Nick Clegg: We must build a new kind of economy to create a stronger, balanced Britain

This Government is determined to build a new kind of economy for

Britain. For years our prosperity has been pinned on financial wizardry in London's Square Mile, with other sectors and other regions left behind. That imbalance left us hugely exposed when the banking crisis hit. And now Britain has a budget deficit higher than at any time since the Second World War.

It's time to correct that imbalance. We need to spread growth across

the whole country, and across all sectors. We need to rediscover our talent for building and making things.

The first step is getting the books in order – our recovery depends on it. That meant some difficult decisions in last week's Budget. We set out plans to cut public spending in order to fill the gaping hole in the public finances. It's not a task we relish, and we have had to take some steps that we hoped to avoid, including the rise in VAT. But the plan we have agreed is the right one. The options available to us just two months ago have now vanished. Unless we show the markets that we have a strategy to bring down our debts, we risk the kind of upheaval engulfing other parts of Europe, like Greece and Spain. If we refuse to act, we condemn our children to higher interest rates and fewer jobs

for years to come.

But action must be fair. The burden must be shared, and we have a duty to protect those who need it most. That's why, for example, public sector workers are being asked to accept a two-year pay freeze. Pay restraint has already become a fact of life in many private companies. And a temporary pay freeze helps us see off greater public sector job losses. But, at the same time, we must make sure the lowest paid

workers are protected. So each will still get a 250 pay rise, each year. And all public sector staff on low and middle incomes will keep more of the money they earn as we increase the income tax personal allowance.

The conversations I have with public sector staff show that very often their first thought is not for themselves, but for the people they work with: the children they teach, the patients they treat. Groups that must not be allowed to suffer the brunt of cuts. So we are protecting health budgets and targeting extra school funding to disadvantaged children. By restoring the pensions and earnings link, we'll also improve living standards for around one million pensioners here in Yorkshire and Humber.

As we return our economy to health, supporting business is a priority, too – especially in the North where many have had to let people go, and new companies struggle to get off the ground. We must avoid the kind of North/South divide that has made past recessions so much worse. And, if we've learnt anything from the last two years, it's that London doesn't

hold all the answers. As a Sheffield MP, representing one of the

world's oldest industrial cities, I know that manufacturing and

industry must be at the heart of future growth.

Our support for business won't repeat the false promises made by Labour to selected firms like Sheffield Forgemasters. It was wrong for Labour to promise money they knew didn't exist as a pre-election stunt.

We'll only make pledges we can afford, like our Regional Growth Fund, which will provide opportunities to businesses here in the North. And we have plans to reduce National Insurance payments for new businesses outside London, so they can afford to take more people on. This could benefit thousands of local companies.

We're also cutting red tape, doing everything we can to support our budding entrepreneurs, instead of clipping their wings with endless regulation. And we're giving local communities much more control over how their economies develop. In areas where local people don't feel that their regional development agency is working, it will be replaced with a Local Economic Partnership, empowering locally elected-leaders to work with business to make sure their communities thrive.

Finally, whether you work in the private or the public sector, everyone knows that a fair economy is one in which the banks pay their share – helping fix the mess they caused. That's why last week the Government announced a new levy on the banks, and work is underway on tackling bonuses and getting the banks lending to hardworking businesses.

Tackling the deficit is this Government's immediate priority. But we know that lasting prosperity rests on building a new economy – one that is fair, strong and balanced. That's the future we will secure – a future we can all look forward to.