There will be no return to mass unemployment in the West Midlands, Prime Minister David Cameron insists. Speaking to Political Editor Jonathan Walker, he said cuts would spark opposition, but they would strengthen the economy in the long run.

David Cameron has vowed there will be no return to the 1980s under his premiership, as he predicted the West Midlands economy would grow stronger despite spending cuts.

The Prime Minister pledged that hardship caused by growth in public spending, and the benefits of economic growth he expected to follow, would be “regionally balanced”.

Speaking after new figures showed unemployment in the West Midlands had risen by 13,000 between July and September, putting the total out of work at 233,000, Mr Cameron said there were similarities between the situation his government faces today and the challenges facing Margaret Thatcher in the 1980s, when Britain was also in debt.

But he insisted that his government would “bring the country with it” as it cut spending – and highlighted research by the Office for Budget Responsibility, a Treasury watchdog, which predicted unemployment would fall.

Mr Cameron was speaking in the week that marked the 20th anniversary of Margaret Thatcher’s resignation as Prime Minister.

He stressed that there was a bright future for manufacturing firms in the West Midlands, but for high-end manufacturing and green technology rather than cheap, mass-produced goods.

Asked if he saw similarities between his own government and the Conservative government in 1981, when Lady Thatcher introduced a radical “austerity” budget, he said: “One similarity with 1981 is we inherited a situation from a Labour government that had completely bankrupted the country and left us with an enormous budget deficit.

“But there are differences. You have a coalition government that has passed a budget and spending round that has deliberately protected the inheritance on child poverty and is not adding a single family to the statistics on child poverty.

“You have a government that’s doing some extremely progressive things in terms of helping the poorest families through early years, school and university – for example, 15 hours of nursery education for two-year olds from deprived backgrounds, increasing the amount of nursery education for three and four-year olds, and a £2.5 billion pupil premium that will follow the poorest children in to school, and then with our university reforms some free university education for children from poor backgrounds, and also nobody paying back any money until they earn £21,000.

“So you have a different government approaching the problem in a different way, trying to bring the country together.

“Yes, of course you have people who are opposing this, but I think in terms of winning the argument about why this needs to be done, and why it will in the end strengthen the country and economy, I think we are making good progress.”

But what about increasing unemployment, caused by cuts in public spending? His own government, after all, has accepted that 490,000 public sector jobs could go.

“So far what we’ve seen is unemployment falling rather than rising. Of course when you make public spending reductions – remember we are only taking public spending back to the level it was in 2008 – but when you make reductions, obviously that has a consequence for employment in the public sector.

“But the Office of Budget Responsibility, which is now independent from government, has been forecasting that unemployment will continue to fall.

“That is their forecast. It’s not a government forecast, it’s an independent forecast.”

Another difference with the Thatcher years was that the Government was determined to ensure the regions outside London and the South-east would not suffer disproportionately from the impact of spending cuts, he said. He highlighted the £1.4 billion regional growth fund set up by the Government to support regional economies.

“We are trying to make sure the picture is regionally balanced. That’s what the regional growth fund is about.”

The private sector would lead the recovery and needed government support, he said.

But Mr Cameron admitted Ministers needed to do more, particularly to make sure credit was available to small businesses.

“I totally recognise we need to do more on helping small firms and also getting bank lending going.

“We are doing a lot in terms of loan guarantee schemes, but we’ll keep looking at whether there’s more we can do.

“And we’re doing a lot to help small firms in terms of cutting the small firm rate of corporation tax, in terms of allowing new firms that set up not to pay National Insurance for the first few employees. So far this year, it has actually been encouraging that unemployment nationwide has been coming down.”

The Prime Minister said his recent visits to China and India had been designed to help British industry by opening up new markets for exporters.

“One of the reasons I have been travelling the world is to connect Britain up to some of the fastest growing parts of the world. That’s why I’ve been to China, India, Turkey, all of which have double digit growth rates.

“They want to buy British exports – high-end manufacturing, aerospace, green technology, science-based businesses – and we are definitely in the business of making things, and there is growth in manufacturing industry at the moment and also growth in our exports.

“We’re not going to compete on the basis of cheap, low cost, mass-produced goods. We are going to be competing on the basis of skills, science, engineering, aerospace, green tech industries of the future.”

Spending cuts rarely make politicians popular, and the Conservatives have been roughly level with Labour in a recent opinion poll, despite apparent divisions within the Labour Party.

But the Liberal Democrats have suffered the most, and polls suggest their support has plummeted from 23 per cent of the vote in May’s election to around half that today.

Does Mr Cameron worry about the political damage being inflicted on his coalition partners? Perhaps, surprisingly, given that his Conservative candidates will still be competing against Lib Dems when the next election comes, he does.

“Coalitions are not easy because you have to make compromises in the national good.

“The Conservative end of the coalition has had to make compromises on some policies and obviously that’s difficult.

“What I would say about my coalition partners is they have behaved in this coalition with honour, with decency, with good nature and with the nation’s interests at heart.

“The reason the coalition is working is because there is proper trust and working relationships between, not just Prime Minister and Deputy Prime Minister, but between the Ministers working in ministerial teams and also members of Parliament in the House of Commons.

“I pay tribute to the Liberal Democrats for the way in which they have approached this coalition, putting the national interest first. Yes, that has meant making some difficult decisions because neither of us won this election outright, but I think they should be commended for doing the right thing.”

The Prime Minister said he understood why some people might criticise his decision to support the Irish economy when cuts were being made at home, and warned of a “huge” influx of Irish jobseekers to Britain if Ireland was allowed to go bankrupt.

“We have to ask the question, what would be the consequence for Britain if the Irish economy failed?

“And the fact is that as one of our biggest export markets, and we export more to Ireland than to Brazil, Russia, India and China combined, that would have a big impact on us.

“The fact that our banks are connected and bank failures in Ireland would affect Britain, that would have a big effect on us.

“The fact that an enormous migration takes place between Britain and Ireland, if the Irish economy collapsed – that would have a huge impact on Irish people coming to the UK for work.

“So, for all these reasons, there is a great connection between Britain and Ireland, and that’s why it’s right that we should stand ready to help the Irish economy as others will do as well.

“The alternative would be to make the situation worse in the UK.”

Mr Cameron also defended the decision to pay compensation to former Guantanamo Bay detainees, such as Sparkhill father-of-four Moazzam Begg.

Justice Secretary Kenneth Clarke announced last week that the Government had agreed to make payments, which could reach £1 million each, to 16 former prisoners after some of them launched legal action.

Mr Cameron said the Government had wanted to avoid a long and costly legal battle, but insisted the decision had not been driven by financial concerns.

He also highlighted the inquiry, to be led by judge Sir Peter Gibson, into whether the British government had been complicit in torture.

He said: “This was not just about saving money. It was also about freeing our security services, who at the moment have got hundreds of people working on these cases, and I want to make sure that we learn the lessons of what went wrong in the past – that’s why we have an inquiry – but I also want to let them get on with the job of keeping the country safe rather than being held up in a series of court cases.

“So yes, there was a value for money consideration, because these cases could have cost us £10 million pounds a year for five years, but there was also a case for, let us try to draw a line under the past, let’s solve the problems of the past, deal with it, have them reviewed by Judge Gibson, and then we are in a position to go forward and make sure the security services are doing what they ought to be doing, which is keeping us safe rather than fighting cases in the courts.”