Jim O'Neill, the chairman of Goldman Sachs Asset Management, said the chancellor's continued pursuit of austerity despite signs that the economy was stagnating, including worse-than-expected GDP figures, risked a lost decade for the British economy with low growth and increasing public debt.
Figures unveiled on Friday showed that the British economy shrank in the last quarter of 2012. If the economy shrinks again in the first quarter of 2012, Britain will be in recession for the third time since the economic crash of 2008.
The government insists that its policy of cutting expenditure is the only course available but critics insist that the absence of growth was increasing the deficit rather than cutting it.
O'Neill told the BBC: "Based on my business experience, if what you thought was not delivering what you expect to be the outcome surely you have to change what you thought a little. At a minimum, a repositioning of the stance, if not a full change."
The banker's comments echo criticism of Osborne from within his own party. Boris Johnson, the mayor of London, said government spending could trigger a virtuous cycle of spending by business, which would activate cash held by companies and create economic growth.
Ed Balls, the shadow chancellor, accused Osborne of being "asleep at the wheel" and said now was the time for a "plan B" to promote growth through cuts to VAT and spending on infrastructure.
"The longer David Cameron and George Osborne cling on to their failing plan the more long-term damage will be done. They must finally listen and act to kick start this economy," he said.
But Osborne, speaking at the annual World Economic Forum in the Swiss ski resort of Davos, remained defiant. "We can either run away from those problems or we can confront them and I am determined to confront them so that we can go on creating jobs for the people of this country," he told Sky News. "I am absolutely clear that we have got the right plan but of course it is not a plan that was ever going to deliver results overnight. We said from the start it was a long road, it was a hard road, but it was the only road."
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