David Cameron today dashed hopes of public sector funding levels being restored once the budget deficit has been addressed, saying he expects staff to find new ways of working to deliver services on less money.

The prime minister told an audience in Birmingham that cuts imposed by his government should be "sustainable".

"We are going to have to change the way we work," he said. "How can we do things differently and better to give value for money?"

Urging voters to recognise that his administration was thinking in terms of cuts of 5% a year, rather than a big bang cut of 25% immediately, he nevertheless said that the government was focusing on the big-ticket items such as welfare, pensions and public sector pay rather than smaller cuts in other departments.

Cameron outlined the government's long-term outlook on the day he and his deputy prime minister, Nick Clegg, jointly sent a letter to cabinet colleagues reminding them that reducing the deficit is the "most urgent issue facing Britain".

The pair said that because the new administration, "unlike previous governments, would govern for the long term", it would allow ministers to take "difficult decisions".

Cameron squared up to these decisions after being confronted by a public sector worker during the question and answer session in Birmingham today – one of three public sessions he intends to conduct this month.

The woman – who did not give her name – urged the prime minister to give a pledge that he would review cuts being imposed to tackle the deficit once the austere times are over "and you have the money back in the bank".

The local fire brigade worker cited the "sweeping cuts" the service had already endured since 2003 and warned that the new round of cuts due to be imposed would mean more fire engines taken off the road.

Citing the dramatic increase in the deaths of firefighters, and an increase in deaths as a result of fire, she asked him: "Will you give me a pledge today that when these austere times are over, and you have the money back in the bank or you're balancing your books, that you will look at anything that is cut during this period and go back and get in those fire engines back in the places they are needed to support the public?"

Cameron refused to make the pledge.

"The direct answer to your question, should we cut things now and go back later and try and restore them later, I think we should be trying to avoid that approach," he said.

"Because I'm not saying we won't have to make cuts to all sorts of difficult services, because we will, but let's try and do it in a way that actually is sustainable. And try to make sure that the fire services that we have is capable of doing the very important work we want it to do but let's all open our minds and think how can we work in a different way."

Cameron admitted in an interview before his public Q&A that he and Clegg were "learning as we go along" and "won't get everything right".

But he insisted that the new administration was a "good, strong, stable government".

"We are living beyond our means and (must) tackle it," he told the audience, who were taking part in his latest 'PM Direct' meetings.

"Every family knows that as a business you cannot go on living beyond your means indefinitely. You have to make sure that revenue and spending come into balance. At the end of this parliament we will be paying £17bn in interest just on the interest on debt, (which) is more than we spend on schools."

He added: "There is a moral responsibility. I don't think we should be racking up our debts for our children to pay. We need to be fair to future generations, and this generation should deal with its own problems."

During a Q&A session that lasted approximately one hour, the prime minister fielded a number of questions on the government's cuts agenda as well as his 'big society' initiative.

A question on social housing provision prompted the prime minister to say that, in his view, council houses should no longer be granted "for life".

He added that it would make sense for tenants to be given fixed-term deals in future so they can be moved on if their circumstances change. He was responding to a mother of two teenagers who said she had slept on a blow-up bed for two years because her council could not find her a bigger house.

Cameron said: "At the moment we have a system very much where, if you get a council house or an affordable house, it is yours forever, and in some cases people actually hand them down to their children.

"And actually, it ought to be about need. Your need has got greater ... and yet there isn't really the opportunity to move."

He conceded that attempts to reform the system would cause "a big argument", but he said it was right to look at a more flexible system.