Negative growth figures show the chancellor's strategy is well off track, but Labour is not reaping the benefit
The political script was given its big rewrite with the autumn statement's admission that the deficit would not be eradicated by the end of the parliament, but Wednesday's announcement of a return to negative growth in the fourth quarter of 2011 was also not part of the Osborne plan – and just confirms the recovery is badly off track.
The "march of the makers", which Osborne once proclaimed, has come to a shuddering halt and now looks more like the retreat from Moscow.
The only factor even more off track is the psephology. Polls showing a small to impressive Conservative lead as the economy goes negative was not in anyone's forecast.
Osborne wheeled out the two ready-made arguments, or alibis, that have stood him in good stead so far. He said: "We are dealing with their debts built up over the past 10 years," and, "the problem has been made worse by the crisis on our doorstep in Europe."
He had last week wisely tried to prepare the ground for the fall by raising the possibility of negative growth. He will hope that the relatively small fall of 0.2% does not presage a further fall in the first quarter of this year, which would denote the official return of recession and represent a blow in itself to economic confidence. The much-maligned Office for Budget Responsibility predicted a small fall in the last quarter, but recovery in 2012.
Treasury sources remain relatively confident that the second half of the year will see substantial growth, largely due to a resolution of the euro crisis, and an upsurge in the UK export market. But stagnation remains the cloud loitering overhead, and, if the economy sulks its way through 2012 and living standards continue to fall, the polls may shift as voters' patience wears out.
But there is no immediate sign that any of the big economic or political actors are going to change their arguments. Rather they appear poised to dig in even deeper. The deficit hawks in the City, the thinktanks and on the Tory benches have intensified their calls for low spending, labour market deregulation and a solution to the euro crisis.
The Keynesians in the Labour party redoubled their efforts to argue co-ordinated spending is necessary, and claim key figures in the IMF are starting to preach this course. Labour also argued that the figures confirmed that borrowing will not fall even as fast as Alistair Darling the Labour ex-chancellor planned. The prospects of unemployment starting to lift by the end of the year also look minimal.
Yet the Labour fear is that it may win the economic argument on austerity, but lose the political one. Hence its new year political course correction. For Labour the hope must be that its efforts to rebalance its message will reap political dividends soon.
In a painful shift, it has put a renewed emphasis on the need to get the deficit down in the long term, hoping that it will help electors open their ears to their shorter-term messages on spending, and growth.
There were very tentative figures in this week's polling suggesting a small positive shift in attitudes towards Labour. Ed Miliband and the shadow chancellor, Ed Balls, have taken risks in shifting the message, and are urging their colleagues to recognise it may take the whole of this year for the polling to shift.
It has been bumpy internally: some regional party and union meetings this weekend were said to be very difficult. But Labour will also have to follow through on its rebalanced message – something it has sometimes failed to do– starting at prime minister's questions.