Nick Clegg: The cupboard is bare... and we can't afford the reckless promises that Labour made

I said that before the campaign, I said it during the campaign, and I said it as soon as we formed the new Government. Those difficult decisions are inevitable for one simple reason: the Labour government spent far more money than we, as a country could afford. They were reckless, racking up billions of pounds of debt every week in your name without a thought for how to pay the money back. They left the country's finances in a mess, and it's got to be sorted out. I'm sure you, like me, wish it wasn't this way. But we are where we are, and difficult decisions are the only way out.

In the last few weeks, we have had to start taking those decisions. It is with great regret that one of them has been to withdraw the promise of an 80m loan to Forgemasters in Sheffield.

It is a company I know well, a great British company and one that is at the cutting edge of its industry. It was promised a loan to help it expand; and in a perfect world there would be money available to help it do so. But, as Labour's Treasury Chief Secretary Liam Byrne wrote in his letter to his successor, there isn't any money left. Labour spent it all, and then some. The cupboard is bare.

The truth is, Labour promised the people of Sheffield millions of pounds they knew full well they didn't have. It was an election stunt, a bribe to the voters of this great city that they knew they would never have to pay.

In front of the TV cameras, Labour made all sorts of lofty promises, but behind closed doors they left notes admitting those promises could not be afforded. This was breathtakingly cynical, raising false hopes for everyone in Sheffield. They left it to the next Government, to myself and Vince Cable and our coalition partners in the Conservative Party, to cancel the cheques and take the flak.

Make no mistake, if Labour had won the election, they would be doing exactly the same thing now. These are Labour's cuts, to pay off Labour's debts. The coalition government is just the bearer of the bad news Labour hid from you.

If we shy away from our responsibilities we won't just delay the problem, we will make it a lot worse – interest rates will go up, jobs will be lost and money which should be spent on educating our children and policing our streets will be wasted on servicing our debts.

I have no doubt that Forgemasters will continue to thrive. The cancelling of this loan will not mean a single person loses their job. This was a programme for expansion, not survival. Forgemasters is a profitable company providing a service that few in the world can provide. It has a highly skilled workforce with talent and knowledge that can't be easily replicated elsewhere.

I believe Forgemasters can find the money for expansion elsewhere, and the Government will do everything that we can to help them to do so, including bringing in specialist advisers to help secure private finance.

You may think that it would have been easy for me, a Sheffield MP, to use the power of my office to force my colleagues in Government to make sure that while the rest of the country suffered, my constituents were treated differently. That would have been an abuse of power. It's the

stuff of shady deals in smoke-filled rooms.

But I can promise that Sheffield will not carry an unfair burden. There will be no return to the neglect of the 1980s. Our ambition is to bring to an end the North-South divide, and help regions like Yorkshire and cities like Sheffield to thrive. But we cannot build a better future – in Sheffield or elsewhere – on a mountain of debt.

The whole country has to unite, each taking our fair share. It will be painful, but that's why I am determined to make sure that the pain is distributed fairly and that those with the broadest shoulders carry the heaviest weight. That is what the Liberal Democrats promised throughout the election campaign and that is what we will deliver in government.

That's why we promised to make the tax system fairer by taking steps towards ensuring that no-one pays tax on the first 10,000 they earn, putting money back into the pockets of those struggling to get by on low wages. We can't do it all in one go, but we will be making a start in next week's Budget and we will go further in future.

The Liberal Democrats had a choice before the election: to come up with a wish list of wonderful sounding promises of all the things we'd like to do, or to be honest and only make promises we knew we could keep.

There are very difficult days ahead, but I have no doubt that by taking the tough decisions now and sharing the burden fairly Britain will recover and thrive. I am certain that Forgemasters will too.