Why George Osborne will stay

Shadow Chancellor George Osborne may have survived his latest encounter with Peter Mandelson at the Spectator Parliamentary Awards, but he has faced rather more intense friendly fire from Conservative voices over the last week than he did during yachtgate.

The usually mild mannered Michael Brown, Independent political commentator and ex-Tory MP, is calling for his head, along with Iain Martin of the Telegraph and a host of other commentators in the paper.

Contrary to Guido Fawkes' attack on The Telegraph, the pressure on Osborne can't be dismissed as a media invention, nor something being stoked by a government machine which has got its act together. These Tory-friendly commentators are clear that they are reflecting the heated debate at all levels within the party which is breaking out into the open.

Today, Tory peer and former party Treasurer Lord Kairns says publicly that he wants Osborne replaced, and his job given to David Davis. Backbenchers are pursuing their concerns about the Treasury team's performance through the 1922 Committtee. William Hague is being promoted most prominently as a replacement, with Chris Grayling. the pro-European Ken Clarke and even John Redwood all having their supporters.

In response, Osborne is reported to be stepping back from his Conservative Central Office and party strategy roles as 'unofficial party chair' for several months at least.

The Guardian reported yesterday that Osborne "admits in private that he is being bested by Gordon Brown and Alistair Darling", recognising that momentum and the ability to make the political weather have now shifted back to the government.

That explains why Osborne is desperate to get back onto the front foot. But the aggression of his attack, warning of a collapse of Sterling, this morning is a high risk move: it could well become seen as another unforced error of judgement.

So the pressure is clearly on. But I would confidently predict that the Shadow Chancellor will stay in post.

In part, the scale of public criticism would now make moving Osborne too great a climbdown for the leadership.

And that is especially true because Osborne has become a lightning conductor for a concerted challenge David Cameron's political and policy strategy - on both tax cuts, and on how to oppose the government - by those who want a significant change of direction without wanting to be publicly critical of the leader himself.

So David Cameron can't afford to respond to the pressure with the defenestration of his closest political ally.

But nor does that necessarily mean that Cameron will stand firm. The height of his modernising agenda was in his party conference pitch for the job. Since then, he has from the early days of his leadership much more frequently given ground to pressure from the party's right than has been recognised. He has kept the party in its comfort zone, praising the party for already having modernised (by electing him) and rarely challenging members on the need to change further.

If the Tory right keeps up the pressure on Osborne, the signs are that they may well get some substantive shifts in Tory policy rightwards on spending and tax.

If they fail to also get the symbolic scalp they are calling for, they may not mind too much about that.

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