You've never had it so bad: Cameron slams Labour for grim legacy of debts

The Prime Minister accused Labour of a "public sector splurge" that threatens to leave the country paying 70bn a year in debt interest alone – more than the combined spending on running schools, tackling climate change and transport.

Laying the blame for the "unavoidably tough" decisions that must be taken – likely to include public sector job losses and cuts to pay and benefits – firmly at Labour's door for "reckless" spending, he raised the spectre of Britain being plunged into a crisis like Greece unless action is taken immediately.

With Yorkshire's councils expected to discover this week – possibly as early as today – how much of a 1.2bn cut from this year's local government budget they will have to find, Local Government Secretary Eric Pickles also warned that "quite drastic measures" would be needed to tackle the deficit.

Regional development agency Yorkshire Forward, which is already expected to have to make some cuts this year, is likely to find its spending under pressure and the very existence of the 7m-a-year Government Office for Yorkshire and the Humber, Whitehall's outpost in the region, is under review.

The Prime Minister's stark warnings of years of "painful times that lie ahead of us" paved the way for Chancellor George Osborne and Chief Secretary to the Treasury Danny Alexander to launch the comprehensive spending review today, which will set out in the autumn how far Whitehall departments will have to cut back their spending over the next few years.

It has already been dubbed a "once in a generation" reassessment of the role of the state, with the experience of other countries such as Canada being studied to see how they cut deficits.

Mr Osborne and Mr Alexander will today publish the framework for the review, explaining the principles on which it will be carried out, and are also expected to announce plans to allow members of the public to suggest where they think cuts could be made.

Both Mr Cameron and Deputy Prime Minister Nick Clegg, MP for Sheffield Hallam, have promised special help for northern regions including Yorkshire which have more fragile economies and where towns and cities like Barnsley, Doncaster and Hull are heavily dependent on public sector jobs.

The Prime Minister's bleak outlook also sets the scene for a tough Emergency Budget on June 22 which will include the scrapping of child trust funds, cuts to child tax credits for middle income families and increases in capital gains tax.

Nick Pontone, policy director of Yorkshire and Humber Chambers of Commerce, said a phased plan for cuts over the next few years was painful but necessary.

"The Prime Minister seems to be setting the stage to announce the vast bulk of the pain this year," he said. "This is the right strategy although he must be careful to protect the most important public services and capital investment in future growth."

Steve Houghton, Labour leader of Barnsley Council, said local authorities are still in the dark about where cuts will come but insisted: "It is hard to imagine it won't affect jobs or services in some way or other."

Kris Hopkins, Tory MP for Keighley and former Bradford Council leader, said it would be a "significant challenge" for local authorities but added cutting posts – through natural wastage rather than redundancies – was the most obvious way to save money.

In yesterday's keynote speech Mr Cameron said the Government's deficit was "even worse" than thought and the action needed to tackle it would change everyone's way of life. He condemned a 20bn increase in benefits, a 4.5bn overspend in defence projects and a doubling in NHS managers.

In a speech which was condemned by Labour and trade unions, Mr Cameron said the "complete economic failure" of the previous government had been "laid bare", but pledged to cut spending in a way that united the country and protected those in need.

"We are not doing this because we want to, driven by theory or ideology," he said. "We are doing this because we have to, driven by the urgent truth that unless we do, people will suffer and our national interest will suffer."

He said failing to tackle the 156bn deficit now would mean that by 2014/15 debt interest would swallow up 10p of every 1 paid in tax.

"People's lives will be worse unless we do something now," he said. "The cause of building a fairer society will be set back for years unless we do something now."

In what he described as "a tale of two economies" Mr Cameron said the public sector was "insulated from the harsh realities of the recession" with a 15 per cent increase in public sector jobs while private sector employment 3.7 per cent.

Liam Byrne, Labour's Shadow Chief Secretary to the Treasury, said: "Everyone agrees that the deficit must fall, but we must do it fairly. And on that basis the coalition has made a poor start, cutting support from young people out of work, and breaking their promise to protect frontline services."

Leadeer of the public serv ices union Unison General Secretary, Dave Prentis, described the speech as a "chilling attack on the public sector, public sector workers, the poor, to the sick and the vulnerable and a warning that their way of life will change".