CUTTING the deficit must not come at the expense of the economic recovery or public services, Budget Minister Jane Hutt said today.

She insisted the Assembly Government was prepared for a spending squeeze and would make a "responsible’’ contribution to paying the UK's debt.

Ministers in Cardiff are planning for revenue cuts of 3% and cuts in their capital budgets of 10%.

Mrs Hutt said steps were being taken to run services more efficiently - "a recognition that we are working responsibly to reduce the deficit in Wales, but not at the expense of our public services and indeed the recovery of the economy’’.

"We have been preparing for an increasingly difficult financial situation in the public sector.’’ The Labour-Plaid Cymru Cabinet is due to meet tomorrow morning to discuss the impact of today's Budget.

But it will not announce whether it plans to postpone more than £160 million of cuts already announced by the Chancellor for this financial year.

The Assembly Government has been offered the opportunity to find the cuts next year, protecting its near-£16 billion budget for 2010/11.

Mrs Hutt said she was awaiting further information from the Treasury on whether the Assembly Government would be able to retain savings, known as end year flexibility. She expects to make an announcement before the summer recess.

"We should be in charge of our own finances here,’’ she told reporters in Cardiff Bay.

She said a warning today from the Institution of Civil Engineers that Wales's infrastructure requires urgent attention showed the continued need for capital investment which helped boost the economy during the downturn.

"I want to say that fiscal stimulus has not gone out of fashion here as far as the Welsh Assembly Government is concerned,’’ she said.

"We are an interventionist government, the One Wales government. We are a responsible government.’’ She said the Assembly Government's priorities were "schools, skills and health’’ as well as maintaining "universal benefits’’ such as free primary school breakfasts and bus passes for the over-60s and disabled.

She repeated her call for a "fair funding deal’’ in the wake of last year's Holtham Commission which said Wales risked being short-changed by the Barnett formula.

And she added today's statement from George Osborne was a "so-called emergency Budget because this is not a Budget that I think was necessary, certainly the cuts were not’’.