World News Today: Osborne and Balls clash over GDP

David Cameron briefed the cabinet on latest GDP figures

Prime Minister David Cameron has told cabinet colleagues the government would not be blown off course by a surprise 0.5% contraction in the UK economy.

He told the meeting the government had never hidden the fact that this year would be choppy, the BBC understands.

But Labour said the UK's economic recovery had "ground to halt" and urged Mr Osborne to rethink his "reckless" deficit reduction plan.

Mr Osborne said: "These are obviously disappointing numbers, but the ONS has made it very clear that the fall in GDP was driven by the terrible weather in December.

"There is no question of changing a fiscal plan that has established international credibility on the back of one very cold month. That would plunge Britain back into a financial crisis. We will not be blown off course by bad weather."

At a cabinet meeting ministers Ken Clarke, Vince Cable and Iain Duncan-Smith are all said to have spoken up in favour of the chancellor's view that the government must stick to its course.

Mr Cable, the business secretary, has said the probability of a double dip recession is "not high".

At a press conference with business leaders, Mr Cable accepted that the economy had a "bad quarter", but added: "Within the overall numbers, there were some encouraging figures from manufacturing industry."

But shadow Chancellor Ed Balls said: "We are seeing the first signs of what the Conservative-led government's decisions are having on the economy.

"The fact is cuts which go too far and too fast will damage our economy. And shrinking growth and rising unemployment is not only bad news for families but will actually make it more difficult to get the deficit down.

"As the head of the CBI said only yesterday, this government has no plan for growth and it is taking political decisions regardless of the damage they will cause to job creation and business. Simply slamming on the brakes is not a credible economic policy.

"It is not too late - George Osborne and the Treasury must urgently re-think their reckless plan to cut the deficit too far and too fast and start putting growth and jobs first."

He stopped short of predicting a "double dip" recession, but he said it was clear Mr Osborne's economic strategy was not working and he should act now to reverse it.

"We will see a much, much tougher year in 2011 unless George Osborne listens and changes course and does do quickly," he told the BBC News channel.

Len McCluskey, general secretary elect of Britain's biggest trade union, Unite, said it was "beyond belief" that ministers were blaming the weather for "these appalling growth figures".

"George Osborne sounds like a rail boss trying to blame delays on leaves on the line," he said.

"The blame lies squarely on this government's policy of massive spending cuts with no strategy for growth."

The economy shrank by 0.5% in the last three months of 2010, the Office for National Statistics (ONS) said.

The severe weather hit activity in the quarter, but the ONS said even if the weather impact had been excluded, activity would have been "flattish".

The contraction follows growth of 0.7% in the previous three months and 1.1% in the second quarter of 2010.

The release is a first estimate for the quarter from the ONS and is subject to revision. The statistics body will publish two further updates at monthly intervals.

The contraction took economists by surprise, as forecasts had been for growth of between 0.2% and 0.6%.

The construction industry was a large contributor to the fall, with activity decreasing by 3.3% in the quarter.