PETER OBORNE: Beginning of the end for Dave and George? 

Very few political reputations have fallen as fast as George Osborne’s over the last few days. 

It’s only a few months since the Chancellor was widely hailed as the next Tory leader, the man who steered our economy away from the rocks. Today, as calls are heard for his resignation, there’s a doubt as to whether he will even survive as Chancellor.

Part of the reason for Osborne’s downfall is his savaging from former welfare secretary Iain Duncan Smith in that contemptuous resignation letter to David Cameron on Friday.

Duncan Smith accused Osborne of putting politics in front of sound economic management. He said that he favoured the well-off ahead of the genuinely needy. These charges were all the more damaging because, as everybody bar a few fanatical Osborne loyalists recognize, they contained an element of truth.

However Osborne could certainly have weathered the storm but for the fact that, in addition, his Budget statement last Wednesday has gone sour.

Very few political reputations have fallen as fast as George Osborne’s (right with David Cameron) over the last few days

Prime Minister David Cameron and Chancellor George Osborne during Prime Minister's Questions in the House of Commons,

For the second year in succession the Chancellor’s financial statement has fallen apart, because his sums simply don’t add up.

The Chancellor’s claims to have a ‘long-term economic plan’ risk turning into an embarrassment. His chief long-term plan has been his determination to enter Downing Street, and that has blown up in his face.

It is quite clear that, barring some giant slice of luck, George Osborne will break his promise to balance the books by the next General Election in 2020. If he fails to do so he will be remembered as the man who promised to sort out the economic mess inherited from Labour, and did not do so.

However, it would be wrong to think that Osborne will go easily. Cameron cannot allow that. The Prime Minister knows that if Osborne fails, he fails too. Cameron will be all too well aware that if Osborne’s reputation collapses – so does his own.

The two men are political twins. They cannot be separated. They rose together. If they fall, they will fall together. If Osborne is destroyed, Cameron is destroyed as well.

These are dark days for the Cameron leadership. The Prime Minister and his beleaguered Chancellor are fighting for their reputations. At present Osborne is Cameron’s air raid shelter, his lightning rod. But the attacks on Osborne are meant for Cameron as well. After ten years at the top of the Tory Party, both Cameron and Osborne have suddenly become fair game.

The Prime Minister has started to look different. He is no longer fresh faced. He appears tired and may even not be that interested.

His golden touch has gone. He’s making mistakes. This happens to all Prime Ministers at a certain stage. There’s been a change in the political weather, and life looks chilly for the Prime Minister and his closest political ally.

The departure of Duncan Smith has set the scene for an almighty battle for the heart of the Tory Party. 

Chancellor of the Exchequer George Osborne delivering his Budget statement to the House of Commons, London

This battle is partly about the Budget. But it’s also about two visions of the Tory Party. Osborne and Cameron represent the modernising metropolitan elite and Osborne in particular has rarely hidden his scorn for the ordinary Tory members. But most of it is about Europe. 

We have at last reached the defining battle of the Tory Party’s 30 Years War over our relations with the EU. This war was instigated with the political assassination of Margaret Thatcher in 1990 by a pro-European clique. 

It’s no coincidence that Osborne is the protégé of Michael Heseltine, Maggie Thatcher’s assassin. The war worsened in the 1990s, with the internal convulsions over the Maastricht Treaty, when the rebels were led by Duncan Smith.

Now it’s reached another climax. Cameron and Osborne always intended to use the European Referendum to destroy the Tory right. 

Iain Duncan Smith leaves his home to appear on the BBC's Andrew Marr Show on March 20

They have long sought the extinction of Duncan Smith, and other Brexiteers such as Owen Paterson, Bernard Jenkin, Sir Bill Cash. There are very old scores being settled here and neither side will show mercy. This is ugly, visceral politics, which is why Tory Party discipline has collapsed over the last few days.

The party may split altogether. This is now a possibility. If it is not to do so, it will soon need a new leader who can heal the wounds after the monumental combat that lies ahead in the run up to the referendum.

With Osborne on his knees, there was a talk yesterday about the leadership succession. Boris Johnson is favourite, and it is easy to see why. He is hugely popular with the party membership and has proved himself as a capable mayor of London. By sheer force of personality, Boris could well meld the warring parties together while restoring the popularity of the Conservatives in the country.

But Boris is distrusted by a number of MPs, above all by Osborne’s allies who will still control many of the key positions in the party, whatever happens to the Chancellor.

So do not discount the chances of Michael Gove. Amidst all the bitterness and feuding, the Justice Secretary is the only member of the cabinet who is admired and trusted by both sides of the Tory divide. He is a close personal friend of Cameron and Osborne, yet regarded as a hero by the Tory eurosceptics.

Boris is distrusted by a number of MPs, above all by Osborne’s allies who will still control many of the key positions in the party, whatever happens to the Chancellor.

Gove is at home in the smart parties which Cameron and Osborne love to attend, but also admired by the Tory grassroots. Consider this: he is the only Tory eurosceptic who is acceptable to the pro-Europeans.

It is certainly true that Gove acted out of principle when he joined the anti-European camp. But that act of integrity and self-sacrifice means that he is now the figure with the best credentials to reunite the sides of the Tory civil war.

Yesterday, he wrote an emollient newspaper article praising both Duncan Smith and Osborne, calling for unity and pointing out that this country has done better, and will continue to do so, under a Conservative government than under Labour. If he can be convinced to run, he may be best placed to succeed Cameron and rebuild a ruined Tory Party.