The chancellor, George Osborne, came under fire today from MPs on the Treasury select committee, charged with "misleading the public" for claiming the UK was near bankruptcy in the weeks after he took office. He was accused of using inflammatory language to justify massive public spending cuts.

The committee chairman, Tory MP Andrew Tyrie, said Osborne's claim that Britain had been "on the brink of bankruptcy" was "a bit over the top". He also challenged the chancellor's claims that his emergency budget had been progressive, accusing him of "over-egging it a bit".

Tyrie's comments followed heated exchanges during which Osborne was tackled over his handling of plans to cut central and local government spending. The chancellor has repeatedly justified the cuts as a reasonable response to unprecedented debt levels and the threat from credit ratings agencies to downgrade the UK's blue-chip AAA rating.

Tyrie said Osborne's inflammatory language was counterproductive. "Maybe the tough measures on the deficit and also the effort to make the budget fair would have come across more clearly if they hadn't been obscured in debate of claim and counter-claim," he said.

"I think there is something there to look at when making these remarks, which do look to me more like the language of opposition than government. Tell it as it is."

Labour MPs on the committee said it was false to describe Britain as on the edge of bankruptcy when other major economies such as France, Germany, Italy, Japan and the US had higher debts.

Giving evidence about the spending review, Osborne insisted he had been forced to take drastic action to take the country out of the "financial danger zone". He admitted the overall debt levels remained below those of the UK's main rivals, but the annual deficit last year of 11.4% was the highest in the G20 and needed to be cut back quickly.

Osborne, who said the next budget will take place on 23 March, insisted that the situation he inherited had been "incredibly serious".

"The largest bond investor in the world was saying that UK gilts were a no-go area, sitting on a bed of nitroglycerine," he said. "I have done everything I can to move Britain out of the financial danger zone."

He said Britain was being spoken of in the same terms as Portugal, Italy, Greece and Spain – known by the acronym "pigs" – which were facing sovereign debt crises.

"Then there was another acronym doing the rounds which was 'stupid' and the 'u' in 'stupid' was the United Kingdom," he said. He also denied that his budget was not progressive, insisting that if all the measures were taken together – including some inherited from Labour – they would hit the richest hardest.

"I believe the richest pay more than the poorest, not just in cash terms but as a proportion of their income," he said.

Chuka Umunna, the Labour MP for Streatham, asked whether Osborne still believed that any decision by the Bank of England to pump more money into the economy would be an admission of failure, and if he would consider his own policies to have failed if the bank followed the US Federal Reserve's strategy and put billions of pounds into the economy.

Osborne said it would not be appropriate to discuss the matter before the bank's interest rate decision , due to be announced one hour after the committee meeting finished.