The head of the CBI has dismissed Government boasts about the health of the UK economy and called on Ministers to develop a serious plan for growth.

On a visit to Newcastle, CBI director-general Tony Danker downplayed Government claims about the country having the fastest-growing economy of top nations, and instead pointed to official forecasts of sluggish growth in 2023 and 2024.

He said that unless there were policies to support more business investment, the UK would face either “higher taxes or austerity” because the country’s economy would not be able to support all the spending needed on public services.

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And he added there was a risk places like the North East could lose the lead they currently have on the green economy as other countries around the world invest more in renewable energy.

Mr Danker said the economy was caught between “tailwinds and heawinds”, with companies coming out of Brexit and the pandemic and looking to grow, but facing challenges from inflation, rising energy costs and skill shortages.

And he said that unless something could be done to improve growth levels forecast by the Office for Budget Responsibility, it would be impossible to improve living standards in the UK.

He said: “The Government is caught in a trap, fiscally. The spending pressures are enormous. You’ve got the health service, educational catch-up, transport grinding to a halt post-pandemic: there’s no end to the spending pressures.

“So where do you go for money? Tax? We’re about to put corporate taxes up six points overnight, National Insurance is going up.

“All the other things we’d like to invest in to move our growth rate, the Government is saying we don’t have the money. Which on the one hand is true, but can you really not invest in future growth? Because if you don’t move that growth rate higher, either you have permanently high taxes or you start to have austerity.”

The Government has defended its economic record, with Prime Minister Boris Johnson saying this week that the UK had “the fastest exit from Covid of any European economy” and “the fastest growth in the G7”.

But Mr Danker said that was only true because it was preceeded by the largest economic fall during the pandemic.

He said: “It is technically true, depending on how you cut the data, that right now we have the fastest-growing economy in the G7, just as it would’ve been true a year or two ago that we were falling faster than those other countries.

“Taking either the blame or the credit for what is one of the biggest V-shapes in our economic history – I get why you do it in the world of politics but no-one should believe it’s a statement of any significance for our economy.

“What is very important to look at is what the independent Office for Budget Responsibility says for the economy once the V-shape is complete and they say we’re coming back and staying low.

“The question is, when we come back to a steady state, what’s the growth plan? That’s when the Government needs to really be on the ball.”

Mr Danker said last week’s White Paper on Levelling Up was “good in some ways” but that the Government needed to “follow through” by focussing on economic clusters that could drive growth and push up wages and skills.

And he warned that in the green economy, “there’s an absolute danger that the lead we’ve got, we will lose” as other countries invested more in that sector.