* Opposition Lib Dems rein in spending pledges
* Leader Clegg says would not sacrifice policies for power
* Clegg backs break-up of banking activities
(Edits)
By Tim Castle
LONDON, Jan 11 (Reuters) - The leader of the Liberal Democrats, potentially a pivotal figure in any hung parliament after an election this year, on Monday jettisoned a number of spending pledges because indebted Britain cannot afford them.
Nick Clegg, head of the country's third party, refused to be drawn on whether he would support a minority administration in the event of an inconclusive election result, saying he would not sacrifice his core policies for the sake of power.
Clegg told a Reuters Newsmaker event in London that voters had no time for "implausible promises" when Britain faced the greatest financial crisis in generations.
Opinion polls suggest the opposition Conservative party will beat the Labour government in an election due by June, but may fall short of an outright majority, leaving Clegg's party holding the balance of power.
Both the larger parties have been wooing the Lib Dems in recent weeks, emphasising areas where policies overlap.
Britain's budget deficit is running at a record 178 billion pounds ($284 billion) after the global financial crisis.
"Shopping lists of pledges don't wash any more," Clegg said, ditching earlier Lib Dem commitments on childcare and pensions, and slowing down plans to remove tuition fees for students.
"The politics of plenty are over. Voters will have no time for implausible promises and no interest in attempts to buy their favour with cheap trinkets."
Instead the Lib Dems would campaign on just four priorities -- fairer taxation, a boost for primary school education, a programme of infrastructure investment and political reform.
"The heart of our manifesto will be short, direct and to the point. We have stripped away everything that is not essential because the country cannot afford it."
HUNG PARLIAMENT FEARS
Clegg also said Britain's largest banks should be broken up to ensure that the riskier activities are separated from the more conventional retail operations.
Prime Minister Gordon Brown has yet to name the date of the general election, but campaigning has effectively already begun ahead of an expected May 6 vote.
The economy is emerging as the main focus, with parties differing over how they will tackle the budget deficit.
Markets are concerned a British election could produce a "hung parliament" with no absolute majority for either main party, or a government too weak to take the tough measures needed to cut a deficit totalling a record 12.6 percent of GDP.
Conservative leader David Cameron says his party would cut the deficit faster and further than Labour, but has yet to detail spending cuts.
The government plans to halve the deficit over four years but is reluctant to cut spending until recovery is assured.
In a Reuters Insider television interview, Clegg said he would also not sacrifice any of his manifesto priorities after the election should the vote prove inconclusive, leaving open the prospect of a minority government.
"I am a politician of conviction ... and I've been very clear that a core conviction for the Liberal Democrats is fairness," he said.
"I'm certainly not going in any way to trim on our core convictions in those four priorities."