The Conservatives must be elected with a working majority to avoid "economic paralysis", George Osborne has said.
During a Daily Politics debate this afternoon chancellor Alastair Darling and his Tory and Lib Dem shadows, Osborne and Vince Cable, clashed over their plans to cut the deficit.
In their opening statements, Cable said today's unemployment figures are a reminder of the human cost of the downturn. He proposed a levy on banks, public finance discipline and fair taxes.
Darling said he is confident about the future after the deepest downturn in generations as long as we stick to the course that has been set, secure the recovery and not cut support too soon.
Osborne said the rise in unemployment is a sign of failure and the country does not need five more years of debt, waste and taxes.
A Conservative government with a clear mandate will "balance" the economy and get it moving. Challenged about a poll that shows City figures would prefer Ken Clarke as shadow chancellor, Osborne said a recent poll of investors found they support Tory policies and think a hung parliament would cause serious problems.
Darling was asked why the economy is in "such a mess".
He replied that growth is fragile and the government's actions in supporting people was right - take that away and you risk more people losing their jobs.
Osborne was challenged about Clarke's assertion that a hung parliament would lead to the IMF having to intervene to help the UK economy.
He replied that if the markets have no confidence in the government the IMF will have to be called in and pointed out the last time that happened was with a hung parliament and weak government.
Voters should be aware of the consequences of political instability on economic confidence, he added.
Cable said the whole idea that a hung parliament produces disaster is scaremongering. He said the Tories are losing the election and starting to panic.
Darling said Clarke's comments were "desperate stuff" and making promises you can't pay for upsets the markets.
He said the Tories have no credible plans for tax cuts and Ken Clarke "ought to know better" than to make such a "ridiculous statement".
Osborne said Clarke was "more successful" than Darling as chancellor.
Darling was asked why he has said the Tories are putting recovery at risk by taking £6bn out of the economy in cuts when he as chancellor had taken £20bn out this year by putting VAT back up.
He said the stimulus was temporary, to make sure the UK avoided recession.
Taking out 6£bn a quarter of the way through the financial year would damage the economy.
When challenged that it represents just one half per cent of GDP, Darling said it still makes a difference and next year is the time to cut public spending.
Cable called for "broad fiscal neutrality" - not having a severe contraction this year.
He said the government has already made substantial cuts in science and further education in name of efficiency.
Osborne said the government ran out of money and the deficit was a result of bad management in the good years - whoever wins faces difficult public spending decisions.
He was challenged about his use of the term "age of austerity" - he declined to repeat it but said it is "what we find ourselves in after 13 years of Labour".
Cable said we are in age of austerity and now have to pay for it.
Osborne was asked to set a target for borrowing at the end of next parliament.
He declined to do so but said he will eliminate the "bulk" of structural deficit.
He refused to define what the bulk constitutes but said he was following the advice of the Bank of England who are unhappy with the government's plan.
Cable was asked where the "£30bn hole" in his plans would come from.
He said £10bn would come from existing tax rises and more could be saved on public sector pensions and defence cuts.
Cuts of £20bn to the structural deficit are already in place.
Osborne said he had a letter from the man who ran anti avoidance at HMRC and he said the Lib Dem plans are doubtful and do not stand up.
Cable said the official estimate from Revenue is £40bn evaded and he wants to save one tenth.
He was accused of being dishonest on VAT increases.
Cable said the Tories made tax promises on national insurance and inheritance tax with no idea of how they would pay for it and their "preferred" tax is VAT.
He said it is a "legitimate debating point" that they have not costed their tax cuts and would resort to past measures.
Osborne said the best ways of dealing with deficit is cutting public expenditure. 80 per cent should come from spending cuts and 20 from taxes.
He said he cannot rule out tax rises but will try to ensure there are none.
Darling said the Tories have made £34bn of promises with no credible way of paying for it.
Osborne said the NI rise would kill jobs and the recovery and it could be avoided by making efficiencies this year.
He said he is a low tax Conservative but has to be aware of Labour taxes in the pipeline, like the 50 per cent income tax band.
Osborne said he would avoid taxes "on the many, not the few" and all parties favour a "lower headcount in the public sector".
Darling, accused of breaking promises on tax rises in last manifesto, said he had to raise income tax to get borrowing down and the people affected did well in the good years.
He said he had made "clear, difficult decisions" to get borrowing down over the next four years.
Cable was accused of changing his mind on big issues and calling "quantitative easing" dangerous and a Mugabe-like move but also supporting the policy.
He said he had used "a tone of irony" to illustrate what could happen and he had put forward proposals in the past to stop demutualisation of banks and regulation of mortgage lending.
In their closing statements Osborne said Darling offers more of same, a choice between hung parliament and economic paralysis or a Conservative government that will get the economy moving.
Darling said that Cable is "flaky" and Osborne's policies are "incredible". He said he is confident about the future if we stick to the course set by the government.
Cable said his party has set out how to create jobs and cut public spending. A lot of people "like what we have to say" and if they vote Lib Dems they will get Lib Dems.
