We had to make early cuts to avoid danger zone - Clegg

Nick Clegg on relationship with David Cameron: "We're open about disagreements"

Nick Clegg has said ministers had to start cutting spending early because of "perilous" economic circumstances after the general election.

The Lib Dem leader, whose party once opposed early cuts, told the BBC Britain had been in the "danger zone".

But he also warned banks against "offensive" bonuses saying he would not take another bonus tax "off the table".

Meanwhile, Lib Dem members have voted to ensure spending cuts do not hit the poorest disproportionately.

They backed a motion at the party's conference in Liverpool demanding that the "inequality gap does not widen".

It called for child benefit to remain universal, to explore the possibility of a graduate tax and build more social housing.

'Genuine fear'

In an interview with BBC Radio 4's Today programme, Mr Clegg said his party, which went into coalition with the Conservatives when the general election resulted in a hung parliament, had reacted to changing economic circumstances.

He denied he had changed his mind about when cuts should start: "We kept saying this is not an issue of political dogma. It's an issue of economic circumstance."

"Everybody's working assumptions were seriously challenged by the circumstances which we found ourselves in economically after the general election.

"People forget that the Sunday after the general election there was an emergency summit in Brussels where there was a genuine fear that the Euro zone was going to go up in flames."

"There was a real sense... that we were in the danger zone straight after the general election that if we didn't set out a plan that went further [than Labour's]."

He said the five-year deficit reduction plan built on Labour's planned eight-year plan: "It's a significant acceleration but it's not a completely different plan. If we hadn't done that, if we hadn't tightened a little further, I believed we would have had our hand forced by market panic."

Mr Clegg also warned banks not to indulge in "ludicrous" bonuses and said the government would not "be able to stand idly by" if "offensive" bonuses were awarded.

"There are a number of options, the last government imposed a temporary tax on bonuses. I'm not going to take any options off the table."

"Clearly, if the banks pay themselves unjustified bonuses, we reserve the right to take very serious action on that."

"I think it is incredibly important that the banks understand that you cannot possibly award yourself ludicrous sky-high bonuses in an industry that has been bailed out by the taxpayer when those same taxpayers are now having to make very serious sacrifices in their own lives."

Asked about tax avoidance - when people pay accountants to minimise their tax bill - he said as a "matter of principle" it was better for people who do well in Britain to pay their "fair share" of tax.

'Grim reaper'

While there was "nothing illegal" about tax avoidance he said it was the "responsibility of the government to make sure the opportunities for doing that are minimised".

The conference is the party's first get-together since its leaders formed a coalition government with the Conservatives in May.

On Monday, Mr Clegg urged his party to hold its nerve over the coalition agreement and said planned cuts, due to be outlined in next month's spending review, were the "only choice".

But backbench Lib Dem MP Mike Hancock told the BBC that his party leader "didn't once mention how they [the government] were going to protect the poor, and how they were going to ensure people that desperately need our help are going to get it".

He added: "It is no good saying what we might achieve. What people want is some reassurance that they won't be punished, and I think this is a golden opportunity that was lost."

Speaking during the debate on "fairness" in cuts, Ros Kayes, from Dorset, said: "We need to protect the poor... It will be a retrograde step if [Chancellor] George Osborne is able to cut like a grim reaper of death through benefits that people rely on."

Whitehall departments have been told to plan for budget cuts of between 25% and 40% ahead of the spending review.

Ministers say this is necessary to cut the deficit, which reached £155bn last year, in order to improve the UK's economic performance.

But critics, including Labour and the unions, claim the savings programme will hit growth and damage public services.

TUC leader Brendan Barber, a vehement critic of the cuts programme, is due to address Lib Dem activists at a fringe meeting.

Ahead of the speech he said people would start to ask if there was "an alternative to slash and burn economics", adding: "There is real concern that the government's programme of deep spending cuts, while our economy is still fragile, will spark spiralling unemployment in both the public and private sectors."

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