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The Chancellor George Osborne has refused to change the government's deficit cutting strategy yesterday following revelations that the economy grew by only 0.2% in the second quarter this year.

The rest of the world would consider Britain "completely mad" if the government changed course now but the opposition Labour party blames the slow recovery on government's current economic strategy.

In stark contrast to countries such as the US or Germany, Britain's economic recovery has been slowest since 1930s. Based on figures released by the Office for National Statistics (ONS), the UK economy would take upto 2013 to reach back at the levels of 2008.

Economic crisis and problems in the eurozone has compounded challenges for the UK and the industrial production has fallen by 11% from its 2006 level. The figures also show there has been no impact of the "balancing of the economy" strategy as the City remains the fastest growing sector.

High value knowledged based activities such as accountancy, banking, management consultancy have seen their output rise by 5% since 2006. The UK economy did start to recover towards the end of 2009 and in the second quarter of 2010 witnessed a 1.1% growth.

However since then growth has been slower than expected and in the final 2010 quarter the GDP contracted by 0.5%.

"The positive news is that the British economy is continuing to grow and is creating jobs," said Osborne. "And it is positive news too that at a time of real international instability we are a safe haven in the storm."

He went on to say: "Would we really take the risk of yet more debt? Would we risk the sky-high interest rates, the economic instability? I think most people would think that is an absolutely mad course for us to head down."

The Shadow Chancellor Ed Balls has accused Mr. Osborne of being "breathtakingly complacent" and being in "total denial" about the state of the British economy.  Mr. Balls urged the Chancellor to cut the VAT.

"These figures show that last year's recovery has been recklessly choked off by George Osborne's VAT rise and spending review," said Balls. ""The economy has effectively flatlined for nine months and this is very bad news for jobs, living standards, business investment and for getting the deficit down."

And he rejected Mr. Osborne's comparison with other economies around the world. "Every other major economy in the world has faced challenges like high world oil prices but their economies have continued to recover while Britain has barely grown at all over the last nine months."

There is no doubt that the Chancellor is under pressure to stimulate growth in the economy.  For the first time since the formation of this government, both the Treasury and No. 10 had to deny conflict and tensions around the economic strategy.

The Prime Minister and the Chancellor both rejected the claims. "Unlike previous governments, there is one team at the heart of this government: that is the chancellor and the prime minister working together," the Prime Minister said.

Some observers feel the government can carry on with its own strategy for a little while longer as the underlying growth has been stronger than expected in the last quarter.

Mr. Balls has found an unlikely ally in Boris Johnson.  The London Mayor has called on Mr. Osborne to cut taxes and NI to stimulate growth.