Evidence shows that the Government's austerity programme is working and the UK economy is "turning a corner", Chancellor George Osborne declared today in his most upbeat assessment yet about the country's prospects.
In a foretaste of the political argument Conservatives will use in the 2015 general election campaign, the Chancellor warned that holding to his course is the only way of delivering lasting improvement in living standards. Switching economic policies would be "disastrous", putting at risk the advances achieved by the sacrifices of the past three years, he said.
In a speech at a building site in east London, Mr Osborne said that those - like shadow chancellor Ed Balls - who argued for a Plan B involving more state borrowing and less deep cuts have "lost the argument" because they were unable to explain the recovery of the past few months.
And he warned of the need to make "many billions" more in savings after the next election, cautioning Labour that "anyone who thinks those decisions can be ducked is not fit for Government".
In a direct challenge to Labour's decision to put cost-of-living issues at the centre of its agenda in the run-up to the election, Mr Osborne said that Britain was poorer today because of economic decisions taken by the previous government and warned that Plan B would "add hugely to the cost of living".
"Just as our economy recovers and the British people's efforts start to pay off - now is not the time to put all that at risk, a nd I will not do that to this country," he said. "We have laid the foundations. We have built on top of them. But we cannot stop now. We have got to finish the job. And we will."
Labour accused the Chancellor of a "desperate attempt to rewrite history".
"Three wasted years of flatlining under George Osborne have left ordinary families worse off and caused long-term damage to our economy," shadow Treasury minister Chris Leslie said.
"This desperate attempt to rewrite history will not wash when on every test he set himself, this Chancellor's Plan A has badly failed - on living standards, growth and the deficit."
Opposition leader Ed Miliband is expected to use his speech to the TUC conference tomorrow to lambast the Chancellor for being "out of touch with ordinary families" by celebrating while they face the squeeze.
But Mr Osborne said that the last few months - which have seen growth forecasts revised upwards amid a number of positive indicators - had "decisively ended" questions about his deficit-reduction strategy.
Treasury officials believe the economy has entered the "next phase" of recovery - only months after economists feared the UK was set to plunge into an unprecedented triple-dip recession.
Mr Osborne said: "The message from here to the British people is this. The economic collapse was even worse than we thought. Repairing it will take even longer than we hoped. But we held our nerve when many told us to abandon our plan.
"And as a result, thanks to the efforts and sacrifices of the British people, Britain is turning a corner.
"Many risks remain. These are still the early stages of recovery. But we mustn't go back to square one. We mustn't lose what the British people have achieved.
"This is a hard, difficult road we have been following. But it is the only way to deliver a sustained, lasting improvement in the living standards of the families of this country."
Mr Osborne has been buoyed by revised gross domestic product figures showing the UK economy grew by 0.7% in the second quarter of the year, with predictions it could reach 1% for the third quarter.
The respected OECD think-tank has almost doubled its prediction for UK growth this year to 1.5%.
Rising property prices and a summer retail splurge as well as booming car sales have also contributed to the feel-good factor, with s urging manufacturing figures for June also helping fuel the improved mood.
Goods exports excluding oil plunged however by 9.3%, and the overall trade deficit more than doubled from £1.3 billion to £3.1 billion, with real terms wages also in decline.
The economy remains 3% below its pre-crisis level.
The venue for today's speech was chosen as a symbol of the turn-around in the economy, as it was a construction project where work came to an abrupt halt when investors withdrew funding in 2008, only to restart last year as vigour began to return to the economy.
Addressing an audience of academics, think tanks and businesses, Mr Osborne said that " the last few months have decisively ended" the idea that the scale and pace of his measures were to blame for much slower than projected growth over recent years and dismissed suggestions that the Government's support for the housing market meant Britain was experiencing "the wrong sort of growth".
Borrowing more to boost spending would have " undermined" recovery and the impact on living standards " would have been much harsher", he said.
"Our economic plan is the right response to Britain's macro-economic imbalances and the evidence shows that it is working," said Mr Osborne.
"As I have argued for more than five years now, the correct macro-economic response to the perilous economic situation in which the UK found itself in 2010 is a combination of fiscal responsibility and monetary activism.
"Fiscal responsibility to deal with a record budget deficit over a period of several years; monetary activism to manage the process of deleveraging and support demand."
Labour leader Ed Miliband said: "I think it's extraordinary complacency from the Chancellor. He is actually saying to the British people that he has saved the British economy at a time when, for ordinary families, life is getting worse and living standards are falling."
Steve Radley, director of policy at manufacturers' organisation the EEF, said: "Faster growth and more positive business surveys do suggest that the outlook is improving. But the Chancellor is also right to stress the scale of the challenge.
"With business investment still down by 25% and manufacturing by 10% on where they were before the recession, we still have a long way to go to create the balanced economy that will deliver lasting improvements in living standards."
Len McCluskey, leader of Unite, said it was "nonsense" to suggest that those who has called for a Plan B had got it wrong.
He told a fringe meeting at the TUC Congress in Bournemouth that growth would have been stronger and more sustainable if the Government had followed different policies.
"The pain people have suffered would not have happened. The idea that fledgling green shoots proves the measures were a price worth paying rejects reality."
Mr Balls said Mr Osborne should stop the "boasting and bluster", but acknowledged Labour's failure to build enough homes.
He told Channel 4 News: "The big question is can George Osborne now catch up the lost ground we've lost in the last few years? My fear is, we've had three years of high youth unemployment, of business investment low, living standards falling month by month by month.
"The question is can we catch up that now or are we going to be all poorer, and our economy weaker, because of the failures of the last three years? That will determine the next election."
He added: "Rather than boasting and bluster, he should do something on jobs and homes and living standards."
Pressed about Labour's record of housebuilding and whether that contributed to the squeeze on living standards, Mr Balls said: "Labour didn't build enough homes in the first part of our time in government."