It's difficult to do anything about Tory idiocy when most of the country disagrees about how idiotic it is. See, for instance, Osborne's economic nonsense about the country 'maxing out its credit card', and that if spending isn't cut immediately and severely, 'the UK will be the next Greece'. I don't know if you'd find a credible economist in the country that agrees with those claims, but they were accepted as political orthodoxy and he had broad popular support for doing it. Even the fact that they failed and set the economy back by several years was successfully spun as being a vindication of his economic plan.
It's more than just that, though. I think a large proportion of Conservative voters are economically closer to Labour than they are to the Conservatives, but they feel Labour is too cosmopolitan/liberal. This is true (even more so, in fact) for UKIP.
This is a pretty common research conclusion in PolSci. Basically, they ask a bunch of questions on policy stances, and then see which stances correlate - meaning, if someone tells you how they feel about X issue, how well can you guess what they think about other issues? Generally speaking, there are two dimensions. People end up being economically left/right and socially expansive/inexpansive (the paper I took the image from above calls them cosmopolitan/communitarian, but I don't think that's a very useful way to think about it).
It's not really "libertarianism vs. authoritarianism" like you see on online political compasses because they don't actually track very well people's claims of how much they value liberty/freedom, so while libertarianism vs. authoritarianism might be a matter of genuine debate between identifiable principles, it's largely an academic one that doesn't appear to matter to most people's decision making. Instead, it's more something like "how widely you perceive your identity", with lower values meaning you tend to offer less support to people not like yourself (i.e., gays, or non-white ethnicities, or poor people, etc.).
The increasingly pertinent conclusion is that the left/right divide is beginning to matter less and less. Inglehart and Dalton have both put out papers pointing out that your economic left/right stance is becoming steadily less and less predictive of how you vote, and it seems to correlate with the design of key institutions that fostered and mobilized a base - economic leftism started to die with the death of the unions. Among people below the age of 30, politics almost *entirely* splits on the expansive/inexpansive dimension, and your social views actually predict your economic views, unlike older generations where being economically leftwing can sometimes still include being socially very conservative, and vice versa being economically right wing can still allow for a very permissive attitude towards homosexuality and non-white ethnicities.
What's happening in British politics is that parties are having to realign from their traditional left/right axes and move towards expansive/inexpansive ones, but we're in a FPTP so that's like trying to fit a square peg in a round hole. Labour is losing out because Labour is positioning itself in the wrong spot entirely. In the graph above, if you weight the centre of each party's support according to the number of supporters, and try to find the geometric mean, it's about here:
In other words, the Labour Party is struggling because more centrist Labourites economically are defecting to the Lib Dems, sure, but *much* more importantly, more inexpansive Labourites socially are defecting to UKIP. By contrast, the Conservatives actually have a really 'uncontested' part of the British electorate. You can even see that the winning point in British politics is effectively the economically moderate, socially centrist side of the Conservatives - it's little wonder that the Coalition and then in turn Cameron won (and I suspect as May goes on her popularity will begin to recede).
Now, obviously this is reducing politics to a rather simple level. There are non-ideological reasons to select parties, such as perceptions of competence, that don't feature in this. People may not believe a party when it announces a policy position change, and so not follow it. Rather than always vote for the nearest party ideologically, people may simply not vote if the nearest party is too far away. Parties actually have the ability to 'shape' the political landscape very slowly over time by prioritizing some issues and downplaying others. Nevertheless, it serves as a good illustration of the point that Labour is losing not really because of economics but because of social issues, because it's closer to the correct point on the economic axis than it is to the correct point on the social axis.
Labour lived when the primary motivating factor for both metropolitan liberals and the working classes was economic issues. It is dying because that is no longer the case. The big problem is that the winning point has now moved *outside* the opinion spread of Labour's core support base - to win, they need to move the party to a point where it is too centrist for effectively all of its own (current) support. The Conservatives, by contrast, just need to make sure the nutters don't take charge, because the winning point is a point that exists inside the Conservative's current base (although having said that the nutters are now in charge, so we'll see how long that lasts...).
EDIT: As a side note, interestingly the SNP is actually a hugely amorphous party. You'll find a huge swathe of different opinions in there; there doesn't seem to be much agreement on anything except the idea that Scotland should be independent.
