Have the Tories found a big idea at last?

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Ever since 1990, when Margaret Thatcher was flung out of Downing Street, the Tories have been engaged in a fruitless search for a guiding philosophy. It is doubtful if John Major even knew what an idea was, while poor William Hague casually allowed the party to become the vehicle for an ugly nationalism with racist undertones. The arrival of Iain Duncan Smith, who received his intellectual education in a smart British Army guards regiment where thinking is regarded as a subversive activity, did nothing to inspire hope.

Yet Duncan Smith's speech in Harrogate yesterday was a revelation. It was potentially the most interesting speech by a Tory leader for two decades. I say potentially because it is far from clear that Duncan Smith quite understands the full magnitude of what he is saying. It is yet more doubtful whether he will have the courage and self-belief to follow what he says to its extraordinary and radical conclusions. But if he does, then yesterday's Harrogate speech will go down in history. It may come to be seen as a great turning point, the moment when the Conservatives began their long way back - if not to power than at least towards playing an important and purposeful part in our national life.

First, it is important to say what Iain Duncan Smith's new idea is not. It has become fashionable to suggest that the Conservative Party leader has embraced the agenda of Michael Portillo, the defeated candidate in last summer's Tory leadership election. He hasn't. Duncan Smith is far from unsympathetic to Portillo's ideas, and yesterday made a powerful call for more blacks, gays and women to be represented on the Conservative benches. But he does not think that the Conservative Party lost the last election because it failed to appeal to metropolitan values.

The last election was not about metropolitan values, but local values. It was the election when everything changed, and yet everything remained the same. It was as if the number of seats held by the main political parties was frozen in aspic. But beneath the surface a new politics was making itself felt, driven by a visceral cynicism about Westminster and a reemergence of local loyalties. That specifically local motivation - not seen in British politics since the 19th century - in large part explains why so few seats changed hands in 2001. It used to be said that no local MP, however assiduous, could resist the national swing. The 2001 general election proved that old saw wrong. In dozens of seats good local MPs from all parties benefited from a novel "incumbency factor".

Strategists in all the main parties have realised that globalisation has had the paradoxical effect of making voters relate more profoundlyto local issues. It is this that partly explains the startling success of the Liberal Democrats at the last election. They grasped that it is the quality of the local school, or whether planning consent will be given for an incinerator to be built in the locality, which people care about passionately.

Yesterday's speech by Duncan Smith shows that the Conservatives have woken up to all this. It was an extraordinary statement from a Conservative leader, a repudiation of everything the party has done in office for 100 years. Duncan Smith told his mainly uncomprehending audience that Tory reforms to the public services would be based on reinventing them as "community institutions and not part of the government". He asserted that the centralisation of the 1980s - when Margaret Thatcher abolished the GLC and took schools out of local control, was "a mistake".

Duncan Smith's new slogan is "trust the people". In policy terms the implications of this innocent little maxim are massive. It opens the way to the abolition of the national curriculum, to local taxation, to putting the local police force under the control of local mayors. But it is even more radical than that. It means that the Tories will start to advocate the destruction of the centralised British state they have played such a large part in painstakingly constructing over the past 100 years.

It helps that the doctrine of returning power to ordinary people, not dictating to them from above, fits easily with traditional Tory philosophy. It has echoes of the party's greatest philosopher, Edmund Burke, with his " little platoons" that mediate between the individual and the vast, impersonal state. It is profoundly at odds with New Labour's quasi-Stalinist democratic centralism, with its endless targets, five-year plans and angry intolerance of free speech and dissent.

More remarkable still, it puts the Conservative Party at one with the mood of the times for the first time in nearly two decades. Business organisations now look for decentralised and nonhierarchical structures. The most intelligent critics of Labour on the Left - above all the political philosopher David Marquand or Tom Bentley in the current edition of the centre- Left Renewal magazine - have tended to identify the agglomeration of power in Downing Street as Tony Blair's biggest vulnerability. In one way or another, control freakery lies behind many of the problems from which the Prime Minister is now suffering - his inability to control his own party on Iraq, public service reform or on fox-hunting.

That is why, if Duncan Smith really goes through with it, his Harrogate speech will not merely be the first positive event to occur in the Conservative Party in 15 years, it will present a genuine problem for the Government. The Tories under Duncan Smith will improbably find themselves, for the first time in memory, the progressive party in national debate. It remains to be seen both whether Duncan Smith really means it and, if he does, whether Tony Blair can reinvent himself and rise to the challenge.

Peter Oborne is Political Editor of The Spectator