Page last updated at 15:20 GMT, Tuesday, 2 August 2005 16:20 UK

Full text: David Willetts speech

Here is the full text of David Willetts' 2 June 2005 speech to the Social Market Foundation:

The Conservatives had lost office in a landslide defeat nearly eight years earlier.

Since then they lost two more elections.

Things were looking so bad that the party was contemplating the possibility of a fourth election defeat.

One of the party's thinkers tries to investigate the party's crisis by writing an imaginary dialogue after a fourth defeat.

TORYISM A POLITICAL DIALOGUE

A: What a ten years it has been! Four lost elections, four years of the new finance.

E: And yet the pendulum will not swing.

E: I doubt if the party are giving it any assistance.

A: The fact that I find so disconcerting is the extraordinary apathy of modern politics. We pipe to them and they will not dance.

E: And they won't until you call a different tune.

B: Let us be honest with ourselves: the old Toryism is dead. The old Toryism is one of the outworn beliefs that hang on to cumber a newborn earth. What place shall we find for it in an age of unrest, scepticism, speed, experiment?

Tell me that, and I will hold fast to it. That is the opening of "Toryism: A Political Dialogue".

It was by the Tory historian Keith Feiling back in 1913.

Yet nearly a century later it still captures the kind of conversations that Conservatives have after heavy defeats.

They have been going on for several years now in the privacy of think-tanks and party meetings.

After our third heavy defeat the debate has to be out in the open.

It was supposed to happen after Michael Howard announced his resignation. But where is it?

We desperately need a grown-up discussion about why the Conservative Party keeps losing and how we are to renew ourselves and our purpose.

We must not allow ourselves to be distracted from the debate we ought to have by the debate too many in our Party would like to have.

Of course it is much easier just to focus just on the next leadership contest for the leadership. Is so and so "too old," " too young," "good on TV," " bad on TV", "bad at the Dispatch Box,"?

We have even managed to find another subject fascinating only to ourselves - our own internal organisation, whether it is "too decentralised"," too centralised", " too amateurish", " too professionalized".

But all of these inconclusive conversations avoid the crucial issue.

If the next Conservative leader turns out to be the most charismatic politician since Lloyd George, if they preside over an organisation more efficient than Tesco's, we still won't win the next election unless we can answer two fundamental questions: "what does Conservatism stand for in the Britain of the 21st century?" and "why should many more people than today feel the need to have a Conservative Government instead of the alternative?"

If we use the time ahead of us to debate these questions honestly and to answer them clearly and convincingly, we might even find that the decisions about our next leader and our organisation follow more easily.

After the 1945 landslide defeat one party official described the mood of the subsequent Party Conference as: "Much facile revolt and much aimless candour, a cry that the Party should march somewhere, though few could suggest where."

Sometimes it seems much the same today except we all say we should "modernise".

We are all modernisers now.

I confidently predict that when it comes to the Conservative Party election every candidate will claim they are a moderniser. But what will they mean?

My aim today is to try to cut through this confusion with your own cut out and keep guide to the Tory modernisation debate.

The party needs to look outwards, not inwards.

Our party will only really make progress when it looks outwards and engages more energetically with all those problems out there in the real world.

But we can't turn to that without some sort of intellectual framework of what the party stands for, how we have to change and why.

So first we do need to sort out this confused debate about modernisation.

It is a tough job, but someone has to do it. Here goes.

We can distinguish three different approaches to modernising the party. Each has important insights.

One of the reasons why the party has not made more progress in the past eight years is that the case for change, has been fragmented between these three different schools of thought and we have ended up in a stalemate.

We have not created a synthesis between these three strands of thought that is coherent, rigorous, and that might command sufficient assent across the party to be delivered. But I do believe we now have our best opportunity since 1997 of achieving this.

That it is now within our grasp: that is why the next six months are so crucial.

The First Strand: Rolling back the state

The conventional wisdom is that the Conservative Party stands for more personal freedom in a smaller state and there is no better measure than the amount the state taxes and spends.

We just need to tune the TV so that people can see the picture more clearly.

There are many outside observers who are desperate for the party to make this case with the greatest possible vigour.

With Gordon Brown quite possibly facing his comeuppance in the next few years it seems the ideal time to attack this territory.

Sometimes this argument is expressed as if it is not just a matter of economic and political strategy but almost biological determinism.

Tax cuts and a small state are supposed to be in our DNA.

It is true that freedom is an idea that runs deep through our national history and culture.

But liberal economics didn't really enter the mainstream of the party for quite a while.

The Marquess of Salisbury cast a typically beady eye over the Conservative Party's attitude to the free market.

His assessment in 1892 was that about half the Conservative Party was committed to free trade, notably: "1.The representatives of commercial constituencies; 2. The political economists of whom we have a sprinkling; and 3.Those, mainly young men, who are sensitive to the reproach of belonging to the stupid party."

The real change came after the Second World War when we faced a Labour opponent committed to massive state intervention in the economy.

I believe we can fix the date when economic liberalism was whole-heartedly embraced by the party very precisely - the decision in early 1945 to sacrifice 1.5 tons of the party's precious paper ration for the coming election so that more copies of Hayek's 'Road to Serfdom' could be published.

Ever since that commitment to market reform has been a key strand of Conservative thinking.

Labour might believe in organising the economy in corporatist deals with the producers - we are the party of the consumer.

Often, especially in the early days, the consumer was identified as the "housewife".

She was the person standing in the queue on the receiving end of rationing.

Everyone is familiar with the notorious remark that 'the gentleman in Whitehall knows best' but fewer know the full quotation which was: 'Housewives as a whole cannot be trusted to buy the right thing - the gentleman in Whitehall really does know what is best for the people than the people themselves. No wonder the post-War party allied with that formidable political force, the Housewives' League, and those arguments were absorbed by the party's youngest candidate in the 1950 General Election - Margaret Thatcher.

Without the party's lead amongst women we would barely have won any election since 1945.

One of the most worrying features of the last election is that we have now lost that lead.

We unleashed changes in the jobs market in the 1980s which have transformed opportunities for women who now wish to combine family and a career. You can't have economic change without social change as well.

But Conservatives don't always appear to understand the social and economic changes which we above all have created.

What got me committed to Conservatism originally was precisely the power and excitement of free market economics.

There was a stream of IEA pamphlets identifying some over-regulated under-performing part of the British economy that was ripe for reform.

In the 1980s in the Number Ten Policy Unit and in the Centre for Policy Studies we were investigating virgin territory untouched by market forces for decades, which could be opened up and transformed.

My new responsibilities as shadow secretary of state for trade and industry have already persuaded me that there is an enormous opportunity for the party to commit itself to serious economic reform once more.

This has to be part of the Conservative Party agenda for the future and I will turn to it again later. So far so good.

Now for the buts.

For a start, it is easy to give up on the wider project of reforming the British economy and instead just to settle for tax cuts.

The Conservative Party in the past eight years has put far more effort into arguments about which taxes should be cut and by how much than it has into supply side reform to raise the performance of the British economy.

But if you look at the Thatcher Government, it could not deliver tax cuts year after year.

Some years we even had to put up taxes, because of the state of the public finances.

But what that government did deliver year after year was more big measures to extend the market, privatise industry, and reform trade unions.

In our first six months in 1979 we abolished price controls, dividend controls, pay controls, and exchange controls.

That was heroic economic reform.

It clearly rolled back the state.

But we also had to put up taxes in 1979 and in the crucial Budget of 1981 which helped to put Britain on the path to economic recovery.

The public finances were in such a mess that there was indeed no alternative.

There may even be tensions between supply side reform and tax cuts.

Let me give you an example.

There are strong arguments for reforming the way that public services are delivered so access is opened up to outside providers.

That might well be a good thing but might not actually cut the cost of these services and therefore creates room for tax cuts.

One of the reasons why the Treasury was comfortable for decades with a centralised command system for public services was because even if it didn't deliver choice and efficiency, it was an effective way of delivering public spending control.

This is one reason why Gordon Brown is today such an obstacle to serious reform of the public services.

Moreover, people don't necessarily believe you can deliver the tax cuts you promise.

As a party strategist muttered under his breath during the election campaign, when one report came back from a focus group: "I don't know why we are bothering to offer tax cuts, nobody believes us."

So I don't think there is this magic bullet of tax cuts that will win us votes despite the scepticism of the voters and the heavy pressures on public finances.

Of course tax cuts are desirable.

But I believe they should be part of a much broader programme.

Even this is not enough.

Many people think that all that Conservatism stands for is personal choice in a modern market economy.

That is essential but it does not capture the full depth and wisdom of the Conservative tradition.

It was Quintin Hogg who shrewdly observed that economic liberalism is "very nearly true".

We should stay true to the free market economics that originally got so many of us involved in Conservatism, whilst grappling with the big social issues that go beyond economics.

So let's turn now to a second attempt at modernising which explicitly brings in the social.

The Second Strand: "Not just an economic liberal but a social liberal too"

So far we have looked at tax cutting and economic reform.

These are the Roundheads reminding the party of the rigours of economic liberalism - and they are right to do so.

But then there are the Cavaliers who say that our economic liberalism should be matched by a similar social liberalism.

If the spiritual home of the economic liberals is the IEA, the spiritual home for the social liberals is Policy Exchange.

This second strand of modernisation has an easy logic to it.

If we believe in economic freedoms then we should believe in wider social freedoms as well.

You just have to stop bossing people around and that means taking a much more relaxed view of everything from drugs to the diversity of modern families.

In the old days people used to say they were dry in economics and wet in social policy.

That cliché became so tiresome that you became desperate for someone to who would say they were wet in economics and dry in social policy - perhaps believing in a prices and incomes policy enforced by corporal punishment.

Nowadays people say they are economically and socially liberal.

There are again some very important insights in this strand of modernisation.

For a start it recognises that our culture is far more tolerant than many Conservatives appear to believe.

It recognises that there is a very big problem of just what Conservatives and Conservatism are thought to be like.

As Bridget Jones puts it in her diary: "The point is you are supposed to vote for the principle of the thing, not the itsy-bitsy detail about this per cent and that per cent.

And it is perfectly obvious that Labour stands for the principle of sharing, kindness, gays, single mothers and Nelson Mandela, as opposed to braying, bossy men having affairs with everyone, shag shag shag left right and centre, and going to The Ritz in Paris and telling all the presenters off on the Today programme."

Social liberals recognise that we just have to be much more comfortable with our own country as it is today.

It should be Conservatism with a smile not a frown.

Especially in today's culture, where appearances matter so much, what better way is there of signalling you are in touch, some of these modernisers suggest, than how you dress.

Marx might have got his economics deeply wrong but surely he understood contemporary culture when he observed that: "a black broadcloth suit becomes a social hieroglyphic".

Now we might translate that as "when the Conservative party has mastered smart casual it will once more be ready for office."

It is easy to mock this preoccupation with appearances, but there is a real social change going on.

Society is becoming more individualistic.

There are more people spending a longer part of their lives living on their own, moving more rapidly between jobs and relationships.

They are not tied down in the old way.

This is especially true of younger people in our great cities, and above all, London.

In fact researchers have identified a part of London which has a greater proportion of single people aged under 60 living on their own than just about any other part of the western world.

It must be the epitome of economic and social liberalism and it is of course Kensington.

These young people are well-educated, aspirational, enterprising, making their own way in the world and they can manage without government, thank you very much.

This modernising strand of economic and social liberalism in the Conservative Party appeals to them and may be one of the reasons for the party's conspicuous success in London in the recent election.

And the move of these young Londoners back towards Conservatism is one of the best things to have happened to our party recently.

But there are some serious problems with this strategy.

It is no accident that it has become associated with the triviality of how we look.

It risks becoming a bit like the Fast Show sketch - an obsession with 'does my bum look big in this?' politics.

This is because deep down it is all about me, the individual.

It is about expanding the sphere in which individuals can freely express themselves.

But the Conservative Party's problem is not getting more about the individual, "me," into its philosophy.

We have already been saying that loud and clear.

The challenge is to explain where "other people" fit in.

It is the other people who change an individual life into a meaningful part of a family, a neighbourhood, or a nation.

I recently attended a presentation by a senior Conservative strategist who just assumed that the central principles of Conservatism involved personal freedom and personal choice and not much else.

Later in his presentation he said, almost baffled by the unfairness of it all, that the biggest single problem that we faced with voters was that they saw us only ever talking about individuals and thought we appealed to selfishness and greed.

We Conservatives have got very good at explaining and expanding what individuals can do for themselves.

What we are much less good at is what we can do for other people.

Economic and social liberalism in its simplest form conspicuously fails to tackle this.

We still have to show we engage with the problems of people who may not have had the same advantages and opportunities as us.

We Conservatives understand that rolling back government creates the space in which a rich civil society can flourish.

Left-wing pundits may warn of the corrosive effects on values of free market capitalism.

Conservatives can rightly respond that and clumsy big government does not exactly transform people for the better either.

The real and interesting battleground of politics today is non-state, collective action - everything that stands between the individual and the state.

The best of the economic and social liberals understand this and want such a society to flourish.

It is what I described in a pamphlet for this very Social Market Foundation ten years ago as Civic Conservatism.

It is the thick social networks that make life worthwhile.

But even this won't quite do on its own.

We sometimes talk as if government is like the thick snow on an Alpine meadow: as it melts away a thousand flowers bloom just by force of nature.

But government disengagement doesn't automatically solve our social problems.

Recognising this is the crucial difference between the success of George W Bush in winning the presidency and the failure of the Gingrich Revolution in the Congress.

In his 2000 campaign Bush attacked "the destructive mindset: the idea that if Government would only get out of the way, all our problems would be solved. An approach with no higher goal, no nobler purpose, than 'leave us alone"'.

We talk as if the problem is just the supply of government.

But increasingly I believe the real problem has been the demand for government that grows as a consequence of a fractured and fragmented society.

There are different ways in which this demand for government expresses itself.

If people are living on their own, we know they are more likely to use the NHS, especially A & E departments.

If you feel rotten in the middle of the night and there literally is nobody beside you to mop your fevered brow and tell you not to worry you go to A & E instead.

This is just one example of a wider point: atomised individuals need more external support.

Social liberalism doesn't come cheap.

Why has Britain become a more unequal society with such pressure on the tax and benefits system to redistribute from rich to poor?

The clue is the size of the family.

We focus very much on the diversity of individual incomes.

Of course in a modern market economy there will be great gaps in individual income.

But the big difference between more equal and less equal societies is that more equal societies have bigger households.

You see things very differently if you measure incomes not by individuals but by whole households.

A society where well paid individuals are sharing their income with other members of the family can end up quite equal.

In Britain, by contrast, as we have unusually small households, that task of redistributing income falls much more heavily on the state because we do much less of it informally within the extended family.

Take the issue of drugs.

If you come from a prosperous background with all the advantages that brings you may be able to get away with some experimentation with drugs without too many ill effects.

But what happens when access to drugs becomes more widespread on some of our toughest estates where people don't have so much money, or opportunity? Sadly they may have less hope. There drugs can do real damage.

Getting government out of the way of strong people at the most dynamic part of their lives is not necessarily the best way of helping people who are less well off in communities that are deeply fractured.

The Third Strand: Social Reform

So that brings me to the third strand of modernisation.

It is Conservatism not just of economic and personal freedoms but also of social reform to create a stronger society.

What it understands is that freedom is not enough on its own.

The fundamental challenge facing the Conservative Party today is not to show with even greater energy that we understand people's desire for freedom, opportunity, and mobility.

Those are important but they are not the whole story.

The real challenge for Conservatives today is to show as well that we understand roots, belonging, and identity, and can speak to our fellow citizens about security and obligation as well.

This perhaps is the key insight of the Centre for Social Justice.

The Conservative strategist who was baffled that voters thought Conservatives were individualistic and selfish and wanted to know how this could be tackled had his answer at another meeting that I recently attended at which we discussed the lessons of the Election.

Two new Conservative MPs who had gained seats from Labour and Liberal Democrats spoke to us.

They described how they had fought their seats.

Yes, they had taken off their ties and rolled up their sleeves, but not to celebrate their personal freedom: instead it was to get to work to make their communities better.

One had literally led a group of young Conservatives into a tough estate in his constituency in order to spend a weekend clearing it up.

That was voluntary activity, of exactly the sort we need - not just encouraging others but doing it ourselves.

Imagine a Conservative leader who could speak like this and be believed: "I leave you with this challenge: serve a neighbour in need, because a life of service is a life of significance. Because materialism ultimately is boring, and consumerism can build a prison of wants. Because a person who is not responsible for others is a person who is truly alone. Because there are few better ways to express our love for America and to care for other Americans. And because the same God who endows us with individual rights also calls us to social obligations."

That was President Bush speaking to students in May 2001.

There are, I realise, dangers in this approach too.

The Conservative Party cannot become the political instrument of moral rearmament.

And we must not preach - we all have our own deep moral failings.

And we should remember the warning that trying to restore an abandoned tradition was like a man trying to repair a broken cobweb with his bare hands.

We mustn't drift into lazy "bring backery" - the political equivalent of comfort eating.

And we cannot impose morality on others, any more than we could impose enterprise.

But you can take away the barriers, many of them put up by governments themselves, which stop people taking responsibility for themselves and others.

We have at last started talking about the public services.

But that won't mean much to people unless they believe that we understand public service.

Some people don't recognise this even as part of the Conservative tradition.

In truth it is deep rooted in Conservatism but in a way that is hard to express today - it was embodied in the great historic institutions with which we were associated.

We were the party of the countryside and landowners who felt a paternalist duty to the community and an obligation to pass on the environment in at least as good a state as they found it.

We were the party of the Church of England.

We took great pride and still do in our Armed Forces, and the reason why the Army is still so respected today is surely that it embodies values that go way beyond consumer and choice.

I remember one elderly Tory lady expressing her dislike of corporate fat cats by simply saying to me "the officers should never eat before the men".

It is these institutions which shaped the values of generations of Conservatives - indeed they were the background of many MPs.

But because Conservatism just shared the assumptions of these great institutions, it somehow didn't feel the need to express them or bring them out in the open.

H.G.Wells said that the great thing about being English was that you didn't have to wear a national dress.

As these institutions and the idea of public service this embodies have fallen away we are left with the language of personal freedom and choice, a crucial part of the Conservative tradition but not by any means the whole story.

A stronger economy and a better society

The marketing experts say that you can sell a shampoo by promising it will tackle your dandruff, or by promising it will make your hair more lustrous.

But what you can't do is claim it tackles both. For far too long the Conservative Party has operated on this assumption. Now we should break free of it.

The Conservative Party has been at its most successful when it has understood people's aspirations.

As Margaret Thatcher memorably said in the opening line of the 1979 Conservative Manifesto, "For me the heart of politics is not political theory, it is people and how they want to live their lives".

The centre ground of British politics is where the central concerns of the British people lie.

In the 1970s Keith Joseph talked of the common ground, meaning the shared values of the British people.

He understood that a free market economy had to operate in a strong society: that's why he observed "monetarism is not enough".

Then that was far from the centre of British politics.

But now Keith Joseph's common ground is at the centre of our political debate too.

That is precisely how he and Margaret Thatcher changed the British political landscape - and what Tony Blair forced the Labour Party to recognise.

The Conservative Party needs to stand for a stronger economy and a better society.

It would be very wrong for us to feel that we could only embrace one of those principles by excluding the other.

It was precisely the achievement of Blair's "Third Way" that he appeared to offer some combination of economic efficiency and social justice.

For too long the Conservative Party has impaled itself on the horns of this dilemma, sharpened for us by Blair.

Either we had to veer off as purely the party of neo-liberalism and personal freedom, or we become a Party of cultural Conservatism trying to protect traditional ways of doing things.

But neither of these approaches will work.

What we have to do is move forward confidently and challenge Tony Blair for the centre ground of British politics.

Indeed we should have the boldness to trump him.

We should offer a stronger economy and a better society than he can.

A Stronger Economy

Let me now try to sketch out what our policies might be to make this claim credible.

Gordon Brown has indeed managed to sustain the macro-economic stability that he inherited from us.

But what has he done with it?

It is not just a goal in its own right, it should be economic stability with a purpose - to transform the supply side of the British economy.

But the Chancellor has failed to take the extraordinary opportunity of eight years of economic growth and low inflation to tackle the big, long-term problems that would really raise our economic performance.

We all talk about Tony Blair as the lightweight who has frittered away the enormous opportunity of his big majorities.

But this is Gordon Brown's failing too: with far fewer economic problems than confronted Conservatives in the 1980s he has achieved far less by way of economic reform.

What has struck me moving from shadowing the Department of Work and Pensions to the DTI is how similar are the fundamental problems in both cases.

Britain has got a serious pensions crisis.

For years the government denied it and they still have not come forward with any serious proposals for tackling it.

I now shadow Energy and what do I see - exactly the same thing. We are facing an energy crunch.

We have had years when energy prices have been relatively low and supplies have been relatively secure. But those are coming to an end.

We are all going to face the prospect of much higher energy prices or much more vulnerable supplies, or some combination of the two.

Again, what has the government done about it - nothing.

The same goes for transport where there is a complete mess instead a coherent framework for public and private investment.

I believe that the economic historians will judge Gordon Brown as the opposite of the dour, earnest puritan he appears.

They will say that these were the wasted years when we lived it up and borrowed the money, but never did what had to be done to tackle our nation's problems and invest in the future.

The Conservative Party must show that we are serious about taking the long-term decisions needed to make Britain's economy stronger.

That includes thinking much more rigorously than the Government has done about the framework that you need in order to reward savings or get investment in energy.

Next month I will be convening a summit on the big long-term challenges facing the real economy.

We will be looking at why our productivity performance has failed to improve, and is lagging behind our leading competitors.

We will look at what we will need to do to tackle the looming energy crisis.

We will be looking at why, despite all the rhetoric of investing in human capital, we still face such problems in giving quality education and training.

I am confident that what we need in all these areas above all is an injection of imaginative rigorous thinking about the role of markets.

There must be more to our economic policy than cutting taxes and red tape - desirable though these are.

We can see enormous economic challenges which are crying out for market solutions.

A Better Society

As well as a stronger, more flexible economy we also need to commit ourselves to a better, more cohesive society.

If the problem with our economic debate is that there is now too much easy optimism that things must always get better, the problem with the social debate is the exact opposite - a deep-seated pessimism.

Twenty-five years ago we thought we were Europe's sick economy.

When I first worked in The Treasury the task was thought to be managing Britain's economic decline with as much decency as you could muster.

Margaret Thatcher changed all that.

She showed that there was no law that economic decline was irreversible.

Now I detect a similar pessimism about British society.

Again people think that somehow we just have to settle for being the sick society of Europe, the country with the most fragile families, with some of the toughest estates, the most drunken tourists, and some of the worst problems of crime and drug abuse.

It doesn't need to be like that.

There is no law of social decay that says all these things need to get worse.

Twenty years ago New York was one of the most brutal urban environments in the world. It has been transformed for the better: they have just celebrated the 14th successive year of the murder rate falling.

There is more civility and courteousness than you find now in many other international cities.

How was this achieved - by implementing some of the deepest insights of Conservatism about how to create order in society by protecting and repairing public space.

The decent law-abiding majority should feel the public realm belong to them, not to marauders.

And we know, in the words of that famous experiment, repairing broken windows to restore confidence in good order can be a crucial step to repair a broken society.

I don't believe that the problems of Britain's toughest estates are hopeless.

We can unpick that dreadful interaction of traditional school catchment areas, poorly managed social housing, ineffective policing, and the disappearance of small businesses, which together add up to the problems of urban decay.

This might well require opening up, for example, school choice.

But it is not just a matter of rolling back the state.

Of course government can't do everything, but that doesn't mean it must do nothing.

We Conservatives recognise that often the state fails but we shouldn't react with glee when it does.

Instead we should believe in effective government.

Too often government seems to be in the way when you don't need it but not there when you do.

So yes, the state needs to be reformed and indeed rolled back but not because we hate it like some libertarians who have taken to the hills of Montana.

We should be followers of Burke, not Rousseau, and it was Burke himself who attacked the French Revolution and their liberal English allies because they thought of government as a mere contract to deliver services.

This is how Edmund Burke, the founder of British Conservatism, put it: "The state ought not to be considered as nothing better than a partnership agreement in a trade of pepper and coffee, calico, or tobacco, or some such low concern - it is to be looked upon with other reverence, because it is not a partnership in a thing subservient only to gross animal existence of a temporary and perishable nature. It is a partnership in all science; a partnership in all art; a partnership in every virtue and in all perfection. As the ends of such a partnership cannot be obtained in many generations, it becomes a partnership not only between those who are living but between those who are living, those who are dead and those who are to be born." [Edmund Burke: 'Reflections on Revolution in France.']

What we need nowadays is much more rigorous thinking about what the state can do and what it cannot.

One of the things in my career that I am most proud of is working in the Number 10 Policy Unit on social services when we broke the NHS monopoly for glasses and opened up the supply.

It seems incredible that at the time it was deeply controversial but we pushed it through.

But we also have to recognise that by paying their taxes for health and education people will expect government to take some responsibility for what happens.

What we really need is a much clearer sense of what it is in public services that needs to be set by elected governments and where freedom and diversity can be allowed to rule.

One of the reasons why our message on public services has been so incoherent is that we haven't cleared this up in our own minds.

Sometimes we appear to believe that personal choice alone will solve the challenge of raising the standards in health or education.

Other times we say that government is going to tell schools how to teach literacy or how to force hospitals to get cleaner.

We are never going to get to a model of public services where you just hand out the public money and let everything else be determined by the dynamism of personal choice.

There are inevitably going to be big questions about publicly financed public services for which ministers will be held accountable.

We really will be taken seriously as reformers of public services when we engage with this.

Grown-Up Conservatism

This is no mere intellectual exercise aimed at reconciling different views of Conservatism.

This is my own personal journey through Conservatism over the past 20 years.

But I wouldn't bother you with it if it were just me, I believe it is how many people change as we go through our lives.

You start by making your own way in the world and what appeals to you above all is the language of flexibility, mobility, opportunity. It is the economically liberal bit which brings many people to Conservatism.

But you can be awfully sure of yourself and believe you know exactly how the market is supposed to work.

Then you get more tolerant as you begin to realise people don't always behave as you expect.

You recognise how wide is the range of human motivation and how much knowledge and wisdom is dispersed.

You see the market as one way in which all this diversity can be respected.

Perhaps you become more tolerant and open-minded.

That's the social liberalism.

Then you have children and you start thinking about the environment in which they will grow up.

You worry about how to transmit your values to the next generation.

It can feel as if you are fighting a battle against not so much the state as an incredibly crude commercial culture that tells them there is no more to life but consumption.

You begin to discover that there are deep ties and obligations across the generations.

You notice that your friends who understand this best and live up to it are the ones with the most fulfilled and satisfied lives.

In fact they are much more satisfied than the people who are just following the thin freedoms of mobility and choice.

This story is what many of us learn as we go through our lives.

It is indeed for many people their personal narrative, though these attitudes needn't be tied to people's ages.

And it is also a story of what the Conservative Party has gone through.

The 1980s were an exciting, breathless time, with dragons to slay and the world at our feet.

In the 1990s we realised that we didn't have all the answers but that became self doubt and uncertainty about what the Tories stood for.

Now I see the opportunity for a mature Conservatism, a new Conservatism, a Conservatism that has grown up over the past twenty years as our country has changed.

It should combine energy and humanity.

It needs to understand our own traditions better and use that knowledge to look forward to make our country a better place.

It needs to be confident of what it stands for, so it can then serve the country confidently.

We must understand people's two central aspirations which surely we all feel - whatever our age.

First, we want freedom and opportunity - to feel that we can make life better for ourselves and our families.

That means more prosperity and more choice.

This is the power of the consumer in a modern free-market economy: free, mobile, individualistic.

It is innovative, striving, enterprising. It is the Conservatism of our historic liberties and of a flexible economy.

But we want something else too - to know who we are, bound by ties of affinity.

We want to feel that we have roots and identities.

We want to serve some project or cause that is greater than ourselves.

It may be a family. And at historic moments it can be the whole nation.

We want a society where there are strong social ties, not one which has been finely graded into individual grains moving frictionlessly past each other.

This is the Conservatism of cohesiveness and community.

And yes, the nation state and good government must be part of that.

These two principles can both be traced far back in the tradition of Conservative thought.

Conservatism is at its most dynamic when it holds in creative tension these two principles: our belief on the one hand in individual freedom, private property, and the market economy; and on the other hand a commitment to maintaining the institutions which hold our nation together.

It would be a failure of imagination for a political party to say to the British people that they could only have half of what they want - either personal freedom or a strong society.

Our aim must be to not just to make the British economy stronger but British society better.

Surely this long promised debate about the future of Conservatism should be about how these two great principles of a dynamic economy and social cohesion come together.

That really is worth talking about.

That is the synthesis I have tried to put forward today.

As we understand our own history we will see this is our own Conservative tradition.

As we look at Tony Blair we will see that we can only challenge him by claiming this ground, the centre ground, from him.

And as we look at our country we will see that this is what shapes the lives of our fellow citizens as they grow up.

I think that should give Conservatism renewed confidence and purpose.

It will then be a new Conservatism for a new century.



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