A headless Thatcherism is no basis for a credible alternative government

It says something for the power of Margaret Thatcher's legacy that someone, 12 years after her departure from office, still thinks it worth taking a metal pole to her marble effigy and knocking its head off. It was quickly established that Paul Kelleher was motivated by ideological rather than aesthetic considerations. He did not object to the larger-than-life Stalinist solidity of the statue; he was making a protest against global capitalism.

It was telling that the symbol of the week – a week in which Tony Blair's Government has appeared vulnerable on the economic front for the first time – was provided by a former Conservative leader rather than the current one. This was not for the want of an opportunity. Iain Duncan Smith had the platform of a sympathetic interview in The Spectator to make his pitch. He blew it.

He made the obvious point that the classic Tory promise of lower taxes would not be credible until the party knew what it was going to do about the health service and education. Then he said he would not announce detailed policies in these areas until "I believe the public is ready for it, and when I believe the public recognises the true extent of the problem".

To be fair, he mentioned the Swedish model of health care, in which power is devolved to local hospitals. Much of his rhetoric of decentralisation in the public services is promising, but it is only that, and in the National Health Service, at least, the Government is already taking its first, rather hesitant, steps towards breaking up the dreadfully monolithic NHS.

With the threat of recession making Labour's spending plans seem worryingly complacent, however, the need for a credible alternative is urgent. Intelligent oppositions travel light in policy terms, but they have to have something to say on the big issues.

Some of the Conservatives' failure is not Mr Duncan Smith's fault. He has taken over the leadership of a party that is in several ways structurally disabled. The largest of these disabilities was the trauma created by the political decapitation of Mrs Thatcher herself in 1990. She was brought down by her parliamentary party, which recognised, rightly, that the poll tax and her own monomania had become electoral liabilities. After the husk of the non-Thatcher Tory party was routed in 1997, the party was taken over by the Thatcherites, who managed to associate themselves with the electorally repellent aspects of her legacy, while the constructive parts were stolen by Mr Blair.

Now the Thatcherites have swung back to non-Thatcherism. From William Hague, who was against anything from abroad, whether seekers after asylum or the euro, to Mr Duncan Smith, who wants to "help the vulnerable" and not mention the single currency. But the self-denying ordinance on the euro means that the party has nothing to say about economic management. It has accepted independence for the Bank of England and the minimum wage without any plan to unleash the dynamism of British free enterprise as an offshore hub liberated from the euro-sclerosis.

A gap is opening up in British politics for a party that is serious about individual liberty and that does not instinctively reach for subsidy, central intervention, spin and public spending whenever the focus groups suggest there is a problem.

It says something about Mr Duncan Smith's leadership qualities that, even after the stock market boom and bust and with economic confidence dragging its anchor, the most effective leader of the opposition and the most credible alternative to Mr Blair still appears to be Gordon Brown.