Senior Conservatives are already rehearsing the election lines they will use against Eds Miliband and Balls

A senior coalition figure puts it with stark profanity: “If the economy comes right, Labour is fucked. If it doesn’t come right, we’re fucked.” I wouldn’t frame it quite like that myself. It is too determinist to think that elections turn solely on whether the growth figure is positive or negative. Governing parties in Britain have won in the shadow of recessions and they have lost when presiding over expansion. But the basic point is surely right: the economy will be far and away the single most important issue when the country next makes a choice of governors. More specifically, many voters will be hugely influenced by whether their household disposable incomes are rising or falling.

Hence the rather desperate alacrity with which the prime minister and chancellor hailed the latest figures that suggested that the economy grew by 1% in the most recent quarter. Hence the welcome through gritted teeth that this news received from the Eds Balls and Miliband.

Both sides have to be very careful about how they address a country feeling the pain of prolonged austerity. Labour ought to be wary of exposing itself to the Tory charge that it is talking down recovery or secretly hoping for continued misery. The coalition, frantic for something to boost morale after a terrible few months, has to guard against the impulse to greet any modest movement in a positive direction as a glorious new dawn, a temptation to which David Cameron is prone to succumb.

In his early months as prime minister, back in October 2010, he seized on one quarter’s growth figures to brag that Britain was “out of the danger zone” and firmly set on the road to recovery. Within months, the economy was shrinking again. Once burnt, the prime minister is not twice shy. Naughtily pre-empting the official publication of the latest figures, he cockily told the Commons that the good news would keep coming, a rather reckless hostage to future fortune when there are considerable internal and external risks that Britain could slide into negative territory for a third time, a triple-dipper.

When trying to establish where the parties really stand with the public, the headline polling numbers are often not as informative as how voters answer the question: “Who do you most trust with the economy?” On the crucial issue of perceived economic competence, it is pretty much neck and neck between Labour and the Tories. There’s an encouraging way of looking at this from a Labour point of view. The two Eds have closed what used to be a yawning deficit on this question. Two and a half years since Labour was ejected from office, having presided over the worst financial crisis since the 1930s, the party has clawed its way back to rough parity with the Conservatives on economic competence. But there is also a way of looking at this which makes Labour frontbenchers nervous.

George Osborne has failed in the most important objective that he set himself. The central pillar of his original strategy – closing the budget deficit in a parliament – has no prospect of being achieved by the time of the next election. The original target date has already been put back by two years. Taxes have been hiked, spending squeezed and living standards crunched. Yet the governing party is still even-stevens with the opposition on economic competence and roughly 10 points behind in the headline poll numbers at midterm. Many governments have come back from much worse. Ken Clarke likes to remind younger Tory colleagues that he sat in Margaret Thatcher’s government when Conservative support fell to 18% and they went on to win the 1983 election by a landslide.

I don’t encounter many Tories who think that is likely to happen. But I do meet quite a lot of Conservatives who believe that, if growth can be sustained and the government manages to look competent for a change, Labour’s poll lead is very vulnerable. Senior figures in the Labour party think their Tory counterparts may be right and that current ratings are far more a reflection of the government’s failings than of a settled desire in the country to put Labour back into power.

There is a scenario that haunts some Labour frontbenchers. They sustain a poll lead all the way up to the threshold of the next election, only to lose it in the end because they had not dealt with the doubts about Labour nagging away at the electorate. The Conservatives are already practising their election themes. Boris Johnson played it for a laugh at the Tory conference in Birmingham, but it was a joke with deadly serious purpose, when he called David Cameron “a broom”, George Osborne “the dustpan” and compared other senior ministers to household implements “clearing up the mess left by the Labour government”.

In recent days, the prime minister and chancellor have been rehearsing other lines. It has been tough going, the Tories will say, and a bigger task than we expected because the inheritance from Labour was even worse than we imagined. But we are getting it done; re-elect us to finish the job. That will be a core Tory message. They might campaign on the slogan: “Britain’s On The Right Track. Don’t Turn Back.” They already own the copyright on that one having used it successfully against Labour in the past. One shadow minister suggests the Tories might also steal a soundbite from American politics: “Why hand the keys back to the guys who drove the car into the ditch?” Like cheap music, cheap slogans can be potent. In the words of one Labour frontbencher, the Tories could have the makings of “quite a compelling story”.

To counter it effectively, Labour will need a better story of its own, especially if growth is looking solid by the time of the next election. One line Labour is currently pushing hard is that the Tories have already done lasting, irrecoverable damage to the economy, which has disadvantaged Britain against major international competitors.

Ed Balls will pursue this theme with all the aggression for which he is famed, but the shadow chancellor also knows that it is very difficult to prove a counterfactual, a what might have been. Arguments about the past will probably matter less to voters at the next election than which of the parties seems to offer the best plan for the future. Labour will need a compelling case that it is better able to deliver jobs, rising incomes and enduring prosperity. There are unresolved tensions within the Labour high command about how to go about this. There is no open dissent from Ed Balls towards Ed Miliband’s speeches about reforming capitalism, but colleagues don’t come away from talking to the shadow chancellor with the impression that he burns with unbounded enthusiasm for this as a way of winning the confidence of voters. In the view of quite a lot of Labour MPs, ruminating about responsible capitalism is all very well, but also a bit too highfalutin. “What people will want to know at the next election is how we are going to make them better off,” says one member of the shadow cabinet.

Another, equally stiff challenge for Labour is to answer the anxieties about its trustworthiness when it comes to the nation’s finances. The Tories will ceaselessly repeat variations of David Cameron’s conference line: “Labour: the party of one notion – more borrowing.” The sort of questions in voters’ minds are well put by one senior Labour figure: “Will they always go for the short-term fix? Will they just throw money at problems and give in to vested interests?”

The two Eds have one main answer to this at the moment. That is to get themselves booed by trade union audiences at every opportunity by telling them that they won’t be able to reverse everything done by the coalition and warning that a Labour government will also have to inflict cuts.

That’s probably quite useful in improving their fiscal credentials with sceptical voters, but far from sufficient really to establish trust in Labour. There is a range of options on fiscal discipline. At the most astringent end of the spectrum, Labour could commit itself to introducing an American-style law setting a debt ceiling. This would oblige the government to ask for Parliament’s permission every time it wants to raise borrowing. I’m not persuaded they will go that far, but they will certainly need something very firm and convincing to win this part of the argument with their opponents.

Another crucial task for Labour is to impress the public that it would spend wisely and well. This demands some hard, imaginative and brave thinking about ways to sustain public services on reduced budgets. Labour’s team could also be doing a lot more to try to convince the public that they are resolved to extract the maximum return from every pound of taxpayers’ money. The party’s frontbenchers would be smart to seize every opportunity they get to talk about how they would reduce waste and eliminate inefficiencies.

The two Eds can be forgiven for not knowing what the economy will look like in 2015. No one does. But there is no excuse for not preparing for how the Tories will fight the election. Because they keep telling us.