Gordon Brown and George Osborne have much more in common than either of them is happy to admit. Both have famously served as intensely political chancellors. Both are bywords among colleagues for big-picture thinking shot through with meanly partisan calculation. Osborne’s big setpiece speeches can often feel like a Brown tribute act with their rapid-fire delivery, deceptively partial information and love of rabbits pulled out of hats to wrongfoot the opposition.

There is, however, no direct connection between Brown’s retirement and Osborne’s autumn statement except that the two events both took place this week. Yet the coincidence is a dramatic reminder of what happens when the public turns against a government. It happened to Brown in 2010; and now he is gone. The same thing may well happen to Osborne in 2015; and he knows this better than anyone.

One of the keys to understanding the current phase of British politics is that the chancellor has been taken aback by the government’s failure to gain a polling dividend from Britain’s economic recovery. Grasp this and a lot else about the political situation becomes clear.

The confidence that such a dividend would arrive in 2015 was central to Osborne’s calculations when he embarked on what he calls the rescue of the British economy in 2010. But the return to growth in the last two years has not caused the voters to say thank you. Now time is running out before the general election. Hence this week’s shift from Dr Osborne administering the medicine, to Santa George bearing gaudy electoral gifts.

Do not be misled by the admittedly impressive political streetcraft of Wednesday’s announcements. They may have been delivered with the usual icy confidence; but they are nevertheless a large calculated gamble in an intensely difficult set of circumstances. Osborne, like all intelligent Tories, is aware that the economic and the political project on which they embarked in 2010 has been carried to a place it was never intended to go, in which economic expectations are declining, not expanding, and in which re-election, even within another hung parliament, is far from certain.

There are two ways of summing up the Conservatives’ position – an economic way and a political way. Though neither is hopeless, neither is good either. Osborne presides over a failed fiscal strategy – fewer than half of his spending cuts have been completed, and borrowing is set to rise for the next two years – and an economy that is recovering while delivering low wages, diminished government revenues, large spending cuts and where growth will slow after this year. Now, in the autumn statement, by firing up the housing market again, Osborne risks fuelling another rise in debt-driven demand of the sort that caused the collapse in 2008.

Experts are forecasting gloomy times for welfare, health, education, local government and the arts. Photograph: Peter Macdiarmid/Getty Images

Needless to say, this has not been a popular strategy except among the unreconstructed Thatcherites – who do not include Osborne – who see an ever smaller state as desirable in itself and as a royal route to electoral success. Osborne may believe the former, as many of us might in some circumstances, but he is not so foolish as to imagine the latter. No one can draw that conclusion, especially at present, when Tory support hovers around 32%, when the polling in the Tory marginals remains unfavourable and when, as YouGov reported this week, confidence in the government’s handling of the economy has declined this autumn.

It is clear therefore that both the political argument and the economic argument remain wide open to win or to lose. That is not a situation that gives thoughtful Tories much comfort. And in spite of all the noise about Nigel Farage, it is not Ukip that worries them in this context. It is Labour.

It may seem perverse to be worried about a party that was heaved out of office under Brown four years ago. Quick general election bouncebacks of the sort Labour currently needs are rare in UK politics. Add to that the fact that Labour is still blamed more than the coalition for the state of the economy, that its economic prescriptions remain unclear to most voters, that its share of the vote – already low in the polls – tends to decline as elections near and that its leader has appalling ratings, and you can make a powerful case for saying Labour has little chance of victory in May.

And yet the party is manifestly in with a chance. The first-past-the-post voting system in UK general elections gives the bigger parties so many advantages; the failure to redraw the boundaries works in Labour’s favour; though Labour is doing badly by historic measures, the Tories are often doing just as badly or even worse; and, simply, Labour is the party of the NHS.

But it is also because, for all Labour’s many faults, this era in this country still remains more fertile for the party than it is for the Tories. History never stands still, but the post-Thatcher mood that brought Tony Blair into office 17 years ago has not drained entirely into the sand. It was a mood that embraced regulated market capitalism alongside a fair deal and a fair chance for all.

Much of what the Labour governments achieved gave those voters what they wanted; some of what those governments did fell short. Time has moved on, as it always does. But this remains in many ways the mood of Britain today, a generation on, and crucially the coalition has done little to alter it.

Britain remains, in other words, more a Labour country than a Tory one. Other things being equal, Labour ought to be closer to winning the election than the Conservatives. Or, as a former minister put it to me this week: “The country would prefer to live under a Labour government. People want permission to support Labour. But Labour is not doing enough to give them that permission. In some ways it is denying it to them.”

No single issue embodies that problem more powerfully than Labour’s failure to admit its past mistakes while also taking ownership of its past achievements. If it had done so, Labour would be in a stronger position. Yet the enduring mistrust of the Tories and the material self-interest of those worst hit by austerity means Labour can and may still win anyway. Whether it would be either a strong or a good Labour government are other questions altogether.