Gordon Brown today said Britain was "overcoming" the problems caused by the recession as it emerged that spending cuts worth £15bn are likely to be announced in the budget on Wednesday.
The prime minister delivered his upbeat message as he published a strategy intended to help firms take advantage of economic opportunities in the future.
"Our industrial policy is about a dialogue with business, leading to a consensus about what we in Britain need to do to face this global future, and then of course a partnership for the future that I believe is to the benefit of all," he said.
"We have difficulties that we are overcoming, but we have also got enormous opportunities and challenges ahead. Working together, we can meet and master every challenge."
But Brown's message was undermined by news that the budget will contain proposals for spending cuts.
The cuts will come from "efficiency savings" expected to target staff working on "back office" functions rather than frontline services.
The Treasury has outlined plans to achieve savings worth £5bn by 2011. On Wednesday, the chancellor, Alistair Darling, is expected to say that a further £10bn will be cut from Whitehall budgets through savings implemented over the following three years.
In a further development, the Institute for Fiscal Studies today said Darling's plan to raise income tax to 45p in the pound for those earning more than £150,000, from 2011, was "very unlikely" to raise the £1.6bn predicted by the Treasury.
Darling's budget will also set out plans for more than £2bn of extra spending on the unemployed – including a scheme to help those unemployed for more than 12 months – and proposals to offer 18 to 25-year-olds six months of training and work experience.
Research suggests as many as 1.25 million of the 3 million projected unemployed will be under the age of 25.
Darling is also expected to reveal that the economy will contract by as much as 3.5% this year, compared with his prediction of a 0.75% to 1.25% slowdown in the pre-budget report last November.
The chancellor will predict that the recession is likely to end this year and that the economy will grow by as much as 1% next year, even though the forecast's accuracy is entirely dependent on the world economy.
He is unlikely to introduce any tax rises, arguing that they might slow the recovery, and may signal that the rate of growth of spending will have to be reduced in the period after the election.
In a politically delicate attempt to train the electorate's sights on a coming recovery, Brown – with the business secretary, Lord Mandelson, and the skills secretary, John Denham – today published a comprehensive paper on the state of British competitiveness.
Mandelson told the Guardian the policy was "designed to frame the budget statement".
"It's not enough to limit the damage of the recession to the economy, vital as this is," he said. "We need to provide a vision of the opportunities and advantages for the UK in the world economy at the upturn and beyond."
He argued that "the job of governments is not to substitute for markets or displace the private sector".
"We are not into bailing out the past, but removing the barriers to investing in the future," he added. "If markets fail, or don't work efficiently, government has a role to play, as we saw with the financial markets."
The policy statement – Building Britain's Future – calls for greater cross-departmental working in Whitehall, greater use of a £175bn government public procurement programme and clearer signs through regulation for investors thinking to commit themselves to new industries such as renewables.
It also proposes that university research must meet tougher criteria on commercial application.
Mandelson stressed that the government was not picking winners but highlighting potentially strong areas of future growth including aerospace, composite materials and industrial biotechnology.
In a sign of this new activism, Darling will announce an extra £500m of government spending on reducing carbon emissions, including a pledge of £40m to top up and keep open a grants programme for renewable energy technologies.
But at a Liberal Democrat press conference unveiling plans to cut tax bills by £700 a year for people on low and middle incomes, Vincent Cable strongly attacked the government's new industrial interventionism.
"It's a really dreadful old Labour idea," the Lib Dem Treasury spokesman said.
"I'm horrified that the government is going back to it. It's a massive waste of money."