Shadow Chancellor Ed Balls has questioned whether the Bank of England supports the coalition's "crushing" austerity measures as the economy stalls.
Mr Balls said yesterday he believed governor Mervyn King harboured serious concerns in his "heart of hearts" but was unable to voice them publicly as he accused the Government of being in "denial" over signs the UK recovery could be running out of steam.
But Chancellor George Osborne dismissed calls for a "Plan B", insisting there would be "financial turmoil" if he retreated from efforts tackle the deficit. "If, on Monday, I went to Parliament and got up in the dispatch box in the House of Commons and said 'I am abandoning the deficit reduction plan that Britain set out last year', what do you think the reaction would be?" he said.
"Within minutes Britain would be in financial turmoil. I am not prepared to let that happen. It requires tough, difficult decisions. No politician likes cutting spending and increasing people's taxes, but I was delivered a mess by the previous Government and I am trying to clear it up."
The row over spending cuts intensified after figures last week showed the economy contracted by 0.5 per cent in the final quarter of 2010.
Mr King appeared to reinforce his support for the coalition's austerity programme after the data emerged but the newly-installed shadow chancellor insisted the "big issue" was the "stagnation of growth", and he suggested Mr King was not happy with policy.
"If the governor of the Bank of England was to come out and say the country's on the wrong track, that would cause a crisis," said the MP for Morley and Outwood. "I do not think that Mervyn King, in his heart of hearts, really believes that crushing the economy in this way is the right way to get the economy moving."
"It is not what other countries are doing, it is not what many economists think is the right approach, and it is not working."