Steve Richards: Mr Blair has good reason to fear a Duncan Smith victory

As the Conservatives fight themselves to near oblivion, the Government, it seems, is in a "no-lose" situation. At his French holiday hideaway Tony Blair can surely contemplate another eight years or so of opposition-free government. Whoever wins, the Conservatives will be in trouble, leaving Mr Blair free to govern as he wishes. Under the clear blue skies he can worry away about other matters – a possible economic recession, or the related question of what to do with the Euro. But worry about the Conservatives? Pull the other one.

Objectively and rationally, that is how it should look from Mr Blair's chateau. That is how the political situation looked to Margaret Thatcher when she enjoyed an opposition-free era in the early 1980s. While Labour tore itself apart, the warring protagonists ignored her and she ignored them. In 1981, when polls suggested she was the most unpopular Prime Minister of the century, she had the chutzpah to declare: "The leading members of the Labour Party are fighting each other ... They should be fighting me!"

So they should have been, but Mrs Thatcher and her government did not impinge on Labour's civil war. Europe: in or out; nationalisation: good or bad – these were the issues preoccupying Labour's titans. It was as if Mrs Thatcher did not exist. She got away with murder without the main opposition noticing, or bothering to discuss the type of murder she was getting away with. Now the Conservatives are falling into the same parochial trap. No one is offering a coherent assessment of the Government – of what they are all up against.

The increasingly irritable John Major has taken to describing Mr Blair and company as "this wretched Government", but his analysis goes no further than that. Ken Clarke, in that tedious Newsnight debate, called it "this shadow Government". I think I know what he means. The words conjure up a sense of a Government that is not fully there, that has a ghostly quality, behaving as if it was really still in opposition, where it had been for 18 years. He is onto something, but the thesis requires considerable expansion. At the moment the three-word assessment does not even qualify as a soundbite.

No such assessment exists anywhere in Conservative circles. Scrutinise the Collected Speeches of William Hague – an anthology that was always difficult to obtain, even from Conservative Central Office when he was leader – and you will find no attempt to place the Government in any context at all. Part of the reason why the Conservatives have failed to oppose is that they have no idea what it is they are meant to be opposing.

This is where the parallel with the early 1980s comes to an end. While she was being ignored, Mrs Thatcher did indeed govern without paying much attention to the warring Labour Party. Almost certainly, there was not a single occasion when she or one of her entourage declared: "We mustn't do this, or else Michael Foot will outmanoeuvre us." They got on with it as if Mr Foot did not exist.

Mr Blair and his bunch of nervy advisers are not like that. They are congenitally incapable of being like that. Having been slaughtered by the Conservatives for four elections in a row, they retain a residual respect for the once-mighty party that sometimes borders on an irrational awe. I have no doubt, therefore, that the outcome of the Conservative leadership contest will have a profound impact on their behaviour in government. They will not respond objectively or rationally.

Even in the first term, when Mr Blair and his team were 150 per cent ahead in the polls, they got into a neurotic frenzy over what William Hague was up to. An adviser would rush energetically into the Prime Ministerial office and exclaim: "We've picked up that Hague is about to change his policy on rural post offices!" Help! What should they do – outmanoeuvre Hague by changing their policy before he does? Try to make a virtue of not changing the policy? Imagine the exchanges: "If we stand firm, we would make Hague look weak." "Yes, but what if his policy is more popular? It is better to be weak briefly if the policy is more popular in the longer term."

If the Government was obsessed by the Conservatives during a golden honeymoon, they will certainly be even more obsessed now. Which means that we will have a different type of Government, depending on who wins the leadership contest.

If Iain Duncan Smith gets the job, his right-wing policies will soon get The Sun cooing enthusiastically. Indeed, The Sun has already started to coo. The newspaper shows no sign of making him a dead parrot. When Mr Duncan Smith squawks, The Sun squawks, too. Before long the Government would attempt to join in the squawking.

After all, when Mr Hague started to sound much tougher on crime and immigration, Mr Blair tried to be even tougher. In the end he came up with his credit-card initiative, in which drunken thugs would be taken to their nearest cashpoint – a policy that lasted precisely 48 hours. He announced it on a Friday night. By the Monday evening, Charles Clarke told Newsnight that the proposal had been a "metaphor" – an explanation so comically ingenious that Mr Blair must have decided there and then that Mr Clarke was the man to become his party chairman.

Such depressing, manic episodes would not have happened if the Conservatives had been led by someone from the centre right, rather than the populist right. The political dialogue between the parties would have been entirely different, more rational and more progressive.

It is widely thought that Downing Street is praying for the election of Mr Duncan Smith. Perhaps they are. On one level it makes sense for them to do so. A repetition of the Hague years would guarantee another Labour landslide. But those who are praying underestimate the impact such a leadership would have on themselves. If IDS won, there would be more "credit card"-style initiatives from the Government. Ministers would not be able to stop themselves. Charles Clarke would be called on to explain away many more metaphors.

The election of a civilised centre right leader, on the other hand, would embolden Mr Blair to show more of his progressive side. Although, as I suggested on Wednesday, Ken Clarke would be almost impossibly constrained by his right-wing party, there would at least be some hope that a more reasoned dialogue would get a look-in, especially over Europe.

The election of Mr Clarke would be a dangerous and unique experiment for his party. It has not happened before – a party electing someone at odds with itself over a central issue. But such an outcome would have a positive impact on the Government to a degree that should not be underestimated. In the longer term it would have a healthy impact on British politics as whole. Paradoxically, Mr Blair should be praying that the more popular of the two candidates is the winner next month.

s.richards@independent.co.uk