Tories turn right to mend their broken poll lead

The Conservatives would abandon Labour's belief that "pumping" money into the most deprived areas is the way to solve Britain's social problems, a rising star of David Cameron's team says today amid signs that the panic-stricken party is turning to the right to curb a fall in the polls.

As the Tory leader prepared for his final conference speech today before the general election with the slogan "vote for change", a battle at the top of the party over strategy appeared to have been won by those favouring a hardline core-vote agenda.

Baroness Sayeeda Warsi, in charge of Tory plans to mend Britain's "broken society", says the party would send out a "strong signal" that "money is not always the answer" to deprivation. Using Thatcherite language, in an interview with The Independent on Sunday, she says a Tory government would oversee a "retrenchment of the state" – but the difference under Mr Cameron would be funding social entrepreneurs and volunteers to "reinvigorate" local communities.

Nevertheless, her remarks will be seized on by Labour as evidence that planned cuts under a Tory government will hit the inner cities hard.

Mr Cameron, in speech delivered using no notes today, says: "It is an election we have a patriotic duty to win because this country is in such a mess; we have to sort it out." He implicitly acknowledges that he is under pressure from the right of his party by insisting he will not retreat to core values in order to win the election. But there was evidence yesterday that those on the right are winning. Mr Cameron faced a stormy meeting of the backbench 1922 committee last Wednesday, with MPs demanding to know why the Tories are not 20 points ahead in the polls.

One MP claimed "60 to 70 MPs" are unhappy with the leadership – although they are unlikely to make any waves before the election.

After polling evidence showed voters are confused over the Tory election strategy, George Osborne, George Bridges and Andy Coulson, all of whom favour a tax-cutting, "austerity" strategy on public spending, will take charge of day-to-day campaign management while Steve Hilton, Mr Cameron's director of strategy who favours more centrist policies, has taken a back seat, along with Mr Cameron himself.

Leading Tory figures believe a Cameron government will have to "cut into the bone" of public services – further than the "modest" spending cuts the Conservative outlined in Davos in January. The leader this month said that he would find it difficult to avoid introducing Labour's planned national insurance rises because of tight public finances.

In a sign that Mr Cameron is leading a party more comfortable with spending cuts, one of the most popular events at the conference yesterday was the launch of the British version of the Tea Party, the US right-wing lobby for drastic tax cuts, by the Tory MEP Daniel Hannan. He defied the party line by saying radical tax cuts must be introduced, regardless of the size of the deficit. Addressing around 200 people at the Brighton Hotel, Mr Hannan cited Ronald Reagan's remark that "the deficit is so big it can look after itself". He added: "We seem to have lost sight of that wisdom."

A survey of grass-roots activists for the ConservativeHome website found the second most popular issue on which they wanted the party to campaign was immigration.

Mr Cameron has faced increasing hostility from the right-wing media, who are also calling for tax cuts.

The veteran right-wing commentator Charles Moore, writing in The Daily Telegraph yesterday, described Kenneth Clarke as "slapdash and mentally idle", while William Hague is "not fighting as if his life depended on it". It followed a front-page headline in The Spectator magazine declaring "The Tories go off the rails".

Mr Osborne confirmed yesterday that he is planning an emergency budget that will cut taxes for businesses. In his regular YouTube broadcast yesterday, Mr Cameron said: "Some say 'go back to what you might call the Conservative comfort zone and just bang out the old tunes'. Others say 'Look, Labour are in meltdown so just play it safe and you'll win by default'. Well, I can tell you, I have made my choice – and it's for us to be both modern and radical. Not to go back to the old ways and not to play it safe."

In her interview with the IoS, Baroness Warsi says that moving away from state funding of local communities is the only way to build up neighbourhood spirit. About 10 per cent of the national budget is diverted to local authorities to spend on housing, environmental services and other social areas. So far, the Conservatives have been tight-lipped about how they will scale back the state while fixing the "broken society". They have promised to keep Sure Start centres and tax credits for low earners, while taking them away from middle classes. But Lady Warsi's remarks suggest a much harder scaling back of state funding across the board.

Next month, the party will unveil plans for funding social entrepreneurs and "citizen activists" to reinvigorate communities through local not-for-profit projects. Lady Warsi tells the IoS: "In the past, when the Conservative Party fundamentally believes in a small state, and there has been a retrenchment of that state under various Conservative governments, we've assumed that that space will be filled by some level of society or voluntary sector. What's good about David's thinking is that he acknowledges that that's not going to happen automatically. And therefore something has to be done to make that happen."

She says that it was "music to my ears" to be told by a man running a not-for-profit catering project in Rochdale: "We are not interested in government money because it comes with so many strings and so much bureaucracy that it holds us back and we would never be where we are now if we'd got tied up with state funding."

Asked whether spending cuts were the last thing people on deprived estates needed, she says: "Clearly, if the solution to all their problems was money, we would have solved it, wouldn't we? That should send out a strong signal to say – actually, money is not always the answer. Because Labour has pumped money into areas, and has pumped money predominantly into their own areas... but actually why is it still in that mess?"

A sense of panic began to spread among Tory MPs last week after several days of bad headlines for Gordon Brown claiming he was a bully with a volcanic temper made no difference to the opinion polls, which consistently put the gap between Conservatives and Labour at six points.

At the 1922 committee meeting, when MPs confronted Mr Cameron about the polls, the Tory leader responded by saying that voters were disillusioned with all political parties. But one backbench Tory MP said last night: "That completely fell flat because Labour have gained ground on us. The problem is the last few weeks have all been about tactics, not strategy."

Referring to Mr Cameron's call last week for an inquiry into bullying at Downing Street, the MP added: "Voters who work in factories who are worried about losing their jobs do not want to hear about a bullying inquiry in Downing Street."

In a speech to the Labour Party conference in Wales, the Prime Minister attacked the Tories, calling the NHS the "greatest act of compassion our country has seen". Mr Brown said the party should stick by Labour's core values and fighting spirit: "Never to give up. Never to give in. Always hold to our ideals."

It emerged last night that concerns over an alleged "regime of terror" in Downing Street were not centred on Mr Brown, but on the behaviour of some of his closest lieutenants – notably Damian McBride and Charlie Whelan. The behaviour of the pair was thrust into the spotlight last week, after they were accused of briefing against the Chancellor, Alistair Darling.