Danny Alexander backs EU membership and aims for capital overhaul in long-term expenditure plan
Danny Alexander, the chief secretary to the Treasury, on Thursday warned that the UK's nascent recovery would be squandered if the coalition continued to suggest willingness to leave the EU.
He also revealed that the government wanted the spending review, due to be published next month and covering spending in 2015-16, to set out a 10-year horizon for capital expenditure.
He said the Treasury was taking a "zero-based approach" to how capital would be spent over the next decade, with every capital programme up for review.
The 10-year time-frame will be seen by some as a sign that the Tories and Liberal Democrats are willing to set out long-term joint spending plans, despite the differences between the two parties.
George Osborne revealed this week that he was £8bn short of the £11bn cuts he needed to stay on track for his deficit reduction plans in 2015-16.
The government's deficit reduction targets largely apply to current, as opposed to capital, spending.
Ministers are increasingly willing to spell out the importance of capital spending in face of criticism from economists that a simple determination to cut current spending will choke off recovery.
A succession of organisations, including the IMF, has pressed the government to bring forward capital spending.
On the health of the economy generally, Alexander said: "There are some signs of momentum starting to return to our economy. The UK economy grew by 0.3% in the first quarter of this year, more than was forecast by the Office for Budget Responsibility.
"Last year we became a net exporter of cars for the first time since 1975. And British exports of goods to emerging economies have increased since 2010."
He also said that public-service reform could achieve savings without reducing the quality of services.
In remarks aimed at the home secretary, Theresa May – one of the cabinet ministers holding out against big cuts to a departmental budget – Alexander said: "When we first came to office, we were warned that cuts to police spending would reduce police effectiveness.
"Instead, we've seen crime drop to its lowest level in 30 years. We were warned that cuts in the public sector would lead to nearly half a million job losses in the private sector. Instead, we've seen over a million jobs created in the private sector."
But in his strongest defence of UK membership of the EU, Alexander, a strong pro-European, warned that the recovery would be undermined by threats to leave the EU.
He said: "Arguing for Britain to leave the EU at this time is not just irresponsible, but damaging to jobs and Britain too.
"We shouldn't be debating leaving the EU, we should be leading it. We need to complete the single market, open up energy markets, make e-commerce borderless within Europe.
"Britain has never been in a better position to lead these changes. The eurozone crisis has forced many of the countries who used to be the biggest blocks on economic reform to see its advantages."