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Francis Elliott

Deputy Political Editor

David Cameron best reveals his character and that of his political project at moments of defeat. He felt the blow of losing his first attempt at becoming an MP keenly in 1997, analysed correctly the reasons for the Tories’ abject performance in 2001 but then misjudged why Michael Portillo’s subsequent leadership bid fell short. The failure of Iain Duncan Smith’s leadership forced him to reconsider his attitude to modernisation and his last doubts were extinguished by the third successive Conservative defeat under Michael Howard.

During his own period as Leader of the Opposition, Mr Cameron was at his best when he faced the greatest danger, tacking and trimming and finally outmanoeuvring Gordon Brown in the autumn of 2007 to scare the new Labour leader off an early election. When at last the poll was called in May 2010, Mr Cameron best showed his political gifts not during the campaign but in the days afterwards, converting an inconclusive result into a decisive outcome.

But if defeat best reveals the nature of the man and his project, it is in success that his closest friendships and alliances have been forged. The first of these is his relationship with Steve Hilton, whom he first met in the late 1980s when both worked for what was then Conservative Central Office. Their decades-long conversation about the Tories, their strengths and weaknesses, their prejudices and favourites, is the dialogue that most drives the project. At first sight the two men could hardly be more different. Mr Cameron’s privileged background, social assurance and cultural Conservatism fitted him smoothly for the Conservative Research Department in the Tories’ old HQ in Smith Square. Mr Hilton, the son of Hungarian immigrants and a scholarship boy who became a Conservative only at university, was less obviously a CRD Tory boy. Mr Cameron favoured red braces; Mr Hilton was known to wear a “voluminous poncho”.

It is what they share, however, not what they do not, that most influences the modern Conservative Party. A passionate belief in the primacy of the individual over the collective – open in Mr Hilton’s case, partly shielded from view in that of Mr Cameron – is their first shared value. Mr Hilton, whose family endured the Communist repression of Budapest in 1956, has a visceral dislike of the statist mindset.

Neither, however, is a straightforward economic liberal. The purpose of freeing individual action is so that people can better deliver social goods. And the State has a role in fostering and encouraging those other institutions, such as marriage, that help people to share responsibility for one another. The pair have tried a number of attempts to rebrand these strands of right-wing philosophy during their period at the helm of the Conservative Party. It has been known variously as “modern, compassionate Conservatism”, the “post-bureaucratic age” and finally “the Big Society”. For the second big thing that Mr Cameron shares with his closest ally is an abiding interest in and facility for political communication. Both schooled according to the exacting standards of a Margaret Thatcher-era CRD, they write crisply and without jargon or cant. In the run-up to the 1992 general election the pair were selected to manage the relationship with the Tories’ advertising agency, Saatchi & Saatchi.

There is one final shared attribute: their age. They were part of a Smith Square “brat pack” in 1992 and were still young enough to weather the wilderness years so that they could emerge as part of the “next generation” just as new Labour was running out of steam.

In Stafford Leisure Centre in the early hours of May 2, 1997, however, those years outside power were just beginning. By then 31, the Conservative candidate, left hanging around as a loser at the count, knew that losing was no personal disgrace and certainly not a career-ending moment. Nonetheless, he felt it keenly when an elderly woman approached him in tears as the scale of the Tories’ national defeat became clear. “I don’t want to die under a Labour government,” she said. The misery of that exchange still lingered when he wrote of it many years later.

Mr Cameron has suffered personal setbacks. The influence of the birth, life and death, aged 6, of his first son Ivan is well known. It is fair to say, however, that he has suffered less in the way of professional reverses than many other senior members of the Conservative leadership. After defeat in Stafford Mr Cameron went back to a well-paid City job as director of communications for the media company Carlton. It was a younger generation of Conservative staffers who tasted the most bitter fruits of opposition, and started to do the most original thinking about how to return to power.

Although they overlapped while the Tories were in government, Mr Cameron did not really know George Osborne until both were elected in 2001. He was not in Smith Square as Mr Osborne and a handful of other young staffers, including several defectors from the Social Democratic Party, began to think deeply about how to decontaminate the Conservative brand. Figures such as Andrew Cooper and Rick Nye, who went on to set up the polling firm Populus, began pointing out that voters tended to like Conservative policies, until they found out that they were Conservative policies. It was not the policies that were the problem.

Just as Europe divided the party during its previous years in power, so the question of “de-toxifying” the Tory brand fractured it in opposition. The modernisation of the Tories, started under William Hague, slowed as it became entangled in the Tories’ kultur war over social issues such as gay adoption and marriage. Throughout it all Mr Hague’s political secretary, Mr Osborne, had a ringside seat.

Mr Cameron, as he now privately admits, had a slower conversion to the modernisers’ cause than some of his most senior allies. Less than a week after being elected in 2001 (having been selected for the safe seat of Witney) he was asked how the party should change. His answer is telling since it dwells on questions of presentation, not substance. “[The Conservative Party] needs to change its language, change its approach, start with a blank piece of paper and try to work out why our base of support is not broader. Anyone could have told the Labour Party in the 1980s how to become electable. It had to drop unilateral disarmament, punitive tax rises, wholesale nationalisation and unionisation. The question for the Conservative Party is far more difficult because there are no obvious areas of policy that need to be dropped.” Almost as an afterthought, he then added: “We need a clear, positive, engaging agenda on public services.”

Later, when he was leader, Mr Cameron was often asked when he would have a Clause Four moment, a reference to Tony Blair’s totemic defeat of party critics. His answer was always a version of that first, raw, draft. The riposte might be caricatured as: “We’re right, it’s just that the voters don’t realise it yet.”

Although he backed Mr Portillo, the modernisers’ candidate in the 2001 leadership election, the support was hesitant, even knowing. When Mr Portillo lost in an early round, the new Witney MP opted for Mr Duncan Smith over Kenneth Clarke. “What went wrong?” Mr Cameron mused in an online column. “Here was a leadership contender with buckets of charisma, a CV that included experience at the highest level of government and genuine cross-party appeal. Our man had offered leadership, radical change and ideas that challenged the party both in Parliament and the country. They simply weren’t ready for it. In many ways it is view that I share.”

Mr Cameron’s early career as a backbencher is not littered with examples of him acting as a spokesman for the need for the party to broaden its appeal. He was, for example, a passionate defender of fox-hunting. (In fairness, he also took a brave and principled position on the decriminalisation of drugs.) Gradually, however, and partly as a result of a developing friendship with Mr Osborne, Mr Cameron started to think more deeply about what was needed, and in particular what a “clear, positive, engaging agenda on public services” might look like.

At the same time, Mr Cameron was receiving firsthand experience of the NHS as it cared for his son, who was born with Ohtahara syndrome, a serious neurological condition. If the Tories were really going to modernise, Mr Cameron came to realise, they had to embrace properly funded, high-quality, universally available public services. Michael Gove, then a journalist with The Times, Mr Hilton, Mr Osborne and others began to meet regularly in a Mayfair restaurant to plot a Conservative future.

There was still time to test to destruction the alternative model. Mr Howard, who replaced the ousted Mr Duncan Smith in 2003, flirted with a full-throated modernisation but came to view it as unauthentic, at least in his mouth, and opted like Mr Hague for a safety-first “core-vote” strategy in the 2005 election.

Mr Cameron, who with Mr Gove helped to patch together the party’s manifesto, saw at first hand the consequences of limiting Tory appeal to existing supporters. Mr Cameron, then, emerged from another election disaster surrounded by two long-term friends, Mr Hilton and Mr Gove, and one newer ally, Mr Osborne. It was, however, someone he had known longer than any of them that pushed him hardest to run for the leadership. Andrew Feldman, a friend since Brasenose College, Oxford, set up the key meeting with Lord Harris of Peckham, a former Conservative treasurer, that helped to convince him to contest the leadership. Mr Feldman, who was later appointed chief executive of the party and then co-chairman, is an important, although non-political, member of the inner circle.

There were others who might have led the modernisers’ charge against David Davis in 2005. Andrew Lansley, David Willetts, Francis Maude, even Oliver Letwin, had all, at various times, held the mantle. Mr Osborne, had he been a little older and a little more confident, might have challenged Mr Cameron’s right to present the case. But he could see that Mr Cameron was exactly the reassuring figure that the party’s grassroots would trust to carry out the sort of radical changes that were needed to restore the party’s electoral fortunes. Together with Mr Hilton, the pair crafted a leadership campaign that balanced the modernising creed with a traditional message on the family. It was Mr Cameron’s star performance in hustings at the Conservative Party conference in Blackpool, however, that landed him the job. He beat Mr Davis by a margin of two to one: 134,446 to 64,398.

Veterans of the early days of Mr Cameron’s stint as Leader of the Opposition wonder, however, how they avoided disaster. It was not that the Tory leader lacked a solid backroom team: he had in Ed Llewellyn and Catherine Fall two long-term friends for his chief of staff and deputy chief of staff, and another former colleague reporting for duty was George Bridges. It was that the sheer, exuberant energy of the creative talents of Mr Hilton and Mr Letwin, coupled with Mr Cameron’s own inexperience and a general lack of organisational clarity, led to some hair-raising scrapes.

A fascinated and largely supportive media did not seem to notice, at least at first, as it lapped up the youthful leader. The environment provided the theme and the backdrops for an initial repositioning. Carefully crafted photo-opportunities, the most famous involving dog-sledding in the Arctic Circle, challenged voters’ preconceptions about what a Conservative leader looked like. Even the party’s slogan in the 2006 council election – Vote Blue, Go Green – seemed designed to blur former associations.

The Conservative grassroots were a tougher audience, particularly on the sensitive issue of candidate selection. Local associations had seen off previous attempts to dilute their power to select representatives but the new leader knew that, if he was to make the party look more like modern Britain, this was a battle he had to win. His first attempt, the creation of a 100-strong “A-list” of preferred candidates, was a crass but ultimately effective opening gambit. In the new Parliament there are 48 women Conservative MPs and 11 who are black or from other ethnic minorities. In the previous Parliament there were just eight women and two non-white MPs on the Conservative benches.

But while candidate selection was a fight that Mr Cameron knew he had to have with his grassroots, the defining battle of this period was one that he did not mean to pick. Ill-judged briefing around the issue of grammar schools in May 2007 brought resentment over Mr Cameron’s leadership to the surface among activists and MPs. That an Old Etonian was setting his face against state-funded selective education provided the first opportunity for critics to wheel out the issue of his class. Mr Cameron first tried to escalate the crisis making it a “key test” to establish whether it wanted just to be a “right-wing debating society”. When the backlash grew fiercer, Mr Cameron made a tactical retreat. It was the start of an uncomfortable summer, the low point of his leadership in opposition. An increasingly restive party, Mr Brown’s arrival in No 10 and the threat of an early election pushed the Tory leader to the right. Issues such as crime and immigration, deliberately ignored for two years, were foreshadowed.

Here Mr Cameron again showed his skills as a political communicator and the advantage of his youth. A thoughtful speech against multiculturalism won the distinction of an endorsement by Trevor Phillips, head of the new Equality and Human Rights Commission. Similarly, concerns about law and order were framed in the language of social justice. The emphasis was on the impact of crime, antisocial behaviour or welfare dependency on low-income households rather their better-off neighbours.

It took a straightforwardly old-fashioned Tory tax break, the offer to increase inheritance tax to a threshold of more than £1 million, to provide the Conservatives with the momentum at that year’s conference to scare Mr Brown away from going to the country. As the Conservatives began to enjoy huge poll leads after that disastrous miscalculation by Labour, it seemed to Mr Cameron and his inner circle that he had at last resolved the party’s brand problems. Mr Cameron could use the full palette of issues without being accused of lurching to the right. Even Nick Clegg’s arrival as the new Lib Dem leader, another youthful leader offering change, failed to make a significant impact on poll ratings that seemed to pave a sure path to No 10.

The advent of the global economic crisis exposed such confidence as premature, although at first it seemed that it would deliver a landslide victory. Britain’s galloping debt levels seemed to Mr Cameron and Mr Osborne to confirm, not challenge, the need for a smaller State. A tactical decision to match Labour’s spending plans and deny Mr Brown his favoured “investment versus cuts” dividing line was abandoned in favour of a formula that “shared the proceeds of growth”, code for cuts in spending. Expenditure would grow at a slower rate than GDP for all departments except in three ring-fenced areas, health, international development and education. This formulation was itself jettisoned as the recession took hold, however, and the Tories’ economic credibility was tested.

Indeed the global nature of the crisis, and Mr Brown’s relentless use of an international stage to illustrate the need for state action, undermined the Tory case. When framed as a choice between who could best cope with the economic storms, voters cooled on the Conservatives. Mr Cameron found his party’s poll rating pegged back beneath 40 per cent, the share of the vote at which an overall majority was assured.

Throughout his leadership the party’s private polling had consistently shown Mr Cameron to be more popular than his party. When the broadcasters’ attention was on the Tory leader, the Conservative poll rating increased, when it was not they slipped back. The overall strategy of the campaign seemed simple enough: highlight Mr Cameron’s personality while delivering a message of broad reassurance on public services and economic competence.

In fact, as the long campaign ground on through early spring it became clear that Mr Cameron had overestimated his own popularity with voters while underestimating the remaining suspicion voters harboured about the Conservative brand. In avoiding a Clause Four moment with his party, and then by using the economic crisis to seek a mandate for a smaller State directly, Mr Cameron left himself open to Labour claims that he represented the “same old Tories”. It was Mr Clegg, however, who was best able to exploit the vulnerability. Voters wanting a change but not convinced about the Conservatives were offered a route out of their dilemma.

While the campaign exposed some of Mr Cameron’s faults – a tendency to substitute personality for policy, an over-reliance on a small group of confidants – his pragmatism and speed of manoeuvre served him in excellent stead for its aftermath. The manner in which Mr Cameron fashioned his coalition and then drove it through a reluctant party impressed even his enemies.

His coalition with the Lib Dems offers the chance for the late and reluctant convert to complete the modernisation of the Tories.

Francis Elliott is co-author of David Cameron: The Rise of the New Conservatives (2007)