GEORGE Osborne faced rising pressure over the perilous state of the economy yesterday after an influential forecaster said the UK was already back in recession.
Labour seized on the figures to call on the Chancellor to abandon his austerity drive.
The outlook, from the Organisation for Economic Co-operation and Development (OECD), came on a day of growing woes for Mr Osborne and the Coalition.
They faced embarrassment after a senior Conservative warned they were in danger of appearing out of touch with ordinary people over issues such as the "pasty tax" announced in last week's Budget.
One-time party leadership contender David Davis warned Downing Street it had to "get a grip" on the fact many view the Tory frontbench as "toffs".
Labour also highlighted another of the Budget's more controversial measures, warning almost 400,000 Scottish pensioners would be hit by the so-called "granny tax".
Only a tiny number would benefit from the abolition of the 50p tax rate, the party warned.
Fears of a so-called double dip recession have dogged the Tory-LibDem Coalition for months, since figures showed the economy contracted in the final three months of last year.
If the OECD prediction proves correct, it will be the second time the UK has entered recession in less than five years.
The forecast came 24 hours after another set of gloomy economic figures confirmed the economy had shrunk even more than previously thought at the end of last year.
Many economists believe there will be just enough growth in the first quarter of this year to drive it into positive figures.
However, the OECD predicted gross domestic product (GDP) – seen as a measure of the economy as a whole – was on course to fall slightly, by about 0.1%, in the first three months. Technically, a recession is defined as two consecutive quarters of decline.
Sir Mervyn King, the governor of the Bank of England, forecast earlier this week the economy could shrink during the second quarter, April to June, because of the Queen's Diamond Jubilee celebrations which include an extra bank holiday.
The Office for Budget Responsibility, the Government's independent forecaster, had predicted the UK will avoid re-entering recession. That was backed by many experts yesterday.
Philip Shaw, an economist at Investec, said in his view the OECD was "being too gloomy".
He said: "The services sector appears to have strengthened, the manufacturing sector is recovering since the end of last year and there's been signs of strength in retail spending."
Labour's Shadow Chancellor Ed Balls said that, even if a recession did not materialise, there was little good economic news.
He said: "Why is Britain not starting to grow strongly again with falling unemployment, like in America?" He also accused the Chancellor of "choking off" growth with his austerity cuts.
Pointing to previous warnings made by the deputy head of the OECD, where it was stated the Government should slow spending cuts and tax rises if growth was slower than expected, he added: "That is what the OECD is forecasting. It's time the Chancellor listened to wise advice."
The row came as Mr Osborne's affluent upbringing was thrown back into the spotlight by one of his senior colleagues.
Mr Davis, who grew up on a council estate, warned many ordinary people viewed the Tory frontbench as "better off, they think we are toffs".
He added: "If I were advising in Downing Street I would worry about this. It's not an insuperable problem yet, but it's one they've got to get a grip on."
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