Failure at by-election could push Duncan Smith into danger zone

Iain Duncan Smith will spend his second anniversary as Tory leader tomorrow closeted with his shadow cabinet colleagues in a Buckinghamshire hotel as they plan a long-awaited launch of the party's policies.

Although Mr Duncan Smith claimed yesterday that the Conservatives were in better shape than they had been for 10 years, another cloud looms on his horizon. If his party is pushed from second to third place by the Liberal Democrats in next Thursday's Brent East by-election, it could trigger yet another bout of leadership jitters among Tory MPs.

Just when he seemed to have finally quelled the speculation over his leadership and given himself a clear run until the next general election, critical Tory MPs are wondering whether the "Brent factor" will reopen the leadership issue.

As they returned to Westminster after their summer break this week, the mood of most Tory MPs was pretty docile. There was no great enthusiasm for their leader, and bemusement that the Opposition had failed to exploit the crisis that engulfed Tony Blair after the death of David Kelly. "The mood is lethargic," said one senior MP. "No one has a spring in their step, but equally there is little appetite for another bout of leadership blues."

But another Tory MP said: "The Government is doing badly and yet we are not doing well. Don't assume Iain is safe until the election. It all depends on Brent, and the feedback from there is not good."

Such gossip will bring a weary reaction from Mr Duncan Smith, who was in upbeat mood yesterday when he unveiled his "big idea" for the election - a huge decentralisation of power to the people to end the "command state" created by Mr Blair's public-service reforms.

Asked why the Tories were not farther ahead in the polls, Mr Duncan Smith replied that four months ago he would have been asked why they were still trailing Labour. He insisted: "I know that this party that I lead has never been in a stronger position, certainly not for the last 10 years. I believe we have finally won the right to be heard. I believe it is an excellent position for us to go on and win the next election."

Critics point out that the Tories ought to be ahead rather than neck-and-neck with Labour because of the Government's troubles and an electoral system that means the Tories need a substantial lead over Labour to win an overall majority. The grumblers also point to a series of bad staff appointments and continuing tension at Conservative Central Office over the party's strategy, and claim Mr Duncan Smith is sometimes outshone by two shadow cabinet "stars" - Oliver Letwin and Michael Howard.

Mr Duncan Smith has seen off the enemy within before. Two would-be assassins have come forward: Michael Portillo after Mr Duncan Smith's disastrous "unite or die" plea, and Crispin Blunt on the day of the May local elections - but both had made a mistake with their timing.

Allies of the Tory leader insist he is "on track" and, having dragged the Tories back into the game, now has two more years to woo the voters. The foundations to the platform on which he will fight the election were laid in yesterday's 100-page document, with detailed policies on health, education and policing to follow at next month's Tory conference.

The booklet, Total Politics: Labour's Command State, accuses Labour of failing to turn round public services because of its addiction to Whitehall-imposed targets, centrally controlled funding, bureaucratic inspections and rigid staff terms and conditions. The Tories will promise a form of "vouchers" to allow patients and pupils to "spend" the state's contribution to health and education in the private or voluntary sector. Mr Duncan Smith said: "We will free public service professionals from total politics, give citizens real choice through a range of different providers, and where choice does not apply - as in the police force - we will ensure that local communities, not remote officials, decide local priorities."

The document completes a U-turn by the Tories in favour of decentralisation. When they were in office, they took powers away from local government. The new approach is part of a plan to win the voters' trust on the issue of public services which, despite the Iraq war and Kelly affair, is likely to be the dominant issue at the next general election.

But the Tory proposals are still vague in parts. For example, the party could not say how many of the Government's performance targets it would scrap.

The Conservatives hope to capitalise on the feeling among voters that the extra billions Labour has ploughed into health and education have failed to improve services. Labour has traditionally been more trusted to run public services, and the Tories need to allay fears, being stoked by Labour, that they would cut spending and privatise services.

David Davis, the shadow Deputy Prime Minister, said: "We want to fund citizens, not providers."

UPS AND DOWNS

Five triumphs

* Staving off a challenge to his leadership

* Drawing neck and neck with Labour in the opinion polls

* Burying the party's damaging divisions over Europe

* Gaining 580 seats in the local elections in May

* Pledge to scrap university top-up fees

Five disasters

* Failing to exploit Tony Blair's summer crisis

* Still unable to build big lead in the opinion polls

* "Unite or die" plea to his own party

* "Quiet man" speech when opposition needs to make a noise

* Lack of clearly defined policies