A further £25bn of cuts - including £12bn from benefits - must be made after the next election if the Government is to eliminate the UK's deficit, Chancellor George Osborne has said.
Mr Osborne, who set out his priorities for the next 12 months in a speech saying 2014 will be "the year of hard truths", argued that the size of the state and the welfare system must become "permanently smaller".
He claimed Labour was "simply not being straight with people" by suggesting there was a "magic wand" which would allow a chancellor to spend more on public services.
Mr Osborne said: "Thanks to the hard work of the British people, our economy is on the mend - and our country is doing better.
Mr Osborne meets graduate apprentice Tom Mosdale (left) in Birmingham "But what was hard won can be easily lost. So we have a choice in 2014. We can give up, go back to square one, risk everything.
"Or we can confront the hard truth that more difficult decisions are needed - and work through the plan that is turning Britain around. I say: 'let's finish the job'."
"Welfare cannot be protected from further substantial cuts.
"I can tell you today that, on the Treasury's current forecasts, £12bn of further welfare cuts are needed in the first two years of the next Parliament."
And he said curbing public spending was the only way to ensure future jobs and prosperity.
"Government is going top have to be permanently smaller - and so too is the welfare system," he said.
Mr Osborne has also indicated he supported keeping benefits for pensioners such as winter fuel payments and free bus passes.
Nick Clegg said the Tories were making a 'monumental mistake' Instead he told BBC Radio 4's Today programme he would look at targeting housing benefits for under 25s, and means-testing social housing.
But Deputy Prime Minister Nick Clegg said Conservatives were making a "monumental mistake" in seeking "cuts for cuts' sake" and placing the burden of future deficit reduction on benefit claimants alone.
The Lib Dem leader told a Westminster press conference that the major parties were now putting forward "three very different visions" for how to balance the books, create economic stability and support public services.
Mr Clegg said Liberal Democrats agreed on the need for fiscal responsibility to deal with the deficit by 2017/18, but the "big difference" from Conservatives was that "we believe that the way we finish that job should be done fairly".
Shadow Chancellor Ed Balls said: "George Osborne is desperate to stop talking about the cost-of-living crisis on his watch. But that won't stop working people from doing so as they are on average £1,600 a year worse-off under the Tories and prices are still rising faster than wages.
"Nor will the Chancellor admit the reason why he is being forced to make more cuts is because his failure on growth and living standards has led to his failure to balance the books by 2015."
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