George Osborne was not 'read Riot Act', aides say

The Treasury has denied press reports that David Cameron's chief aide "read the Riot Act" to Chancellor George Osborne's advisers over the economy.

A source told the BBC the story, in the Daily Telegraph, was "rubbish", as government figures show growth slowed to 0.2% between April and June.

Mr Osborne has insisted his plans for deficit reduction are "on track".

But Labour argues that not enough is being done to promote growth, risking a "Greek-style debt trap" for the UK.

Figures show the economy slowed between April and June, with growth of 0.2% - down from 0.5% in the first three months of the year.

This followed a shrinkage of 0.5% in the final quarter of 2010.

Analysts warn that one-off factors such as April's extra bank holiday for the royal wedding and the effects of the Japanese earthquake and tsunami in March could have impeded the economy.

The Daily Telegraph quotes a Whitehall source arguing that the Treasury's strategy has "been almost entirely focused on reducing the deficit, not promoting economic growth".

It also reports that David Cameron's permanent secretary, Jeremy Heywood, met Treasury officials, where he "read them the Riot Act", and that Mr Osborne is now drawing up a new package of measures for the autumn, with the prime minister's advisers giving their input.

But a Treasury source dismissed the story, telling the BBC News Channel's chief political corrsespondent Norman Smith it was a "rubbish tale".

Speaking at a press conference on Monday, the chancellor said: "We have an economic plan. We are sticking to our economic plan in a world of very great uncertainty.

"We have brought stability to the British economy. We have brought interest rates down. And we are creating private sector jobs. That is all evidence that our economic plan is working and on track."

He added: "I am taking the right decisions, that anyone in my position would have to take."

For Labour, shadow chancellor Ed Balls has accused Mr Osborne of leading the country into a "Greek-style" trap through cutting spending too quickly.

He said: "Of course the deficit must come down in a steady way but our economy has flat-lined in the last six months. It's not growing.

"That's why the chancellor is having to admit that borrowing is going to be higher than he expected.

"In the end, unless you've got more people in work paying taxes, the economy growing, it is very hard to get these deficits down."