Duncan Smith has led 'Vichy Tories', claims think-tank

Iain Duncan Smith's attempts to modernise the Tories are "worse than useless" and a betrayal of the Thatcherite legacy, the party's favourite think-tank says in a withering report today.

In the most savage critique to date of Mr Duncan Smith's leadership, the Centre for Policy Studies claims he has overseen a "Vichy-style" collaboration with New Labour's inclusive politics. The think-tank's latest pamphlet also declares that the party has wasted its five years in Opposition and is "paralysed with fear" of the Government's tax-and-spend policies.

The report, written by Rupert Darwall, a former special adviser in the last Tory government, warns that Conservative spokesmen risk voters' contempt as they "spout baloney" about the poor in society. The party is obsessed with trying to change its image and relies on "children" at Conservative Central Office to draw up strategy and tactics, Mr Darwall says.

Instead of mimicking Labour, the Tories should set out a clear, tax-cutting agenda that slashes the state's role in public services such as health and education. Coming from the Centre for Policy Studies, which was founded in 1974 and drove the vanguard of Thatcherite thinking, the attack on Mr Duncan Smith's leadership will resonate with many right-wing Tory MPs and party members.

Its report, titled Paralysis or Power?, claims the party simply "gave up" arguing against the Chancellor's tax rises once opinion polls showed that this year's Budget had a 70 per cent approval rating. "Arguments that the Conservatives should move to the centre, in a mirror image of New Labour, would finally destroy the party's chance of restoring its credibility. Instead it should explain why tax and spend will fail to deliver," it says.

Mr Darwall says his party is "paralysed" between the fear that Tony Blair has colonised its ideological heartland and the fear that Conservative principles are inherently unpopular. "Far from the Conservative crisis being caused by the redundancy of its principles, the root of its difficulties lie in their neglect," he says. "The Conservatives didn't lose the argument. They stopped making it. What amounts to a Vichy response to Blairism will not provide a basis to restore the credibility of the Conservative Party. Just because Labour became electable as a result of its long march towards the market, it does not follow that the Conservative Party should move in the opposite direction.

"The cause of the Conservatives' unpopularity, of the lack of respect for the party, is not any lurch to the right but a dislocation between its policies and principles."

The report echoes the fears of some Tory MPs that the party has been slow to offer new policies. "The first half of a parliament is the time to do the heavy lifting. Leaving it to the run-up to an election is far too late," it says.

In a foreword to the pamphlet, Tessa Keswick, director of the think-tank, says Mr Darwall's arguments are "timely", and provide the opportunity of attacking Gordon Brown's tax-and-spend budget.