Budget date gives clearest signal yet of 6 May election

Gordon Brown has given the clearest indication so far that he has decided on a 6 May election, revealing that the Government will set out what could be its last Budget just two weeks before he formally asks the Queen to dissolve Parliament.

In a politically charged speech on the economy yesterday, made in the City of London, the Prime Minster confirmed that the Budget will be held on 24 March. It means that a snap election in April, which ministers had warned until recently could not be discounted, is now extremely unlikely.

Mr Brown signalled he was happy to place the characters of the party leaders at the heart of the election. In a throw-back to the "Not Flash, Just Gordon" slogan devised by ad agency Saatchi and Saatchi in 2007, Mr Brown distanced himself from the more polished image of David Cameron by telling his audience: "For better or for worse, with me what you see is what you get."

His Budget announcement has firmed up the key dates leading to election day. Mr Brown could ask the Queen to dissolve Parliament on Monday 29 March, after his speech to the Scottish Labour conference in Glasgow, but party officials are said to favour starting the campaign after the Easter break.

As a result, the most likely date for Mr Brown to head to the palace will be 6 April. That would allow for a few days of frantic activity, when the Government will attempt to push through as much of its outstanding legislative programme as possible. The formal election campaign would then begin on Monday 12 April, when the parties would launch their manifestos. For the first time, the campaign will also be punctuated by the three televised party leaders' debates, beginning in Manchester on 15 April.

The run-in to the ballot contains some possible pitfalls for Mr Brown, especially on the health of the economy. He admitted yesterday that there would be "bumps in the road" to recovery, with inflation, trade and unemployment figures all due to be announced between the Budget and the election.

He also appeared to prepare the ground for a possible "double dip" recession, which could be announced when economic growth figures appear just a fortnight before the likely election date. "Although the economy is now growing, recovery remains very fragile," he said. "There will be many months ahead of conflicting statistics."

The latest economic data seems to validate Mr Brown's cautious view. The Office for National Statistics said yesterday that industrial output fell by 0.4 per cent in January. Like the depressed numbers on trade earlier in the week, analysts put some of the fall down to the exceptionally bad weather, and the restoration of VAT to 17.5 per cent. However, the weather effect cut both ways; manufacturing fell by 0.9 per cent in the month, a significant drop, with frozen roads slowing deliveries; but natural gas and electricity production rose by 1.4 per cent, as the nation stayed in and turned up its central heating.

Mr Brown also sought to reassure the City that he would take steps to tackle Britain's budget deficit, revealing that £3bn would be saved over the coming year by freezing the pay of senior public workers. George Osborne, the shadow Chancellor, said that the "biggest risk to the British economy is five more years of Gordon Brown".