It’s hard to see how Balls and Osborne can both survive the next Budget. Who will fall?

If the Chancellor wriggles free again, Balls’s detractors inside Labour will be howling for blood.

George Osborne leaves 11 Downing Street in London on February 27, 2013. Photograph: Getty Images.

There is no fixed degree of contempt that the public feels towards politicians. If one day a candidate is despised a little more, it doesn’t follow that his rival is hated any less. Proof of this principle is found in the mutually debasing grudge match between George Osborne and Ed Balls.

The Chancellor’s credentials as a reliable steward of the economy are shot. He has missed the deadlines he set himself to fix the deficit and failed the tests he said would measure his credibility. The loss of Britain’s AAA credit rating with Moody’s is mom­entous chiefly because Osborne flaunted its preservation as evidence that his way works. It doesn’t.

The economy has behaved much more as Balls predicted it would than as Osborne insists it should. The shadow chancellor’s warnings of double-dip recession were vindicated. He said an aggressive lurch into austerity would suffocate growth and sabotage deficit reduction. It did.

If one man’s reputation were boosted by the other’s mistakes, Balls would be a tower of popular acclaim. Opinion polls show Labour inching ahead of the Tories on the question of which party can be more trusted on the economy, but not by much. When the question is made personal, Balls and Ed Miliband invariably lag behind Osborne and David Cameron.

People remember who was in charge when the bubble burst. The Tories have managed to portray indebtedness as both a moral outrage and the lodestar of Labour policy. When Nobel laureates and Financial Times columnists point out that low interest rates invite short-term borrowing to stimulate growth, it is called macroeconomics. Yet somehow, when shadow ministers say the same thing, it is seen as the deathly spectre of Brownism.

It is no secret that a Conservative election campaign will urge voters not to hand the keys back to the party that drove the car into a ditch and other such menacing metaphors. Tory strategists think they need only a modest recovery to make that message resonate. The light at the end of the tunnel doesn’t need to be all that bright if Labour’s offer can be depicted as a U-turn into the darkness.

Despite knowing two years in advance what the attack lines against the opposition will be, Labour has made little progress in rebutting them. Even MPs who swear fealty to the shadow chancellor worry that he isn’t getting his message across. "He couldn’t be proved more right and he still keeps losing the argument," says a despairing ally. Balls’s friends were dismayed by his failure to wound Osborne in the parliamentary debate after the Autumn Statement last December, when the Chancellor abandoned his debt consolidation target.

That flop encouraged those on the Labour side who hate Balls’s style of politics, resent his lofty independence from Miliband’s office and think he is generally a liability to turn up the volume of their complaints from casual murmur to noisy chatter. It is a sound that never quite goes away. In the run-up to the Budget on 20 March the dial is set on low whispers. If Osborne wriggles free again, Balls’s detractors inside Labour will be howling for blood.

There is still time for the tide of public opinion to rise in Labour’s favour. In April, a clutch of cuts and tax changes will take effect, transforming austerity from an abstract noun to a household emergency. Tax credits will shrink, benefits will be stopped, changes to council tax will punish low-income families. Meanwhile, the highest earners will get a juicy tax cut – a favour from last year’s Budget that smears plutocratic contaminant all over the Tory brand.

Fear of repeating the errors of the 2012 "omnishambles" package has made Osborne ultra-cautious ahead of his next Budget. He will deploy no extravagant gestures that might signal capitulation to the calls for a change of direction: no easing of austerity to gratify Labour; no drastic tax cuts as urged by Tory backbenchers.

There is more than stubborn pride to Osborne’s craving for consistency. His team has not stopped believing that the measures taken since 2010 are the right ones. Team members insist a normal recovery has been delayed by foreign turbulence and will arrive later this year. That optimism looks eccentric, verging on the delusional, and the Conservative Party is losing patience with it. The background hum of Tory frustration with Osborne is on the same wavelength and has the same frequency as Labour’s drone of dislike for Balls.

The most plausible economic prognosis is more stagnation and falling living standards. Balls’s calculation is that Britain will find that intolerable, finally pin the blame on Osborne and turn to Labour for salvation. The Chancellor’s calculation is that Balls has no comfort to give when there is no money to spend and Labour has no notion of how to save. They are both right. Osborne will look increasingly ridiculous blaming the failure of his budgets on Labour, while no amount of finger-jabbing outrage will turn Balls into a prophet of national renaissance.

That poses an obvious challenge to Cam­eron and Miliband. Their Treasury generals have fought each other to a bloody standstill, unloved by their parties and scorned by voters. Yet there are two more years of combat to come with the economy as the main battleground. This year’s Budget won’t resolve that argument, but for the sake of a better debate it should still be the endgame for Balls and Osborne.