That dangerous warrior queen

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Margaret Thatcher does not matter. Not in herself: her day has passed and she has had nothing new to say for years. She will not confront the late Nineties with fresh thought or any truly useful provocation in her speech tonight. But the retired warrior queen will achieve something: she will further hurt her wounded, struggling party.

London's political establishment is interested in Baroness Thatcher's words not as a message, but solely because of the impact they may have on the Conservative break-up. Will they drive another teetering One Nation leftie over the edge? Will they encourage Michael Portillo to snort, flick his quiff and say something quiveringly outrageous to "Sir Jim" Naughtie of the Today programme? Such are the amusements of the capital in winter.

Thatcher has become the willing manipulatee of the Tory factionalists, because there is nothing she can say that will not be converted into a weapon. Her pages will be shaken out, her paragraphs pillaged and phrases ransacked by desperate men looking for ammunition against one another. If she offers an olive branch it will be stripped, barbed by backbenchers and used as an arrow.

Thus, if she merely attacks Tony Blair, right-wingers will be shaking their heads and comparing her to "poor John - if only we were still led like that". If she backs John Major, the left will see it as proof that the right has captured the Prime Minister; "she's only patronising him now because she's sure of Portillo later". And anything she says on Europe and the single currency, however expected, however banal, will have both sides at one another with billiard cues and broken gin bottles.

It has become a commonplace to say that the Tories are fighting the leadership battle which they assume will come after their defeat. It is not quite true of the senior Conservative politicians, even now. Michael Heseltine, Kenneth Clarke, Malcolm Rifkind, Michael Howard and, of course, Major himself still act as if victory is possible.

At staff officer level, the Buffs remain steady. In public they barely flinch. Each week the Treasury sends round a new bundle of straws for the Whitehall private offices to clutch at. The public is spending a bit more. Over the past couple of months the savings ratio has been falling. Interest rates are surely on a downward path. The housing market may finally be moving, even if it will not boom.

There is something in all this. Unless the eternal link between rising real disposable incomes and Tory fortunes has finally been broken, then the polling gap with Labour ought to narrow sharply through 1996. All other things being equal, that would transform the Conservative mood in Parliament; a flicker of hope would calm the party factions and rally the Conservative press. That would help in the country. Politics would pay out, in the nice phrase of one Whitehall adviser, a "Tory peace dividend".

All other things being equal. But, as Thatcher must know, the party is close to losing its nerve. In private, even senior ministers are trading demoralising scuttlebutt with their backbench admirers. Ask many Tory MPs what they will be doing after the election and they will murmur about family businesses or returning to the law. Press them on what government job they want and you get a flared nostril and a whinny of nervous laughter, as if you have just made an unpleasantly tasteless joke.

Self-belief, in short, is ebbing away even as the economy improves. I thought the Prime Minister's admission of the possibility of Tory defeat last weekend was an important psychological slip. Party insiders were appalled by it.

He was talking about an event which is brought nearer by his discussing it, but his party has been thinking of little else. Forward-thinking backbenchers and ministers are turning their minds to that bitter, exciting week in (probably) Blackpool in October 1997 when the contenders to replace Major as Opposition leader parade before a seething party.

We know why this has happened. In European integration, Conservative politicians have found an issue which matters more to some of them than holding office, or the party itself. Many on the right, probably including Thatcher herself, would rather see the Tories destroyed than see them bring in a single currency.

And pro-Europeans, though less numerous and more quiet, are no less driven, believing British membership of an integrated European Union to be the great question of national destiny before party and country. Losing two MPs to other parties has finally galvanised the Tory left into factional aggression of the sort pioneered on the right.

Because No 10 is so worried about the majority, the desertion of two Tory centrists has, for a time, made the rest of them more powerful. The non-jumpers, having regained some self-confidence, will make it harder for Howard and others to tout the right-wing populism they plan for the election. One Nation Toryism has found its protection racket.

People talk loosely about a struggle for the soul of the party. But for Conservatives even to think that way must eventually be destructive. The Tories can only prosper as a coalition of interests and views, and coalitions do not have souls. They have an approximate centre of gravity and shared heroes, even a nervous system of political instincts - but no numinous ideological essence. That is the province of religion.

For all his faults, Major understands that - as Thatcher does not. She may be the stronger conservative, but he is the better Conservative. Yet he has tried every compromise position and he has nowhere else to go. He cannot rule out British membership of the single currency in the next parliament without losing his Chancellor, a clutch of other ministers and perhaps his majority, too.

All that is left for him is the promise of a referendum. Many Tories have been surprised that he has not made this final concession. But so far he has been persuaded by Heseltine and Clarke that this would merely fire the starting-pistol for an even worse internal argument, as ministers divided into "yes" and "no" campaigns.

Conservative Central Office has been quietly pushing another, merely tactical, argument for a referendum: officials fear that Sir James Goldsmith's Referendum Party will otherwise help defeat the Tory candidates in a few key marginals. A referendum would, in my view, be good for the country. But it would not help Major survive the in-fighting. The left does not want it and it would not buy off Goldsmith. The financier would simply change tack and start to organise the "no" campaign in the referendum he had helped provoke. So it would be back to the old argument with a vengeance. Voters would be assured that another Tory election victory would be followed by yet more internal party fighting over the issue. They are unlikely to think it an appetising prospect.

In what way, I wonder, can Thatcher's address tonight help any of this? She can restate old truths, mumble implausible support for a successor she disdains, or goad her ideological followers to further mayhem, none of which helps the country or adds a jot to the quality of political argument. Vain in both senses of the word, it is merely her modest contribution to a process that can smash the Tory coalition and keep it out of power for a generation.

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