A long road and a hard one warns defiant Clegg

The Lib Dem leader insisted the worsening crisis underlined the wisdom of signing up to tough Tory-led cuts.

And he urged activists reeling from a year of anger, frustration and hammerings at the polls to believe it would “all be worth it in the end”.

But even before the Deputy Prime Minister got to his feet to address delegates still bruised by the experience of being in government, his advisers were playing down briefings that the Lib Dems were pushing for a £5 billion stimulus after it had been slapped down by the Treasury.

Mr Clegg’s former leadership rival Chris Huhne, the Energy Secretary, said he wanted a change of tack if possible, adding pressure on the government for a Plan B amid fears that the UK economy has stalled as the eurozone teeters on the brink of collapse.

But the announcement yesterday of a record increase in public borrowing by the UK government has limited its room for manoeuvre.

Mr Clegg added to the speculation for a change of direction when he told delegates that ,while deficit reduction was “necessary” on its own, “it is not good enough”.

It was a speech aimed at lifting the party’s spirits after a hard year of controversy over tuition fees and defeats in elections and the referendum on electoral reform. And by the end of it, despite the many empty seats, delegates were noticeably lifted by his note of defiance.

But, with the IMF warning the world is on the brink of economic disaster and Britain’s growth projections downgraded, it was the economy he concentrated on with a hint at a Plan B.

“That’s why we’re already investing in infrastructure, reducing red tape, promoting skills, getting the banks lending,” he said.

“But the outlook for the global economy has got worse. So we need to do more, we can do more, and we will do more for growth and for jobs.”

After a week of senior figures attacking the Lib Dems’ Tory partners in the coalition, Mr Clegg appeared to change direction by focusing his fire on Labour and its leader Ed Miliband.While he failed to mention Prime Minister David Cameron by name at all, he appeared to almost rule out the possibility of his party working with Labour in its current shape and economic policy.

In an echo of Gordon Brown’s attack on Mr Cameron, saying “it was no time for novices”, Mr Clegg insisted it was “no time for backroom boys” in reference to the early Treasury roles of Mr Miliband and shadow Labour chancellor Ed Balls.

Mr Clegg said: “Labour says the government is going too far, too fast. I say, Labour would have offered too little, too late.

“Imagine if Ed Miliband and Ed Balls had still been in power. Gordon Brown’s backroom boys when Labour was failing to balance the books, failing to regulate the financial markets, and failing to take on the banks. The two Eds, behind the scenes, lurking in the shadows, always plotting, always scheming, never taking responsibility. At this time of crisis, what Britain needs is real leadership.”

He went on: “Labour’s economy was based on bad debt and false hope. Labour got us into this mess. But they are clueless about how to get us out. Another term of Labour would have been a disaster for our economy. So don’t for a moment let Labour get away with it. Don’t forget the chaos and fear of 2008. And never, ever trust Labour with our economy again.”

He also called the Tories and Labour the parties of “vested interests”, directing his attack on the trade unions who provide 95 per cent of Labour party funding, but also on the way the two parties courted News International before the phone hacking scandal.

He said: “While we were campaigning for change in the banking system, they were on their prawn cocktail offensive in the City. While we’ve led the charge against the media barons, Labour has cowered before them. The most shocking thing about the news that Tony Blair is godfather to one of Rupert Murdoch’s children is that nobody was really shocked at all.”

But the speech was also largely designed to calm the nerves of activists who have had to suffer heavy defeats as a result of the cuts to public spending, the perceived betrayal over tuition fees where the coalition tripled them despite a Lib Dem election pledge.

On fees Mr Clegg insisted that “lessons have been learned”.

And in a message of comfort to activists he said: “None of us thought it would be a walk in the park, but I suspect none of us predicted just how tough it would turn out to be. We’ve lost support, we’ve lost councillors, and we lost a referendum. I know how painful it has been to face anger and frustration on the doorstep.”

He added: “Some of you may have even wondered: Will it all be worth it in the end? It will be. And today I want to explain why. But above all I want to pay tribute to you. Your resilience. Your grace under fire. Thank you, above all, for never forgetting what we are in politics for.”

While he did not mention Scotland and his party’s near wipe out north of the Border in May, he used a quote from a Holyrood candidate to illustrate his ongoing message that what the party had done in government was “not easy, but right”.

Mr Clegg said: “After the May elections, Alex Cole-Hamilton, one of our defeated candidates in Edinburgh, said that if losing was part payment for ending child detention then, as he said: ‘I accept it, with all my heart’.”

Paying tribute to the candidate, he added: “That is the liberal spirit and that is something we will never lose. The spirit that gave birth to our party a century and half ago, that kept us alive when the other two parties tried to kill us off.

“The spirit that means, however, great our past, our fight will always be for a better future.”