George Osborne today denied getting ‘panicky’ about the state of the British economy as new figures revealed borrowing by the government remains stubbornly high.
Borrowing fell only slightly last year to £120.6billion, just £300million lower than in 2011-12.
It is is worse than City hopes for a £117 billion deficit in the financial year.
Asked today if was ‘getting a bit panicky’ about the economy's parlous state, Mr Osborne replied: ‘No, no, no. The answer is no.’
The government has trumpeted its efforts to cut the deficit as proof its austerity cuts are working.
The headline borrowing figure for last year stood at £86.2billion.
But when the transfer of Royal Mail pension assets to the public purse, plus cash transfers from the Government's quantitative easing programme, are factored in it stands at £120.6billion.
This is only down £300million on the £120.9billion borrowed by the government in 2011-12.
The Office for Budget Responsibility expects borrowing to remain high at £120billion in the next year to March 2014 as well.
Mr Osborne was forced to deny being ‘cute’ by claiming that the deficit – the gap between what the government spends and what it raises in taxes - had fallen by a third.
‘It’s not being cute at all. The budget deficit was 11.5 per cent of our national income when this Government came to office, it is now forecast to be just under 8 per cent - that is a reduction, it’s a reduction of a third thanks to the very difficult decisions,’ he told BBC Radio 4’s Today programme.
‘As a result, the British economy, when you compare it to lots of its neighbours, of course faces a difficult situation but not nearly as difficult as those other countries that have not faced up to their problems, that have not supported their private sector, that have not made themselves more competitive so they can compete in the global race.’
The Chancellor is under pressure ahead of figures on growth out this Thursday which will show if the economy is back in recession
Underlying figures show the government borrowed £120.6billion last year, compared to £120.9billion in 2011-12, the Office for National Statistics said
But Labour claimed today's borrowing figures were proof that the government's plan is not working.
Shadow Treasury minister Chris Leslie said: 'These figures show that the government’s failed economic policies have been totally self-defeating as a flatlining economy has seen deficit reduction grind to a halt.
'Underlying borrowing was essentially the same last year as the year before and the OBR forecasts it will be around the same this year.
'George Osborne no longer has a deficit reduction plan. In fact, at this rate, it will take 400 years to balance the books.'
Total public sector net debt was a record £1.186 trillion in March, equating to 75.4 per cent of GDP and up from £1.1 trillion a year earlier.
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IHS Global Insight economist Howard Archer said the pace of deficit reduction 'makes a snail look fast'.
He said: 'March public finance data are unlikely to take the heat off the Chancellor and he faces another very difficult year ahead on both the growth and the public finance fronts.'
James Knightley at ING Bank said that while the March outcome was a little better than expected, the 'underlying story on the UK's fiscal position was one of hardly any improvement despite so much talk of austerity'.
A Treasury spokeswoman said: 'Though it is taking time, the Government is fixing this country's economic problems.
'The deficit is down by a third, a million and a quarter new private sector jobs have been created and interest rates are at near-record lows, benefiting households and businesses.'
Figures on Thursday will reveal whether or not Britain has fallen into an unprecedented triple dip recession
The Chancellor is under pressure ahead of figures this week which will show if the UK managed to avoid an unprecedented triple-dip recession by growing in the first three months of the year.
The International Monetary Fund last week cut the UK's growth forecast growth from 1 per cent to 0.7 per cent for this year and 2014's projection from 1.9 per cent to 1.5 per cent, noting the recovery was 'progressing slowly'.
IMF chief economist Olivier Blanchard has accused Mr Osborne of ‘playing with fire’ by pressing ahead with cuts despite a lack of growth.
But today Mr Osborne dismissed Mr Blanchard’s criticism as ‘one voice, one person’.
The Chancellor told BBC Radio 4: ‘What the IMF has said actually is that the United Kingdom is forecast to grow more than Germany, than France, than the rest of the eurozone – that is one voice, one person.
‘The chief economist has a well-known set of views on this, which he has expressed in various forms over several years. The IMF will do its analysis of the British economy, as it does all economies – it’s coming to Britain in May to do that.’
Of the major economies listed in the IMF's World Economic Outlook, the prediction of 0.7 per cent growth puts the UK well below the US, Canada, Japan and much of Europe
Mr Blanchard has been a longstanding critics of the UK’s austerity programme. Last week he said: ‘The UK economy has turned out to be somewhat weaker than had been foreseen, so our view is that the pace of consolidation ought to be reconsidered, and we’ll want to come and have some discussions about that.’
Yesterday it also emerged that Cabinet Secretary Sir Jeremy Heywood has privately voiced frustrations at the different approaches to the economy taken by Mr Osborne, David Cameron, Nick Clegg and Vince Cable.
Sir Jeremy told senior bankers that the Prime Minister is prioritising exports, Mr Clegg wants regional growth schemes, while Business Secretary Mr Cable wants to pressure the banks into lending and Mr Osborne is concentrating on infrastructure.
Sir John Gieve, the former deputy governor of the Bank of England, also questioned whether the Chancellor is truly in charge of his economic policy.
In a newspaper article published yesterday, Sir John pointed out that Mr Osborne has subcontracted much of his policy to the Bank, which is in charge of quantitative easing - effectively printing money in a bid to boost the economy.
‘It leaves unclear who is in charge,’ he wrote. ‘The chancellor is responsible for the strategy of monetary activism alongside fiscal and prudential retrenchment. But he has not given himself the powers to determine the policy mixture’.