GDP figure will frame the final leaders’ debate

The electoral significance of today’s GDP number has been apparent for some months. Originally I had thought that the risk of a poor number might be an argument for Brown calling an early election.

Well, today’s number lived up to the billing. It was a smidgeon away from showing a renewed relapse in the economy and is Labour’s last chance of a gamechanger. 

Anaemic 0.2 per cent growth means that Cameron will be hammered from both Liberal Democrats and Labour for £6bn of planned “in year” cuts that will start in weeks. Brown will be hammered for a stuttering recovery.

Brown must be relieved that we avoided the double dip, but the figures were mighty close. The arctic weather in January clearly DID have an impact. Hotels and restaurants were notable drags on growth, having soared in q4 2009. The VAT rise must have had an impact in sluggish retail numbers too.

It’s worth reflecting that this preliminary estimate is based on under half the data, and is highly likely to be revised UP, but not before election. But all sides will attempt to spin it in their direction.

Who it plays best for is a question of two competing political arguments: “Do we HAVE to cut now given the fragile recovery?” vs “You left us with a sluggish economy”. That will play out at next week’s vital debate the first way for Brown, the second for Cameron, and both ways for Clegg. Who will end up looking most convincing?

Intriguingly in George Osborne’s press response to the GDP figure there’s no mention of the 6bn ‘in year’ cut or the record deficit. Remember that starting the cut this year has nothing to do with preventing the NI increase or those business leaders letters, as that only starts in 2011.

Prediction: that if the polls stay where they are, on 7 May Cameron will drop “this year’s cut” faster than you can say “hung parliament”.