Cameron denies Cabinet rift as economic growth slows to crawl

David Cameron dismissed suggestions he was losing patience with the pace of recovery and insisted he had given his “100 per cent backing” to the Treasury’s plans despite figures from the Office for National Statistics showing economic growth slowed to a sluggish 0.2 per cent in the second quarter of the year.

“Unlike previous governments there is one team at the heart of this Government,” Mr Cameron said. “That is the Chancellor and the Prime Minister working together to make sure we do everything possible to get our economy growing.

“The Chancellor’s growth review has the 100 per cent backing of the Prime Minister and No 10 Downing Street, absolutely working together to drive that through government.

“I don’t think you’ve seen in recent years a Prime Minister and Chancellor working as closely together as George Osborne and I do.”

His comments came after a report that his permanent secretary Jeremy Heywood had “read the Riot Act” to the Treasury for concentrating too much on cutting the deficit at the expense of growth.

Mr Cameron insisted the figures were “positive news” and that there was no need for an economic plan B.

He acknowledged, however, that rebuilding the economy would take time in the wake of the global financial collapse. “Clearly it’s going to take time to make sure we produce the growth and the jobs that we need to really strengthen our economy,” he said.

Mr Osborne, who vowed to stick by his austerity measures, also dismissed suggestions he was at odds with the Prime Minister over economic policy as “nonsense”.

He again hinted that he could cut taxes for businesses to ensure the tax system remained competitive but made it clear that he was not prepared to compromise on his overall deficit reduction strategy.

The latest figures showed the UK grew by 0.2 per cent between April and June, compared with 0.5 per cent in the previous quarter. Year-on-year, the UK grew by just 0.7 per cent in the 12 months to the end of June, which was the lowest rate of growth since the first quarter of 2010.

The ONS said the second-quarter figure would have shown growth of up to 0.7 per cent if it had not been for one-off factors such as the extra bank holiday for the royal wedding and the disruption to British manufacturing caused by the Japanese tsunami.

The Chancellor said: “The absolutely fundamental requirement is economic stability. Without that you have nothing.

“Would we really take the risk of yet more debt? Would we risk the sky high interest rates, the economic instability? I think most people would think that is an absolutely mad course for us to head down. Our economy is stable at this time because this Government has taken the difficult decisions to get to grips with Britain’s debts. Abandoning that now, as some argue we should, would only risk British jobs and growth.

A number of economists, unions and business leaders warned, however, that the underlying picture was of a struggling economy.

CBI chief economic adviser Ian McCafferty said it was clear the underlying economic recovery remains “fragile and difficult”, while Shadow Chancellor Ed Balls called for an immediate change of policy, saying the figures were evidence the deficit reduction is not working.

He repeated his call for the Government to reverse temporarily the VAT rise and get the banks lending to small businesses.