UK must cut debt or face obscurity - PM Cameron

By Matt Falloon

BIRMINGHAM, England, Oct 10 (Reuters) - Britain must cut itsbudget deficit and fix its economy or face long-term decline,Conservative Prime Minister David Cameron will say on Wednesday,seeking to convince voters that his austerity plan is the onlyway forward.

Cameron's Conservatives, who lead a coalition governmentwith the Liberal Democrats, lag a revived Labour opposition inopinion polls and face criticism for steering Britain back intorecession and failing to hit their deficit reduction targets.

Labour accuse the government of contributing to therecession by cutting spending too fast, but the coalition arguesits dedication to austerity has kept borrowing costs low andsaved Britain from the claws of the Europe's debt crisis.

Cameron will bring Britain's political conference season toa close with a personal speech to his party that aides say willgive an honest assessment of the economic challenges ahead anddraw clear dividing lines with Labour.

"Unless we act, unless we take difficult, painful decisions,unless we show determination and imagination, Britain may not bein the future what it has been in the past," Cameron will tellthe Conservatives in the central English city of Birmingham.

"Because the truth is this: we are in a global race todayand that means an hour of reckoning for countries like ours.Sink or swim. Do or decline."

Cameron will say Labour's call for a slower pace of deficitreduction would "hurt the economy".

"The risk is that the people we borrow money from wouldstart to question our ability and resolve to pay off our debts,"he will say, according to extracts of his speech released inadvance by his office.

The International Monetary Fund cut its growth forecasts forBritain on Monday and said the coalition may have to defer somecuts if the economy weakened further, casting a shadow over aconference that Cameron had hoped to use to rally his party.

Finance minister George Osborne has already been forced towater down his plans to all but erase a record budget deficit bythe 2015 election because of a weak economy, stretching theperiod of austerity to seven years from five years.

Osborne is expected to either have to announce deeper cutsor further extend the timeline of spending cuts on Dec. 5 whenhe updates official economic and borrowing forecasts.

Credit ratings agencies have given triple-A rated Britainthe benefit of the doubt so far, largely because the governmenthas stuck with strong rhetoric on its determination to cut thedeficit even if it has missed its austerity targets.

(editing by Ron Askew)