It was a cameo appearance in the drama, but significant nonetheless. When Liam Fox, the embattled Defence Secretary, was answering questions at the despatch box on 10 October, Iain Duncan Smith stood at the entrance to the chamber, feet apart, one arm across his waist. It looked as if the Work and Pensions Secretary, a former Scots Guardsman, was poised to draw a ceremonial sword in case hostile Labour MPs needed bringing to order.

It was a signal of support for Fox, battered by the scandal around Adam Werritty, his mysterious sidekick. But it was also a projection of confidence by a man who is emerging as one of the most powerful figures in the government. Duncan Smith's status among rank-and-file Conservatives is now higher than it was when he led the party a decade ago. His reputation as a guardian of sacred Tory principles in a cabinet infiltrated by Liberal Democrats can be only enhanced by Fox's decline.

Tory folklore

As seen from Downing Street, Duncan Smith's position as an ex-leader makes him a safe repository for Conservative resentment over compromises made for the sake of coalition. Disheartened Tories can be cheered by his sermons without that enthusiasm looking like a nascent plot against the current boss. Hence, Duncan Smith was allowed to rebuke Cameron at this year's party conference for failing to offer tax breaks for married couples. But the vital element in IDS's political rehabilitation has been his reputation for evangelical urgency over poverty and unemployment. His epiphany on a visit to a tough Glasgow housing estate in 2002 is a matter of Tory folklore, marking the point at which the right started to address its reputation for cold-hearted economic individualism. When Cameron set about more formally "decontaminating" the Conservative brand three years later, he co-opted IDS, giving him control of a "social justice" policy review.

Cameron, aware of his own lack of empirical contact with skid row, still defers to Duncan Smith as an expert. Others in the government are less persuaded of the Work and Pensions Secretary's credentials and are often irritated by his tendency to assume moral authority on all social issues. "There is a little competition going on between IDS and every government department," says one minister of Duncan Smith's meddling impulses. One Tory adviser calls IDS's moralising grandeur "delusional". It is the Lib Dems who are most wary of Duncan Smith's reach across government and, privately, most scornful of his "compassionate Conservative" politics. That is hardly surprising since Nick Clegg has made it a strategic priority to nab the credit for anything the government does that might be perceived as softening the blows of austerity. The Lib Dems want to position themselves as the conscience of the coalition; it spoils their plans to have Tories, especially right-wingers, looking conspicuously like they care.

As a result, there is a scramble to own every crumb of compassion in the coalition programme. Clegg recently insisted, for example, on sharing an announcement that £300m had been allocated to fund childcare through the universal credit - Duncan Smith's flagship
welfare reform.

Downing Street professes to be relaxed about this campaign to monopolise niceness in the coalition. The counter-strategy is to cast Clegg's antics as petty point-scoring, above which the Prime Minister can rise. "You can't have a row if only one side is rowing," says a No 10 aide. Cameron is also confident that the message coming out of Duncan Smith's department is distinctly Tory and very popular. Private polling shows support for a radical overhaul of the welfare system, which is widely thought to promote idleness.

The indulgence of that tendency is also commonly reported as one of voters' main grudges against the last government. In one common focus group test, subjects are asked to pick out pictures from a pile that they think capture a party's essence. Labour often comes out as a fat slob in an armchair watching TV. Conservatives are stubbornly associated with country houses and pinstripes. That all leads Cameron to conclude that he has just the right man in charge of welfare. IDS does not conform to the stereotype of swaggering Tory toff. Few doubt his sincerity in wanting to create a benefits system that rewards enterprise and no one on the Conservative front bench has spent as much time thinking about the problem. The universal credit is the culmination of a decade of compassionate Conservative soul-searching. That, of course, doesn't inoculate it against failure.

Even if it is implemented on time - and the complexity of the benefits system militates against prompt delivery - the new system won't kick in until 2013. By then, according to a forecast by the Institute of Fiscal Studies published on 10 October, households will have suffered a decline in real income steeper than anything felt since the 1970s. Hundreds of thousands of families will have been tipped into poverty. Meanwhile, the latest unemployment figures, released on 12 October, show joblessness reaching a 17-year high.

Old caricatures

The DWP's calculations on the likelihood of people finding work rely on forecasts from the Office for Budget Responsibility that new jobs will appear in the private sector quickly enough to compensate for public-sector cuts. Those predictions, like the OBR's anticipation of a prompt revival in economic growth, now look plain wrong. Even if the universal credit is designed to eliminate incentives to choose benefits over work, that whole proposition becomes meaningless when there are no jobs out there. The public mood, now scornful of workshy layabouts, could shift to horror at a government that cannot provide citizens with a decent living - and revulsion at a party that, true to old caricatures, isn't that bothered.

Iain Duncan Smith's credentials as someone who frets about poverty from a distinctly Conservative standpoint have made him immensely useful to the Prime Minister and powerful in the coalition. But when the dole queues are lengthening and millions of people are struggling to make ends meet, it is to the current, not the former Tory leader, that voters will turn in hope of compassion.