Has Osborne got away with the ratings downgrade?

It might appear that the Chancellor has escaped relatively lightly from the potentially devastating news that one of the main ratings agencies chopped a crucial 'A' off the UK's credit rating at the weekend. After all, he set the retention of the AAA rating as one of the key benchmarks for judging the success or failure of his economic policies so with it now gone shouldn't he be more exposed?

The answer is yes, but not yet.

Let me first get out of the way my belief that this matters very little in economic terms before people rush to tell me I am getting very excited over nothing. You can see by the reaction of the markets that not much has changed since the weekend. This is partially because the influence of the ratings agencies is very marginal now as they haven't really recovered their credibility after their catastrophic failures in relation to the banking crisis, and partially because the result of the Italian election has proved a bigger distraction.

The seriousness of the loss of that 'A' will be measured in political terms, not economic.

It was very rash of George Osborne to hitch himself up to such a discredited measure of economic success or failure, one that was always going to be susceptible to a wide range of influences well outside of his control. However, he picked it as a benchmark by which to judge him and his policies so he must live with the consequences.

So, back to the key question: why haven't those consequences hit him harder? There is a one word answer: Eastleigh.

With the byelection to replace the disgraced Chris Huhne taking place today, the many Tory critics of Osborne have wisely decided to keep their powder dry. And it is his enemies within his own party that he really has to fear not the Labour Party, as was clearly demonstrated during Prime Minister's Question Time yesterday when David Cameron was able to easily get Ed Miliband on the backfoot on economic issues. The other thing that PMQs demonstrated is just how loyal Cameron is to his Chancellor, a loyalty that could be tested to the limits in the next few weeks.

If Eastleigh goes badly for the Tories – and for many Conservatives failing to win it will be a poor result, let alone getting skewered by UKIP along the way – then the pressure will be on Osborne. There will be some strident outright demands for a change at the Treasury but many more Tory MPs will focus on the policies he has promoted, steadily turning up the heat as Budget Day on 20 March approaches.

That Budget could become a watershed for the Coalition government, not just its Chancellor, depending on how the two governing parties fare today.