George Osborne and Ed Balls clash over UK economy

Shadow chancellor Ed Balls has accused the government of wrecking Labour's economic recovery following a surprise contraction of the UK economy.

Chancellor George Osborne blamed the 0.5% fall in GDP on severe winter weather.

He insisted the government would not be "blown off course" in its plans to cut Britain's budget deficit.

But Mr Balls said that was not good enough - and he urged Mr Osborne to do a U-turn before it was too late.

The pair, who have yet to meet across the Commons despatch box, have been separately touring television and radio studios as the full impact of the GDP figures sinks in.

'Slamming brakes'

Mr Osborne told BBC News: "The ONS has made it very clear that the fall in GDP was driven by the terrible weather in December.

"There is no question of changing a fiscal plan that has established international credibility on the back of one very cold month. That would plunge Britain back into a financial crisis. We will not be blown off course by bad weather."

Mr Balls, who was given the shadow chancellor's role after Alan Johnson quit last week, said the 0.7% growth in the previous quarter was down to Labour's economic policies.

He said he did not want to see the economic picture worsen, but warned that would happen if Mr Osborne did not change course.

He said: "We are seeing the first signs of what the Conservative-led government's decisions are having on the economy.

"The fact is cuts which go too far and too fast will damage our economy. And shrinking growth and rising unemployment is not only bad news for families but will actually make it more difficult to get the deficit down.

"As the head of the CBI said only yesterday, this government has no plan for growth and it is taking political decisions regardless of the damage they will cause to job creation and business. Simply slamming on the brakes is not a credible economic policy."

Tory attack

But the Conservatives have also been on the attack, accusing Mr Balls of "confusion" over Labour's economic policy after exchanges on BBC Two's Daily Politics.

Mr Balls told the programme he stood by "every paragraph" of an August 2010 speech, when he was running for the Labour leadership, in which he appeared to reject Alistair Darling's plan to cut the deficit as too aggressive.

He insisted that as Labour's shadow chancellor he would stick to Mr Darling's policy of halving the deficit within four years - and said he had been referring in the speech to his own earlier fears that the plan was too aggressive.

Conservative deputy chairman Michael Fallon said Mr Balls could not escape his record of being "at Gordon Brown's side" when Labour "maxed out the nation's credit card".

"Ed Balls had to ditch his economic plan to get the shadow chancellor job, but it has taken only five days for him to become confused about what Labour's policy is," he said.

Prime Minister David Cameron earlier told a cabinet meeting the government would not be "blown off course" and had always said this year would be "choppy".

Business Secretary Vince Cable said a "double dip" recession had "always been a possibility" but he warned against reading too much into one quarter's figures and there was "clear evidence" of a recovery taking place in manufacturing, which was key to recovery elsewhere.

The economy shrank by 0.5% in the last three months of 2010, the Office for National Statistics (ONS) said.

The severe weather hit activity in the quarter, but the ONS said even if the weather impact had been excluded, activity would have been "flattish".

'Beyond belief'

The contraction follows growth of 0.7% in the previous three months and 1.1% in the second quarter of 2010.

The release is a first estimate for the quarter from the ONS and is subject to revision. The statistics body will publish two further updates at monthly intervals.

The contraction took economists by surprise, as forecasts had been for growth of between 0.2% and 0.6%.

The construction industry was a large contributor to the fall, with activity decreasing by 3.3% in the quarter.

Len McCluskey, general secretary elect of Britain's biggest trade union, Unite, said it was "beyond belief" that ministers were blaming the weather for "these appalling growth figures".

"George Osborne sounds like a rail boss trying to blame delays on leaves on the line," he said.

"The blame lies squarely on this government's policy of massive spending cuts with no strategy for growth."