Public Affairs: Soap Box - George McGregor, managing director, Interel Consulting UK

Neither David Cameron nor Ed Miliband need reminding of Bill Clinton's mantra that 'it's the economy, stupid'.

This is why the latest economic figures showing a 0.5 per cent contraction in the economy will define politics in 2011.

The gloomy economic news is a sharp reminder to the Government that the numbers will not always drive the political agenda in their direction.

Cameron and Nick Clegg are steeling their parties for things to get worse before they get better.

In the months ahead, Chancellor George Osborne and his shadow counterpart Ed Balls will be involved in hand-to-hand combat, not just over deficit reduction, but over which party has the right mix of policies to promote economic growth and job creation.

The appointment of Balls is a mixed blessing for the coalition. It would be easy to paint him as a close confidant of Gordon Brown and as the architect of the UK's economic woes, but the Treasury team will be acutely aware that Balls is economically literate and one of the few Labour politicians capable of taking scalps.

Labour must also be careful. It still has much to do and, with Balls now in the driving seat on the economy, Ed Miliband will find it hard to apologise for Labour's mistakes, which is what he must do before he can even think about winning back Labour's own economic reputation.

All eyes will now be fixed on the Budget on 23 March and the next set of GDP figures in April. They will tell us if the UK has double-dipped into recession, or if December was just an economic aberration caused by one of the coldest months on record.

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