High Peak Liberal Democrats

And the Chancellor faced calls to quit after being branded a clueless failure whose arrogant insistence on slashing the national debt has sparked disaster with the economy shrinking 0.7% in the three months to June.

That is far worse than the 0.2% decline predicted by experts.

More evidence of a bitter split in the Coalition emerged as Lib Dems demanded Mr Osborne be replaced by Business Secretary Vince Cable.

Even those in his own party admitted the Chancellor was a flop and called for his head.

Lib Dem peer Lord Oakeshott said: "George Osborne has got no business experience, he has never worked outside politics. He's doing surprisingly well for a Chancellor on work ­experience.

"But really, in a torrid time like this, I think we do need absolutely the best people available."

Lib Dem MP Sir Bob Russell added: "We are in the third year of a Coalition Government and it is time that some of the stars whose performance has waned should make way for new blood."

Mr Cable himself backed Lord Oakeshott's call for a change of course.

He said he wanted the Government to do more to boost growth with a plan that was not entirely focused on cutting the national deficit.

Mr Cable added: "Budget discipline is a necessary but not a sufficient ­condition for recovery and for ­rebalancing the economy.

"We clearly do need a strong growth strategy. But we also need policies to stimulate long-term growth.

"The GDP figures are obviously disappointing and I think we shouldn't be surprised, actually.

"There is an ­enormous problem that we are trying to grapple with.

"I call it my Plan A-plus, which means accepting that we have the necessity for budget discipline but that has to be augmented by growth policies, including the industrial strategy approach which we have been ­developing in this department."

The dismal figures from the Office for National Statistics showed construction, manufacturing and hospitality all struggled.

Building was the worst hit, down 5.2% on the previous quarter, but manufacturing slumped by 1.3% and services output was down 0.1%.

The ONS said "special events" such as the prolonged spell of wet weather and the Diamond Jubilee weekend had hurt the recovery.

Mr Osborne's plans to cut the deficit, which relied on growth of at least 2% a year, are now in tatters and Britain's AAA credit rating is at risk of being downgraded.

The dire state of the economy will also pile ­pressure on David Cameron to think about moving the ­Chancellor to another post when he carries out an autumn reshuffle.

Even his own deputy, Lib Dem Treasury Chief Secretary Danny Alexander, declined three times to comment on his boss's future.

Mr Osborne said of the dire ONS figures: "Of course there are one-off factors like the Bank Holiday, but that's not an excuse I'm using.

"Frankly, even without that these would be ­disappointing numbers, and I think they just remind us that Britain has some deep-rooted economic problems that are going to take time to solve.

"We've also got the debt crisis abroad, and all of these things, of course, make it a big challenge for a country.

"But we've got to have that relentless focus on the economy, we've got to make sure we're getting lending to businesses, that we're investing in the future, investing in ­infrastructure, and that's precisely what the ­Government is doing."

The Prime Minister accepted the figures were "very disappointing" but refused calls to change course.

Mr Cameron continued to blame the ­eurozone crisis for the problems, even though France and Germany have so far avoided recession.

He added: "They show the extent of the economic ­difficulties that we're grappling with, not least the situation right across the eurozone where our neighbours are also ­struggling."

But Labour leader Ed Miliband said: "Today is the day we see this Government's economic plan has failed.

"They promised change but month on month, year on year, things are getting worse and it's families and businesses paying the price."

Shadow Chancellor Ed Balls, who writes in The Mirror today, added: "After two years of blaming everybody but himself, the Chancellor has run out of excuses.

"The snow, rain, royal weddings and bank holidays are facts of life in Britain which our economy should be able to cope with.

"These shocking figures speak for themselves.

"As we warned two years ago, David Cameron and George Osborne's ill-judged plan has turned Britain's recovery into a flat-lining economy and now a deep and deepening recession.

"And with Britain just one of two G20 countries in a double-dip ­recession and borrowing now going up as a result, it is clear this Government's plan has failed. If these figures don't make the Chancellor wake up and change course, then I don't know what will.

"Thank goodness the Olympics will give our economy a much-needed shot in the arm.

"But this short-term boost is not enough, we need a plan B now to get the economy moving again and radical reforms to set Britain on a new course for jobs, growth and long-term prosperity. The longer the Chancellor refuses to act, the heavier the price our country will pay."

Angry Conservative MPs also joined in the call to have Mr Osborne booted out after doing such a dismal job on the economy.

They made it clear they would like him replaced by William Hague or Philip Hammond. One, who did not wish to be named, said: "Hammond has the gravity we need for these austere times."

Mr Balls also called for Labour, the Tories and Lib Dems to work hand in hand to save the crumbling economy.

He said the GDP figures required "all parties to come together in grand coalition on the economy."