Pickles admits the Government's economic policy may not work

A cabinet minister has raised the prospect of the Government's economic policy failing as a key economic think tank cut its growth forecast for Britain.

Communities Secretary Eric Pickles said the electoral fate of both the Conservatives and the Liberal Democrats hung on "whether or not our economic policy works".

"If our economic policy doesn't work, then we're both in a great deal of trouble," he told students at the Cambridge Union. A source insisted Mr Pickles was not questioning the Government's economic policy and said he believed the Coalition was on the "right course". "We absolutely think our economic policy is right and any suggestion otherwise is incorrect," the source added.

Ministers usually stress their complete belief in the Government's agenda, emphasising that there is no plan B. The slip came as the influential Organisation for Economic Co-operation and Development again cut its growth forecast for Britain, predicting 1.4 per cent growth this year, short of the 1.7 per cent forecast in the Budget.

The Treasury faced more bad news as official figures confirmed the economy had stagnated over the past six months. Labour accused Chancellor George Osborne of locking the UK into a "vicious circle" by cutting "too far and too fast". But the Treasury said Mr Osborne had always made clear the recovery would be "choppy" and insisted it was on the right course.

The OECD backed the Government's economic policy, saying it struck the "right balance", but said growth would remain slow during 2011. It also called on the Bank of England to raise interest rates to get inflation under control.

Meanwhile the Office for National Statistics left its estimate of economic growth during the first three months of this year unchanged at 0.5 per cent. It means first-quarter growth cancelled out a surprise 0.5 per cent drop in GDP for the snow-hit final three months of 2010 - leaving growth flat over the past six months.

The figures also showed a drop in household spending and business investment, but there was a hint of good news as the economy became less reliant on imports. A Treasury spokesman said this showed a "rebalancing" of the economy, adding: "The continued international concerns about deficits confirm that the Government has set the right economic course."

But Ed Balls, the shadow chancellor, said the economy had "flatlined". "By making a political choice to cut further and faster than any other major economy this Conservative-led government has choked off the recovery when it should have been secured," he said.