Fluent and intelligent, Howard offers hope to his party

In one of those cruel, ironic twists that runs through political life, Iain Duncan Smith gave a speech last night entitled "The First Conservative Government of the 21st Century".

After his failure to win Wednesday's vote of confidence, the outgoing Tory leader's words were rather poignant, particularly to his admirers in the audience at the Centre for Policy Studies event at the Bevin Hall in London.

But after Michael Howard's electrifying leadership announcement yesterday, the Duncan Smith thesis suddenly did not sound half as risible as it would have done a week ago. Armed with a batch of radical policies and surrounded by colleagues from all wings of the party, Mr Howard mapped out the first credible vision of the Conservative road back to power since John Major's disastrous defeat in 1997.

In the first clues to how a Howard led-Tory party would look, he made clear that the policies developed under Mr Duncan Smith would not be ditched. Rather, they will be repackaged, refined and resold in a way that was impossible for the flawed outgoing leader. As part of the presentational overhaul, the Shadow Cabinet will be reshuffled to offer a more convincing, broader-based government in waiting.

The event at the Saatchi Gallery sounded more like a victory speech than a candidacy launch. But his central message was intended to jolt those, Tony Blair included, who expect him to revert to type and offer an aggressive, right-wing brand of Conservatism. Just as his lightning leadership campaign has been a masterpiece of organisation, the speech was meticulously designed to meet head-on what many believe are his biggest personal weaknesses. In a speech that one MP said proved Mr Howard's "emotional intelligence", he said: "I've learnt that just winning an argument doesn't on its own win hearts and minds."

The good news for Labour was that Mr Howard was clear that the party's policy overhaul of the past two years under Mr Duncan Smith was not being jettisoned. Mr Howard himself was one of the architects of that process. Labour is keen to debunk what Mr Blair yesterday described as the "myth" that the new Tory polices on health, education and asylum would prove as popular with the voters as with Tory MPs. Many ministers are keen to expose the weaknesses in what they see as a rag-bag of right-wing ideas, such as vouchers to subsidise private health care and for school passports. The bad news for Labour is that Mr Howard will not ditch the genuinely populist policies, many of which are loathed by true Thatcherites, such as restoring the earnings link to pensions and scrapping student tuition fees.

Other attempts to reposition the party centred on the need to put better public services ahead of tax cuts and on presenting the Tories as "internationalist" rather than "little Englanders".

The only hint of backbiting about the Howard campaign came from one disgruntled MP who pointed out that Mr Howard had dinner with Stuart Wheeler in the weeks before the millionaire donor launched his devastating attack on Mr Duncan Smith that many believed hastened his downfall.

Mr Wheeler told The Independent yesterday that Mr Howard had indeed been round for dinner at his Kent home a month ago but stressed the arrangement stemmed from the long-standing friendship between their two wives. Mrs Wheeler is a photographer who has worked with Sandra Howard ever since she modelled in the 1960s. "I think the question of the leadership came up but Michael was impeccably loyal to Mr Duncan Smith and said he would back him all the way," he said. "There is no need for any conspiracy theory. Michael ended the discussion very quickly."

Further conflicting accounts emerged of the contacts between the Howard and Davis camps in the hours that preceded the vote of confidence. One MP told The Independent that David Davis knew of his fate when a friendly colleague in the Shadow Cabinet told him on Tuesday night he was going to support Mr Howard instead. Mr Davis is said to have asked if the link man could put to Mr Howard the possibility of him becoming party chairman if he didn't stand. The message came back that such an arrangement was not possible.

When the two men met face to face in secret at the Commons on Wednesday morning, Mr Howard told his younger rival: "I want you, I rate you, but I'm not doing any deals." One Davis ally claimed Mr Davis was not directly involved in any discussion about jobs.

Mr Davis said yesterday that only at the weekend did he first begin to think seriously about his chances of winning and made up his mind on Tuesday night. Last night, an embryonic Howard Shadow Cabinet was taking shape. Liam Fox, Mr Howard's campaign manager, is favourite to become party chairman. Oliver Letwin is almost certain to get the post of shadow Chancellor.

Mr Davis has a good case to be made shadow Home Secretary, offering a tougher image on crime. With a lack of many voter-friendly women,Theresa May will be kept on, possibly as shadow Culture Secretary.

Andrew Lansley and Stephen Dorrell, two thoughtful modernisers who have taken time out of the front line, may be recalled to top jobs, possibly health or trade and industry. Oliver Heald, the shadow Pensions minister, may be in line for the role of Chief Whip given his close involvement in the Howard campaign.

Tim Yeo is bound to be retained, and Damien Green and David Willetts are expected to retain their respective education and social security briefs.

Michael Ancram may be moved to Defence to make a vacancy for a shadow Foreign Secretary, which could be offered to a fresh face. To combine youth with experience, high flyers such as David Cameron are expected to see rapid promotion. Regardless of any changes, the big question remains: can Michael Howard and his team convince as many voters of their merits as effectively as they have convinced their fellow MPs? It may take another seven years, but that 21st-century Tory government Mr Duncan Smith talked of has taken a huge step closer.