money, raise taxes and fund debt over many decades. Had they been in power in 1945, coalition ministers would have doubtless used their credit card analogy – yet within a decade we had got the economy back on track, built the NHS, extended the welfare state, and constructed millions of council homes. And through growth and full employment, Britain also got its deficit down.

Myth four: there is no alternative.

Once again, that is playing hard and fast with the truth, because there is a different way forward. A more sustainable, more gradual, more robust deficit reduction plan based on jobs, growth and tax justice. And in four days’ time the TUC will be taking this message to the people of Britain as we stage our national demonstration against the cuts: what we have dubbed the March for the Alternative.

So what does our alternative look like?

Well, I’ve mentioned the need to make jobs and growth the priority, keeping people in work, keeping tax revenues flowing, limiting the huge social costs of unemployment. And rather than swingeing cuts, we need a much more prominent role for progressive taxes – not least on the City and the bankers who caused this mess. The TUC believes this is the fairest and most sustainable way of tackling the deficit.

So far, so good, you might say: but where’s the evidence to support this argument?

Well, the case for jobs and growth is overwhelming. The lesson of economic history is clear: this is the best way of getting the public finances under control in the long run. Massive cuts are a false economy. As we saw in the 1930s, austerity begets more austerity – more unemployment, more misery for working people, and yes, more national debt.

Just as the case for pro-growth policies is compelling, so too are the arguments for fair tax. The coalition government has made the decision to make £4 of spending cuts for every £1 of tax rises – the bulk of which is coming from higher VAT, the most regressive tax of all. We believe this balance needs to change, with the tax burden falling on those most responsible for the crisis we now face. That’s why we’re calling for a determined clamp down on the £25 billion of tax avoidance committed by the City, UK plc and the super rich, why we want to see a much bolder banking levy and more robust taxes on bankers’ bonuses, and why we want to see a Robin Hood Tax on financial transactions, which would raise tens of billions if implemented unilaterally in the UK and much more if introduced either at EU or global level. Encouragingly, the European Parliament voted in favour of such a tax earlier this month.

So there is a genuine alternative with fair tax, growth and jobs at its heart. And these arguments are increasingly resonating with the public. After the election, a majority of voters said they were in favour of spending cuts, at least in principle. Now, a majority are against cuts of the speed and scale being proposed by the government. And with bankers paying themselves £7 billion in bonuses this spring, there is a growing public clamour for change – as I think we will see in London this Saturday. I hope you’ll join us.

I like to think that the TUC has developed good relations with the Liberal Democrats in recent years – of course there have been disagreements but also mutual respect.

Charles Kennedy addressed our annual Congress when he was leader, as my predecessor John Monks spoke to your Assembly. Chris Huhne addressed the TUC environment conference last October – and in turn I’ve been delighted to speak at a number of your fringe events.

That mutual respect has been based on a recognition that we share some basic philosophical roots and approaches.

Social Liberalism was a driving force behind the creation of the post-war welfare state of Keynes and Beveridge, but it also drew on important work done by the TUC on social insurance.

The social democratic tradition that helped regalvanise your party in the 1980s was the UK’s main advocate of what I would call the social Europe bargain – a key belief in today’s trade unions.

On the one hand support for a dynamic economy, but on the other a recognition that prosperity should have a wider social purpose through progressive taxation and well-funded public services.

On the one hand the energy of markets, but on the other protection from their inevitable excesses and instability.

Above all a recognition that markets should not trump democracy – that some issues are just too important to be left to market forces to settle.

Now we can trace and identify the roots and philosophies behind those beliefs, but it might just be as easy to say that they come from the common-sense and deep support for fairness built into the British psyche. It’s the politicians who tap into that who command the centre ground.

But it has to be said that I am finding it increasingly hard to see how those core beliefs can be reconciled with important elements of coalition policy.

Now of course I accept that coalition government is difficult. Uncomfortable compromises have to be made – especially when you are the junior partner.

And I also recognise that you can point to real achievements – linking the state pension once again to earnings is one that sees success for a long campaign backed by unions. The referendum on AV is a big Lib Dem win for a party long committed to electoral reform.

Nor can anyone deny that the public finances remain in a very difficult state, and whoever had won the last election would have faced difficult choices after the damage done by such a deep and world-wide recession.

And while I’m not going to be able to resist a little political knockabout by quoting old speeches and manifesto pledges, I recognise that circumstances change and coalitions constrain choice – a certain amount of bilge water in the diet is inevitable.

But even allowing for all of this, people are now beginning to see a growing disconnect between what they thought your basic values to be and what is actually happening in reality.

And that can’t be a good thing for any party wanting to win votes.

I think there are two areas I want to draw out – not simple disagreements but policies that simply clash with what I always understood to be the basic principles of Liberal Democracy.

First, let me say a few words about the economy, growth and jobs.

As the Lib Dems said before the election: “If spending is cut too soon, it would undermine the much-needed recovery and cost jobs. We will base the timing of the cuts on an objective assessment of economic conditions, not political dogma.”

Yet what we’ve experienced since is the exact opposite.

We’ve been told that we have to eradicate the structural deficit in this parliament and that it has to be done by four pounds of cuts for every pound of tax increase – and that from VAT the unfairest tax of all.

The claim that without this we would become the next Greece is absurd. Our debt is manageable and lower than many comparable countries. It is not to deny the deficit to acknowledge that borrowing is relatively cheap and straightforward.

A four year timetable to undo all the fiscal damage done by decades of a mistaken economic model is not just arbitrary, but a very deliberate political choice. And one that runs the dangers of repeating the errors made in the 1930s.

Even before austerity really gets a grip, dole queues are lengthening with solid predictions of a million more unemployed. And alarmingly the economy contracted by 0.6 per cent in the last quarter of 2010.

Deep rapid front-loaded cuts are not the answer to our economic woes. As that great Liberal John Maynard Keynes rightly said – after seeing the damage done by similar policies, the best way to secure recovery and pay down the deficit is not through massive cuts – but through jobs and growth.

Keep people in work, keep tax revenues flowing, limit the costs of unemployment: that’s the social democratic response to the crisis we face, that’s the progressive approach. But even for those who disagree that there is room for an economic alternative and accept the government’s budget judgement however reluctantly, my second charge still needs answering.

Because my concern is that under cover of the fiscal deficit, public spending cuts are being used to fundamentally restructure the welfare state. The UK version of that Europe style social bargain is being decisively rolled back. The balance between markets and democracy is being fundamentally shifted away from people power.

This is what lies behind the most rapid reform of public services in living memory, with the Prime Minister promising to open up services to competition by “any willing provider” – code for privatisation on a huge scale.

“There is a kind of Maoist revolution happening in a lot of areas like the health service, local government, reform, all this kind of stuff, which is in danger of getting out of control.” Not my words, of course, but Vince Cable’s.

As many people here have realised already this weekend the changes are greatest and most dangerous in the health service.

The Health and Social Care Bill represents the biggest upheaval in the history of the NHS. Yet it wasn’t in the coalition agreement, nor was it put to the electorate last May by either coalition party. Indeed the Conservatives stressed the NHS was safe in their hands and that there would be no top-down reform. Some of us thought that went without saying for the Lib Dems.

There’s an old cliché about putting Count Dracula in charge of the blood bank. Now as a result of the planned privatisation of the National Blood Service it appears he will at least be able to bid for it.

But the damage being done to local government is just as damaging and just as much part of this revolution hidden by cuts. Being a local councillor has become one of the toughest jobs in Britain.

The scale of the cuts is bad enough, but it’s their front loading that is adding hugely to the damage. And it is the clear bias shown by imposing the biggest cuts on the most deprived areas that reveals the politics.

Scaling back ambitions and making planned savings when times are hard, knowing that they can be restored when times get better, is one thing. Deep cuts that destroy services and close community facilities for ever are another.

The new localism has turned out not to be about restoring respect, dignity and resources to local government, but by-passing town halls and leaving individuals to fend for themselves.

Even the Pupil Premium has come at a price – with Michael Gove admitting that funding is coming from cuts to welfare and cuts elsewhere in the schools budget.

Indeed after the Spending Review the IFS has calculated that 60 per cent of primary school pupils and 87 per cent of secondary students will see their school’s funding cut in real terms.

In any event, the Premium will be worth just £430 per pupil this year – not the £2,000 or so originally planned.

Even after making every allowance for the realities of coalition and an election result that closed down options, the Liberal Democrats risk ending up on the wrong side of the fundamental divide in British politics.

It is not just a difference of judgement about the state of the economy, but a move away from the basic principles of not just left-of-centre Britain but middle Britain.

Above the ebb and flow of party politics a big majority of the British share a basic support for fairness – and unlike many in the USA – support an active state providing services and countering deprivation and inequality. Call it the European mainstream, the British sense of fairplay, or basic civilised values – that doesn’t matter.

Detoxifying the Conservative brand was all about appearing to recognise that, even if we see that the conversion was not even skin-deep.

But my worry is that the Lib Dems show signs of leaving that space too – or at least that’s what voters now think.

That’s not just a bad place for your party to be, but it’s a setback for that very broad coalition that has secured so much of the social progress that we have seen in the last hundred years.

In his budget the Chancellor must change course.

Above all the government needs a growth strategy that can get people back to work and the tax receipts flowing again to close the deficit.

Companies and consumers will not invest or spend if they expect the economy to go from bad to worse, and confidence will have been hit for six by yesterday’s growth figures.

Restoring confidence to business and consumers will require bold action.

The Chancellor should reverse the VAT increase. We were worried it would choke off recovery, but now we find the government has managed to do that even before the VAT hike has kicked in.

He needs to call a halt to spending cuts that depress growth and take demand out of the wider economy.

Next the Chancellor should end the public sector pay freeze. Holding back pay when inflation is rising is hitting the living standards of millions of low paid workers and depressing the wider economy. As a priority the Chancellor should ensure the government’s stated policy of a flat rate increase for low paid workers is made a reality.

Ministers should also ignore the siren voices calling for the stripping away of basic employment rights at work. If people are even more fearful of losing their job or suffering pay cuts then that will harm the economy.

Ministers are fond of calling their critics deficit-deniers. This is completely untrue. The problem is that the Chancellor fails to get the most basic lesson of 20th century economics – that the way out of a recession and depressed growth is by increasing demand in the economy. In the words of Nobel prize winner Paul Krugman, he’s a demand denier.

Lastly the Bank’s MPC needs to build on Mervyn King’s strong defence of low interest rates by making even more clear that they are here until jobs and growth have been secured.

But fewer and fewer accept that we are all in this together, and a big majority expect to be personally affected by spending cuts.

Resistance is therefore growing. The student campaign against higher tuition fees may have been dismissed as middle class self-interest by some, but quickly broadened to include a defence of educational maintenance allowances and in any case is about fees for future students. Campaigns to defend science spending, school sports and children’s books have secured at least partial victories.

Yet tactical retreats by a government carefully attuned to the media mood do not add up to any fundamental reshaping of government policies. So how do we take a broader campaign forward?

We should start by learning from the past. The most significant u-turn carried out by the last Conservative prime minister was the end of the poll-tax.

This had to go when it became clear to government MPs – even in their safe seats – that it offended the deep British sense of fairness. London riots may still be the media’s stock pictures for the poll tax,  but he campaign was won in the constituencies of middle Britain when voters stood up and said no in numbers that were quickly taken back to Westminster by MPs in fear of their seats.

These cuts are even more unfair. The poor and those in the middle will pay a heavier price than the rich. Those in banks and finance who caused the crash  are quickly getting back to a bonus-as-usual culture that floats free from the misery that their excess has imposed on too many of the rest of us. Ordinary voters have to pay their VAT, big corporations and the super-rich consider large parts of their tax bills optional.

Yet while the poll tax is a good starting point for the campaign – particularly in its emphasis on fairness and local campaigning – we live in a very different world today.

The mainstream media is less dominant. Political parties are smaller. Trust has declined. The kind of social infrastructure in which my generation began our political lives is still around – with unions as a prime example. But alongside this, particularly for the young, a new more mobile and networked world has grown, with perhaps the UK Uncut protests  as the prime example.

The challenge for the cuts campaign is how best  we can combine the two. The energy, immediacy and  informality of the new networks has just a valid contribution to make as the reach, resources and different style of us traditional campaigners. The real test is whether we can meld them together in a way that reaches out beyond both to put the maximum pressure on government MPs.

This is why the TUC hosting today’s Netroots UK conference and why we have made a strong commitment to False Economy.

I hope the starting point today will be mutual respect for our different styles. Unions certainly recognise that none of us should be trying to stitch together a new organisation. Instead we are setting out to build a movement that will take many forms – autonomous local groups, online campaigns and more traditional – yet still vital events – like the TUC’s March for the Alternative on March 26th. While doubtless there will be initiatives that are counter-productive, and some that simply don’t work, giving people as many routes as possible into a broad movement must be the right approach.

Some said the last general election would be the first internet election in the UK. They were wrong, but the anti-cuts movement is perhaps already proving to be the UK’s first great web campaign.

Netroots has been an important part of the progressive movement in the USA.

I’m proud the TUC is playing its part in bringing the same kind of initiative to the UK.

There is a whole industry of socially-useless advisers who come up with new perfectly legal ways of avoiding the tax that Parliament intended wealthy people and organisations to pay.

As the cuts bite, it is getting ever more clear that we are not all in this together and those who did least to cause the crash are suffering the most.

What UK Uncut are doing is not the way that unions traditionally make their voice heard, but I am sure that they will remember that the workers in the shops they target are just as much victims of cuts and unfair tax policies as anyone else.

As the TUC recognised in the statement we adopted at our Congress last September the campaign against the cuts will take many forms. A tiny minority will go in for ones that are counter-productive, but the rest are going to add up to a real movement for change. We have no pretensions that all of it can be brought together in a single organisation or run in a top-down way.

Our March for the Alternative will be one focus – scrupulously organised and highly disciplined to ensure that it can be both safe and huge – but there’s also room and a need for spontaneity and action at the grassroots.

In short, by 2015 the UK economy will still not be back to where it was before the recession hit in 2008. No politician should seize on these figures as some sort of good news story, least of all one that has just abandoned plans to publish a jobs and growth strategy for the country.

While we welcome the reduction in the likely number of lost public sector jobs, it looks as if this will be largely due to the cuts being taken from the benefits budget instead.

The government may be trying to make these cuts politically acceptable by relying on the widespread view that too many people abuse the benefits system, but these cuts will go far beyond the very limited savings from crackdowns on abuse, and cause real suffering to some of our most vulnerable citizens.

And of course, these cuts will in turn have a knock-on effect on the private sector.

With the economy still fragile, the government is taking big risks with the recovery by deliberately planning for job losses.

Tomorrow the Government will announce unprecedented cuts in public spending – deeper than any of us can remember. They will bite deep into our social fabric – and hit some of the poorest and most vulnerable members of our society.

They want us to believe that they have no choice and that this is economic necessity. Yet economic experts across the spectrum warn us that the cuts are too deep and too rapid. The warnings come from the White House, the US Treasury department, Nobel prize winners like Paul Krugman and Joseph Stiglitz, key members of the Bank of England monetary policy committee, the chief economics commentator on the Financial Times, and yes, even the Mayor of London.

At worst the cuts will plunge us back into recession. And at best they will condemn us to lost years of high unemployment and growth so weak that the deficit may well stay high.

This is not economic necessity, but a political choice. Bad economics is serving a political project that has never been put to the British people at an election.

In Westminster today, we’re bringing together a huge range of people who say that ministers must think again. It involves people whose jobs and livelihoods are directly threatened, from those who depend on quality public services, and from those in the private sector whose jobs are as vulnerable to the cuts as anyone working for a local council.

Above all, we’re starting to hear a new and much broader coalition than that which makes up the Government. A coalition of the concerned, a gathering of those who say that these cuts offend our deep British sense of fairness. Not everyone in this coalition will agree about everything. There may be different priorities, different emphases – but certainly all involved fear for our country’s future if the deep, rapid cuts go ahead.

However you tweak or spin such massive cuts they will inevitably hit the poor and those on middle incomes the hardest. Those at the top who can easily afford to plug any gaps will hardly notice them.

The truth is that there are alternatives. At every point in the development of its policies, the Government had choices.

The Government deliberately chose to meet 80% of its target by spending cuts, and not by tax. And that means making Britain a more unequal, more squalid and nastier country, as a deliberate policy.

Instead we should back fair taxes – because those who did best from the boom should help pay for the bust they created. Whether it’s a Robin Hood Tax on the banks, a crackdown on the £25 billion of tax avoidance by the City and the super rich, or measures to close the corporate tax gap, there are positive choices that a Government committed to fairness could make.

Ministers deliberately chose a timetable for deficit reduction that is so tight they probably won’t meet it. Because the great myth in this debate is the more that you cut, the quicker you reduce the deficit.

The biggest contribution to reducing the deficit in any conceivable plan comes from economic growth. It’s a hard-working country that can generate the tax that can fill the deficit gap, that can create the jobs that a lost generation of young people need, and that can meet the challenges that we face as a society – from moving to a low-carbon economy to eliminating child poverty.

What ministers plan is not inevitable. It’s their political choice and it’s our democratic duty to wage the strongest political campaign of our lifetimes for a change of course. And it starts today.

The report contains not a single proposal that will reduce the high levels of workplace death, injuries and illness. Every year in the UK over 20,000 people die prematurely as a result of their work and at any one time over two million people are suffering ill-health because of their jobs.

Yet instead of looking for ways of preventing people being killed and injured, the report uncritically accepts the myths and preconceptions surrounding health and safety, and focuses on dealing with a compensation culture which the Government accepts does not exist.

Health and safety is not a throwback to a previous century, or an issue that only affects heavy industry. It is just as much an issue for offices and shops – workplaces that Lord Young dismisses as “low risk”, despite the evidence of high levels of work-related ill-health in these sectors.

All workers and their families depend on health and safety to keep them safe and well. They also need assurances that, when workers are killed or made ill because of their work, the culprits will be brought to justice.

This report is a missed opportunity to improve the UK’s workplace safety record. But by failing to challenge the myths around health and safety it could actually make things much worse.

It’s common sense that the poor use public transport more than the rich, and pensioners use the NHS more than the young. But no-one has yet put all the data together to work out the precise impact of the big cuts planned by the government.

Today we launch a substantial independent report that does exactly this.

It is based on the most thorough analysis of who benefits from UK public spending ever carried out. It means that we can use what the Government has said about its spending plans over the next three years to work out how they will hit different groups.

What we can now definitively say is that the spending cuts will make the poll tax look like something dreamed up by Robin Hood.

This graph shows the likely impact of the planned cuts on each ten per cent band of earners.

The poorest ten per cent are set to suffer from cuts equal to 20p for every pound of their income, while the richest ten per cent suffer from a cut of less than one and half pence in their standard of living.

In other words the poorest ten per cent lose more than thirteen times as much as the richest ten per cent. Right across the income bands: the poorer you are, the more you lose.

Coalition ministers say their policies are progressive. They have promised that they will protect the vulnerable, not increase inequality and will not open up a new north/south divide.

Yet today’s figures show exactly the opposite. This is classic doublethink. They say progressive, but these cuts will make the poll tax look as if it was dreamed up by Robin Hood.

Each day it becomes more clear that there are alternative ways to drive down the deficit. These deep cuts not only threaten services, but risk economic recovery.

You do not need to deny the deficit to see that there are practical alternative ways of reducing it.

There is no need for such a rapid timetable. There could be a much greater role for tax increases fairly targeted on those with the broadest shoulders; and there could be much more emphasis on investment to stimulate greener growth.

The only conclusion is that the government is making a political choice, not following economic necessity.

Ministers are following policies deliberately designed to make Britain a far more unequal society. Those who did least to cause the crash pay the most, and those at the top face no more than demands for small change.

But voters last May did not vote for a radical and permanent cutback in the scale and scope of public services.

The poll tax was defeated when the decent majority stood up and said no. It offended the deep sense of fairness that we share in this country across party divides.

The cuts have only just started to bite. When their full extent becomes clear, I know the country will join with us in saying ‘no’ once again to policies that are so eye-wateringly unfair.