Tory MPs are set to demand further tax cuts and a new hub airport if the economy is shown to be flatlining this week.
George Osborne’s internal critics warned last night that the Chancellor will face a barrage of demands when growth figures are released on Thursday.
Senior government sources expect Britain to very narrowly avoid a triple dip recession - but MPs warned that Mr Osborne will face calls to do more to boost confidence and kickstart growth.
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.
One person at the meeting claimed yesterday: ‘He was not explicitly disloyal, and he certainly did not present this in terms of division or split. But we were left in no doubt that his job was being made harder by the differing priorities of senior government figures.’
Privately MPs warned that the coalition’s current economic strife is set to continue until the next election in 2015.
One senior backbencher said: ‘Whatever George says, the economy is pretty bad and even if we avoid a triple dip there aren’t many people who believe it is going to turn around in the autumn.
'Unclear': MPs voiced their concerns as Sir John Gieve, the former deputy governor of the Bank of England, questioned whether the Chancellor is truly in charge of his economic policy
‘I fear even the 0.7 per cent prediction for growth this year by the IMF is a bit optimistic. None of it is very edifying ‘Even if we get growth before the election it won’t make much difference if inflation is eroding living standards.’
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Another said: ‘There is a lot of grumbling about George. No one thinks Cameron will fire him but if we don’t see growth soon, the knives will be out again. There should be a steadier and more mature hand on the tiller.’
Concerns: 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
MPs voiced their concerns as Sir John Gieve, the former deputy governor of the Bank of England, 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’.
He said the government’s plan ‘encourages Mark Carney, the incoming governor, and the [Bank of England’s Monetary Policy Committee] to find ways of reviving growth. But it leaves unclear who is ultimately responsible for achieving “exit velocity”.’
Tory MPs are frustrated that despite Mr Osborne’s calls for more infrastructure spending that plans for new nuclear power stations and a hub airport are stalled. The coalition is not set to decided where to build new runways until after the next election but MPs want action.
MPs warn that poor results in the local elections and further by-election defeats will undermine Mr Cameron’s position.
Liam Fox, the former defence secretary, will issue a Thatcherite call to arms on Friday making the case that ‘Britain is ‘over taxed, over regulated, and we spend and borrow too much’.
The former minister will call on the Government to freeze all state spending for up to five years, and the scrapping of universal benefits for pensioners to fund tax cuts.