Is the Government facing a perfect storm?

The Government is facing what could potentially be a very difficult few months, in which matters both within and outside their control could determine not only the political legacies of many of its big beasts, but also its electoral prospects for 2020.

Ministers are presently facing a near perfect storm of domestic and foreign matters, chief amongst which is the threat of a global economic slowdown. The fragility of overseas markets, most notably in China, will have far-reaching consequences. We’ve already seen Mark Carney, the Governor of the Bank of England, backtrack on comments that interest rates could rise in the near future. But continued questions over China’s economic growth, falling oil prices and the bonds market will do little to inspire investor confidence and could result in a further slowdown.

George Osborne has already attempted to manage expectations for the UK economy, but the cocktail of global circumstances could undermine the UK growth that has been a central plank of the Conservatives’ appeal to voters. It would also risk the legacy that the Chancellor of the Exchequer has built for himself and which, alongside his control of the Party machinery, is one of the main reasons he is seen as the frontrunner to succeed David Cameron.

A domestic economic downturn would, in turn, be felt in every aspect of policy. The Government has robustly stuck to an austere programme since the General Election in May. Departments across the board have been expected to find savings beyond those demanded on them during the coalition years. But a slowdown – and dare we say possible recession – would further reduce the money available for areas such as education and defence, and would present ministers with enormous difficulties in meeting the extra funding demands of an NHS already creaking at the seams. Not only that, but flagship policies such as the introduction of the living wage would be at risk, with employers likely to feel the pinch in the same way as government. Compounding these problems is the fact that much of the low-hanging fruit in terms of government cost cutting has long since been picked, presenting a question of how Ministers can absorb more adverse economic circumstances without severe disruptions to government services.

And all the while a European referendum looms on the horizon. Mr Cameron has staked substantial political capital on being able to secure a settlement that will enable Britain to remain within the EU – and which will satisfy the demands of sceptics across the political spectrum. But despite Downing Street and the Prime Minister hailing the agreement reached yesterday, the reaction of the media and of Mr Cameron’s own backbenchers has been far more critical. Granted, some of the reaction is from those who could not under almost circumstances be persuaded of the benefits of continued EU membership. But the Prime Minister clearly now faces a challenge to convince his own ranks, including members of his Cabinet, of the merits of his deal. And this will likely translate to a more difficult campaign to convince the British public in a referendum that could be mere months away. And that’s only if he can achieve the sign off of all the EU Member States.

Ministers face a challenging six months. How they deal with this range of potential difficulties will determine the political narrative of the parliament, and potentially the outcome of the election in 2020.