Why so many now dislike Labour but still don't want to vote for the Tories

It is hardly surprising that Tory businessmen are reported to be in favour of a new party to exploit the disillusion with Tony Blair

Recently I sat next to an entrepreneur who was fed up with the Government and its ministers. She said that none of them understood commerce. They seemed to believe that every business was infinitely prosperous and infinitely stable, so that it could be taxed and regulated at will. They had no idea of the constant competitive pressures that even successful businesses face, especially in export markets. Ministers would twaddle away about the need for job creation and wealth creation, while making both progressively harder.

"Are you a Tory?'' said I, wondering whether she might be part of the answer to Tory Central Office's urgent need for able female parliamentary candidates. But she was astonished at the very idea that she might be a Tory.

I pressed on, asking four questions. Did she believe in keeping the pound? Yes. Did she believe that in normal circumstances, the Government should own less of the nation's wealth year on year and spend a smaller proportion of its income? Yes. Did she agree that when it was not necessary for government to regulate, it was necessary not to regulate? Yes. Did she agree that the great economic advances in British history had come about because of individual freedom, not because of state regulation? Yes.

In that case, I insisted, it would be irrational of her even to think of voting anything other than Tory. She was unpersuaded. The Tories were not on her political radar screen. It was almost as if I had been trying to convince her that the earth was flat.

For some time, it has been clear that there is far more latent Toryism in the country than anyone could deduce from the party's poll ratings. So it is hardly surprising that some Tory businessmen are reported to be in favour of a new party, which could win over my entrepreneur friend and many others, aiming to exploit the disillusion with Tony Blair from which Iain Duncan Smith seems unable to benefit.

This is not a wholly absurd idea. British political tribalism is not what it was. Over the past couple of decades, there has been a steady decline in rooted party allegiance and a concurrent growth in volatility. Consider Martin Bell's winning Tatton in 1997; the local doctor who swept home at Wyre Forest last year, part of an election in which more than 40 per cent of the voters abstained; the British National Party's recent successes; the initial public reaction to the fuel tanker drivers' dispute – all unrelated phenomena that lead to the same conclusion. Our party system rests on a far shallower foundation of popular consent than our political masters would like to believe.

That said, no one who seeks to advance the Tory cause could possibly wish for a second Tory party. Clemenceau said that such was his love for Germany, he wished there were two of them. Tony Blair has similar feelings for the Tory party. If two Tory parties fought each other under a first-past-the-post electoral system, they would merely destroy one another.

There is an obvious analogy with the SDP, which will be seized on by those who already believe that the Tories are following the script written for the Labour party during the early 1980s. The SDP helped to destroy the old Labour party and, in doing so, to keep the Tories in power for 18 years.

But there is a crucial difference, which potential Tory dissidents should ponder. The SDP had a necessary historic mission with which all Tories should sympathise. It assisted in making the Labour party unelectable, so that it would eventually repudiate socialism. In effect, the Blair Labour party is Labour men and SDP policies, plus quite a few SDP men as well.

There is no similar historic mission for a breakaway Tory party. At least in policy terms, Mr Duncan Smith's party cannot be compared to that of Michael Foot. It is not Tory policies that are creating the obstacles for Tory re-election. It is the party's history and the apparent absence of a plausible leadership.

The Tory dissidents presumably share the lack of confidence in Mr Duncan Smith's leadership, which is widespread even among Tory loyalists. But before panicking and moving towards the chaos of a leadership challenge – or worse still, a split party – Tories ought to work out what sort of leader they want.

If they were to do so, they might discover that they were looking for a man of the right who was not a prisoner of the right; a Eurosceptic who was not an obsessive Europhobe; an honourable man who would not attempt to rival Mr Blair's spin skills, preferring to offer an honest alternative; a leader ready to devote his and his colleagues' intellectual energies to the reform of the public services. Given those criteria, and even after a year of disappointed expectations, Mr Duncan Smith is still the obvious leader of the party.

On one condition. He would be no use if he had lost his nerve; Mr Duncan Smith can only remain leader if he retains his self-confidence. He will need to raise his game and to get on to the attack. He must bring in better people to strengthen Central Office and his own entourage. He has still to prove that he can offer strong leadership to a strong team going forward, rather than plaintive leadership to a weak team holed up in a bunker.

I suspect that he can do all of this, because of who he is. The son of a much-decorated Second World War ace, he is himself a man with a profound psychological revulsion at the thought of defeat. But in one respect he may also be too good-natured: far too tolerant of primeval IDS loyalists whom he has now outgrown and who are of no further use to him.

There is an instructive anecdote. Back in 1992, John Major told Chris Patten that he was going to make Robert Atkins a minister of state, even though Mr Atkins had been a conspicuous failure as a parliamentary secretary. When Mr Patten looked sceptical, the Prime Minister looked sheepish but said that he had to do something for Robert. "Yes," replied Mr Patten: "Just as Margaret did for George Gardiner.'' "Pig," was Mr Major's reply.

Margaret Thatcher never made George Gardiner a minister, and no wonder. Sir George, who died largely unmourned the other day, was lugubrious, conspiratorial and deeply unpopular. "Two yards of cold milk", as they would say in Lincolnshire; in his case, two yards of inspissated disloyalty. But he was loyal to Margaret Thatcher, so she used him. He would never have been any use as a minister, so she did not make him one. She did eventually toss him a knighthood, as a bone of consolation, but she rated her dogs not according to their loyalty, but strictly according to their utility.

Mr Duncan Smith thinks of himself as Margaret Thatcher's heir; if he is ever to prove worthy of that exalted role, he will have to imitate his mistress more accurately. She never lacked in ruthlessness towards her personal staff. More embattled now than she ever was, he should begin by profiting from her example.