Treasury minister Greg Clark said that the row over whether David Cameron misrepresented the views of the Office for Budget Responsibility of the impact of austerity measures on the economy was over a technical detail.
Mr Clark said: "It's a technical point, but it is an important one. Every budget since we came into office has been analysed by the OBR. Because Government spending is part of national income, any reduction in it has always been part of the forecast.
"What David Cameron was addressing in his speech - was to where there has been an extra contribution to the relatively slower growth than was expected from policy.
"What Robert Chote and the OBR have said is they don't think that is the case, that actually the causes of the slower growth than they forecast, were oil prices, the financial sector and the Eurozone."
There's been embarrassing criticism of the Prime Minister's keynote speech on the economy from the independent economic watchdog set up by his government. Yesterday, David Cameron claimed spending cuts had not damaged growth and that the Office for Budget Responsibility agreed.
But today the head of that watchdog said the opposite was true.
From Westminster ITV News political correspondent Carl Dinnen reports:
The head of the independent fiscal watchdog the Office for Budget Responsibility criticised David Cameron for misrepresenting its views on the impact of austerity measures on the economy.
Here is what the Prime Minister said:
Shadow Chancellor Ed Balls said on Twitter that the letter from the Office for Budget Responsibility to Number 10, rebuking David Cameron over claims he made about the economy, was 'deeply embarrassing' for the Prime Minister.
Cameron’s attempts to defend his failing econ policy getting more desperate but as PM he has an obligation to be straight with people
Independent OBR letter a deeply embarrassing rebuke for the Prime Minister - my response http://t.co/MIZAG67Tbx
Sir Alan Budd, the first chairman of the Office for Budget Responsibility , said he believed the OBR had rebuked David Cameron because he "made an error'.
– Sir Alan Budd, the first chairman of the OBR
I think it could be regarded as something of a rebuke.
I think he is correcting a statement that the Prime Minister has made and the important thing is that the Prime Minister is attributing a view to the OBR which it doesn't hold and I think when that happens it is absolutely right to write to the Prime Minister and point out that he has made an error.
Sir Alan was talking to BBC Radio 4's PM program.
In a letter sent to Number 10, the chairman of the Office for Budget Responsibility Robert Chote, said that it believed fiscal consolidation had "reduced economic growth over the past couple of years".
The Office for Budget Responsibility has published a letter sent to Number 10 by its chairman in which he took exception to claims made by David Cameron.
In the letter, Robert Chote criticised the PM's claim that austerity measures were not responsible for a dip in growth:
– Chairman of the OBR Robert Chote
To date our forecasts have used 'multipliers' that imply that every £100 of fiscal consolidation measures reduce GDP in that year by around £100 for capital spending cuts, £60 for welfare and public services cuts, £35 for increases in the VAT rate and £30 for income tax and National Insurance increases, with the impact diminishing thereafter.
We believe that fiscal consolidation measures have reduced economic growth over the past couple of years, but we are not yet persuaded that they have done so by more than the multipliers we use would suggest.
Mr Chote included the following quote from Mr Cameron's comments in his letter to Number 10:
– David Cameron
As the independent Office for Budget Responsibility has made clear growth has been depressed by the financial crisis, the problems in the Eurozone and a 60% rise in oil prices between August 2010 and April 2011. They are absolutely clear that the deficit reduction plan is not responsible. In fact, quite the opposite.
A Downing Street spokesman said David Cameron made accurate claims about the economy when he explained why forecasts came in lower than expected.
– A Downing Street spokesman
The OBR has today again highlighted external inflation shocks, the Eurozone and financial sector difficulties as the reasons why their forecasts have come in lower than expected. That is precisely the point the Prime Minister was underlining.
The head of the independent Office for Budget Responsibility rebuked the PM for misrepresenting its position on the impact of austerity measures.
The head of the independent Office for Budget Responsibility (OBR) has rebuked the Prime Minister for misrepresenting its position on the impact of austerity measures.
Office for Budget Responsibility chairman Robert Chote wrote to David Cameron to dispute claims made in a high-profile speech yesterday.
Mr Cameron said the OBR was "absolutely clear that the deficit reduction plan is not responsible" for depressed growth - "in fact, quite the opposite".
But Mr Chote insisted that it in fact believed there was a short-term effect and that "fiscal consolidation measures have reduced economic growth over the past couple of years".