Howard supporters say a 'dream ticket' with Davis is off the cards, despite backroom negotiations

"Michael doesn't do deals. And anyone who knows him, knows why." As the full impact of Michael Howard's lightning campaign to become Tory leader sank in among MPs last night, one of his senior allies was busy making clear exactly why no "dream ticket" had been agreed with David Davis.

It was during Mr Howard's last leadership campaign in 1997 that another such deal, with William Hague, turned sour as the younger man decided to run himself for the big prize. The Howard-Hague dream ticket, which was toasted with late-night champagne, left the former Home Secretary with a thumping hangover as Mr Hague rang him the next day to declare it was all off.

The bitter experience, which blew a hole in the Howard campaign before it had even officially started, is burned into the Folkestone and Hythe MP's political memory, one aide said. Last night, the David Davis camp were left in no doubt that Mr Howard was never going to countenance any suggestions of top jobs in return for a commitment not to run.

Throughout the day, as Iain Duncan Smith looked doomed and the idea of a "coronation" took hold, speculation about a Howard-Davis deal was rife at Westminster. The chatter in the bars, restaurants and tea room took off after Derek Conway, MP for Old Bexley and Sidcup and a main backer of Mr Mr Davis, gave the first hint of a deal on BBC Radio 4's Today programme.

"David Davis is hugely able, Michael Howard is very, very able," he said. When asked if there would be a dream ticket, he replied: "I think there will be a desire for that later today."

Although Mr Conway later said his remarks had been misinterpreted, it was the signal to the Howard camp that they had the upper hand in the race between the two men.

Mr Howard's campaign team, led by Liam Fox, the shadow Health Secretary, had been in embryonic form since the Tory party conference in Blackpool. Although scrupulously loyal to the leader, the shadow Chancellor's supporters knew that they had to get a professional operation in place just in case the plotters managed to muster 25 names for a vote of confidence.

In what was last night admitted even by their enemies to be a meticulously organised campaign, Mr Howard's team maintained strict "radio silence" as they agreed tactics and strategy. The campaign was ready to go swiftly into abeyance if Mr Duncan Smith won the vote.

For their part, the Davis team had been confident for months that their man had what it took to become leader as long as he could muster enough support among MPs. They thought that if they could get into the top two in any MPs' ballot, the former SAS reservist could woo the rank and file by selling himself as the future rather than the past of the party. "He looks the part, walks and talks like a real human being and is good on the media. It sounds shallow, but that is really what matters out there with voters in the real world," one ally said yesterday lunchtime.

But some insiders claim that Mr Davis' camp was not sure exactly how much support he could garner in the Commons. It is claimed they made their first contacts with the Howard team last week but were rebuffed. As the days passed, some of the shadow Deputy Prime Minister's close allies counselled him to go it alone. Mr Davis' instinct was to agree. It is understood he told friends: "I don't need to talk deals with anyone. If there is a vacancy, I will be a leading candidate."

But the Howard team claimed that the Davis camp did indeed make another approach yesterday morning, only to be told in stark terms that no accommodation was on offer. Among the bids suggested was the post of shadow Foreign Secretary.

After the second rebuff, Davis allies were determined to go on the offensive and stress that their man did indeed have enough votes to threaten Mr Howard. While his enemies said he had no more than a rump of 25 loyal MPs, Mr Davis' colleagues said that he had attracted many of the 2001 intake and could boast the backing of more than 60 backbenchers.

It is hard to determine which camp is closer to the truth, but Howard allies were making plain that Mr Davis' decision spoke volumes about his real level of support. "If he was so confident, why did he pull out? Go figure" said one Howard backer.

Mr Davis certainly had a full campaign team lined up, with Iain Dale, the owner of Politicos bookstore and an openly gay prospective candidate for North Norfolk, pencilled in as his press officer. In the end, he decided on a carefully judged statement announcing that he would stand aside in the interests of party unity. Clearly with an eye on the grass roots, Mr Davis is obviously hoping that his time will come again.

For Mr Howard, the way ahead looks reasonably secure. Dr Fox arranged a clever photocall with himself, Stephen Dorrell and Oliver Letwin lined up to present a picture of unity of the right, the left, and the Portillista wings of the party.

The only fly in the ointment is that man, Ken Clarke. Last night, the former Chancellor's mobile was switched off as he watched his beloved Notts Country outplayed at Chelsea's Stamford Bridge ground.

HOW THE NEXT LEADER WILL BE ELECTED

Nominations for the post of Conservative Party leader will close on Thursday next week.

Sir Michael Spicer, chairman of the Conservative backbench 1922 Committee, announced that candidates would have until noon on 6 November to announce their candidacy. Under rules governing the leadership contest, if there is only one candidate by the deadline, he or she will be automatically declared leader of the party. If more than one emerges, MPs will hold a series of votes to narrow the field down to just two contenders.

Sir Michael said yesterday the first of those run-off ballots, if needed, would be held a week on Tuesday, 11 November. In each vote, the candidate with the least number of supporters would be eliminated. The final two to survive would go forward to a vote of the party's entire rank and file membership.

Candidates will hold hustings around the country, setting out their stall to the party activists. The victor would need more than 50 per cent of the vote to win.

Ben Russell and Marie Woolf