Shortly after 12.30am on Thursday night, Tory party workers at their London HQ gave a cheer. As they watched the election results on giant television screens, they saw Justine Greening capture Putney, a seat Labour had previously held with a majority of 2,771.

Greening, a finance manager, had snatched it away with a swing of 6.4% to the Tories. Young, blonde and personable, she seemed to symbolise the hope of a Tory renaissance.

A little more than half an hour later the party captured Enfield Southgate, where Michael Portillo had been ousted in 1997. Fuelled by alcohol and crisps, some young aides started prancing on the dance floor. Beer glasses went flying and one young woman fell off a table into a flower arrangement.

Though victory was not in sight, at least a backlash was under way against Tony Blair. In England, the Tories were heading towards polling nearly 60,000 more votes overall than Labour, even though they would end up with far fewer seats in parliament.

In Folkestone Michael Howard, the party leader, looked pleased as he attended the count at 4.15am with Sandra, his wife.

“How’s it going, Mr Howard?” called out a reporter.

“Very well,” he replied. To many he was secure in his job, having hauled the Conservatives back to mount a respectable challenge. But Howard already had made up his mind to resign.

The decision was taken “some time ago”, according to a friend. He had decided he would stay only if the Tories won or there was a hung parliament and an imminent rerun of the election. In the event,the Tories had gained 36 seats, lost three and had nudged their share of the vote up from 31.7% to 33.2%. But it was still their third successive defeat, and they had ended up with just 197 seats. The party still had a mountain to climb.

Furthermore, as a senior figure close to Lynton Crosby, the Tory campaign chief, admitted: “The trouble is we have found that, although people hate Blair, they didn’t warm to Michael.”

When Howard announced later on Friday that he would be quitting to give his successor time to create a winning machine for the next election, speculation about the future leadership erupted within minutes. Was David Davis, the shadow home secretary, the frontrunner? Might Sir Malcolm Rifkind, an old one- nation Tory, be a contender? What about Liam Fox, the party co-chairman? To complicate matters, it emerged that Howard aims to reform the leadership election procedure before stepping down. This means he may well stay to the end of the year, because the rule changes will first be debated by the National Conservative Convention — a 1,000-strong body of election agents, local chairmen and members of the party’s executive board — and finalised at the party conference in the autumn.

At present, under rules introduced by William Hague in 1999, all 300,000 members of the party have a vote. As a result, Iain Duncan Smith became leader with grassroots support but without the strength that mattered — at Westminster. Howard wants to “bring the choice back within the parliamentary party”, now infused with 33 additional MPs.

This cannot be welcome to Davis, who would probably be the clear choice of the grassroots but is not widely liked by fellow MPs or trusted in the Howard camp. Though he is the bookies’ favourite, he scored poorly among his parliamentary colleagues when he stood for leader in 2001.

“David believes in climbing one mountain at a time,” said a close friend. “He also believes that he who wields the dagger, loses the crown.”

Explore UK News

• Crime News

• Education News

• Health News

• Scotland News

Times Recommends

• Alex Rider exclusive: Incident in Nice
• Green & confused: do energy-saving bulbs work?
• Let’s skip lunch, say the hungry generation