The Office for National Statistics said the economy shrank by 0.3pc in the first quarter and not 0.2pc as it reported in April. Economists had expected the ONS to maintain its first estimate.
The downward revision meant the British economy was 0.1pc smaller than it was a year earlier. The ONS previously estimated gross domestic product was flat on an annual basis.
It was a blow for George Osborne, who has repeatedly defended his unwavering austerity drive despite its impact on growth.
A combination of austerity and the eurozone debt crisis are expected to weigh further on the British economy in the coming months.
Howard Archer, chief UK economist, described the data as “very disappointing”.
No one dispenses advice to the eurozone better than David Cameron. His speech yesterday was a fountain of good sense and hard truth. Quite rightly, he said there’s no point in any uncompetitive, debt-addicted country thinking it can just muddle along. Radical, structural reform is needed. He didn’t say which of the many basket-case European economies he had in mind, but one sticks out. It is increasing its debt faster than anywhere else in Europe. It languishes behind even Pakistan and Nicaragua on the global regulation league tables. Its growth prospects have almost evaporated.
How do you solve a problem like the United Kingdom? Two years in, and Mr Cameron seems no nearer to a solution. He is ambitious over welfare and schools, but on the economy he seems trapped inside a failed Brownite consensus. The Prime Minister does know what should be done, as we heard yesterday: radical reform, and accepting that you can’t (as he puts it) “borrow your way out of a debt crisis”. But his government is attempting to do precisely that, borrowing more over five years than Labour did over 13.
My reaction to last week’s local election results is straightforward: I get the message, loud and clear. I know that the familiar excuses – low turnout, mid-term blues – aren’t enough. Even the difficulties of our economic situation and the tough but necessary decisions the Government has had to take cannot fully explain the results. The message people are sending is this: focus on what matters, deliver what you promise – and prove yourself in the process. I get it.
So let me spell this out. I am sceptical of those who claim to draw the answer to every problem from a loud ideology, but I am fierce in my commitment to a fair society in which effort is rewarded, work pays, and the state is there to help people but not shape every part of their lives. I am on the side of people who work hard, want to get on and play by the rules. I loathe with a passion the bankrupt, high-taxing, something for nothing society left behind by Labour, and I am in politics to change it.
You may have received by email, as I did a few months ago, a story that purported to illustrate the way the tax system works. It concerns 10 drinkers in a bar who decide to settle their £100 weekly beer bill roughly the same way we pay our taxes. So, the first four men (the poorest) paid nothing; the fifth paid £1; the sixth £3; the seventh £7; the eighth £12; the ninth £18; and the 10th man, the richest, paid £59.
Then the barman decided to give them a £20 discount for being good customers. The group wanted to continue to pay the new £80 bill the same way as before. While the first four men still drank for free, the other six divided up the £20 windfall by following the progressive principle of the tax system. So the fifth man, like the first four, now paid nothing, making a 100 per cent saving; the sixth man paid £2 instead of £3 (a 33 per cent saving); the seventh man paid £5 instead of £7 (a 28 per cent saving); the eighth £9 instead of £12 (a 25 per cent saving); and the ninth £14 instead of £18 (a 22 per cent saving). The 10th man paid £49 instead of £59 (a 16 per cent saving).
Mr Johnson uses an interview in The Sunday Telegraph to make a direct appeal to his party’s core values, presenting himself as a “tax-cutting Conservative” and promising to cut council tax if re-elected as London mayor.
His intervention will be seen as a gesture to his party’s leadership, which is facing growing claims that it is losing touch with grassroots supporters.
As well as his insistence on a low-tax agenda, Mr Johnson cites freedom, democracy and low government spending as his key beliefs, and vows to crack down further on crime.
Mr Johnson, who takes on Labour’s Ken Livingstone in this week’s mayoral election in London, does not mention issues such as gay marriage and the environment – policies that Mr Cameron has promoted recently, earning him criticism from his party.
The mayor also describes George Osborne, his possible future rival for the Tory leadership, as “the jaws of death” — a jibe that comes as the Chancellor faces continuing attacks over the Budget and last week’s confirmation that Britain was back in recession.