Dominic Lawson: Some taxing questions for Cameron

Not long after he became leader of the Labour Party, I asked Tony Blair to lunch - I thought the readers of The Spectator, which I then edited, should know what sort of person and what sort of politician, he was.

Two things remain vividly in my mind from that occasion. First there was the mesmerising effect his presence seemed to have on both the waiters and the other diners. The word "charismatic" is grossly overused in political life, but there was no doubt that it applied - and still does apply - to Tony Blair. The second memory is of what he said to me when, after he had described his passionate belief in the benefits of the free market and low income taxes, I asked how many of his parliamentary colleagues shared his point of view. "None of them," was his instant response.

Now it could be that the new leader of the Labour Party - soon to be renamed New Labour - was simply trying to win favour with the editor of a right-of-centre publication. But since he also fiercely dismissed The Spectator's Euroscepticism and told me that he was irrevocably committed to taking Britain into the European single currency,I chose to believe him. And, on the whole, the events of the intervening years suggest I wasn't completely mistaken.

So when Cameron is criticised by parts of the Conservative press for being nothing more than a Bollinger Blairite, those critics should bear in mind just how far removed Tony Blair's views are from the Labour Party's mainstream - and to consider just where Cameron and the Conservative Party might be placed on the political spectrum when the Labour Party is led by someone with less intuitive sympathy for the aspirant middle classes of the Home Counties.

Perhaps it is a desire to impart that message to his own core voters that in his speech to Demos yesterday Mr Cameron described at some length the extent to which Mr Blair has absorbed and adapted the agenda set by Margaret Thatcher - at least in the economic sphere.

This will obviously annoy some of his more fundamentalist critics deeply - they regard themselves as the only fully licensed interpreters of the Thatcher writ. However, as Charles Moore, who was appointed by the woman in question to be her official biographer, pointed out a fortnight ago: "In roughly the same period of leadership as David Cameron has so far served , Mrs Thatcher made a speech advocating a greater move to the centre for the Tories, another praising Scottish devolution and several on the glories of closer European integration."

In other words, Mrs Thatcher, at least when she was trying to become Prime Minister for the first time, was acutely aware of the need to display her credentials as a politician rather than as an ideologue. Perhaps this was seen at its clearest during the 1979 election. Against the wishes of the economic "drys" Geoffrey Howe and Nigel Lawson, she took the advice of the "wet" Jim Prior to make a pledge to honour whatever might be the recommendations of the Labour -appointed Clegg Commission on Public Sector Pay.

In August 1979, Professor Clegg duly produced his report and recommended a 26 per cent increase in salaries in the public sector. The effect of honouring the election pledge had a near-catastrophic effect on public expenditure,and ensured that the first move on taxes under Margaret Thatcher was up, not down.

It is also the case that the manifesto on which Margaret Thatcher was first elected made almost no references to privatisation and none whatsoever to the abolition of exchange controls, which was the most radical early free market reform of the incoming Conservative administration.

And in case anyone should think that David Cameron is breaking with the recent Tory past in manifesting concern for the environment, here is what Margaret Thatcher said in the 1979 election manifesto: "The quality of our environment is of vital concern to us. The Conservatives have a proud record of achievement in reducing pollution and protecting our countryside ... we attach particular importance to measures to reduce fuel consumption."

And of course it was Mrs Thatcher who as Prime Minister declared that: "No generation has a freehold on this earth. All we have is a life tenancy - with full repairing lease. This Government intends to meet the terms of that lease in full."

This sort of argument of continuity from Thatcher to Cameron via Blair can, of course, be taken too far. And the shadow Chancellor, George Osborne, certainly went too far in his latest interview, in which he argued that the Conservatives of 2006 are like their predecessors in opposition in the late 1970s and that "The Conservatives did not promise tax cuts in the 1979 election and said they had to sort out the public finances first." I can only assume that George Osborne's copy of the Conservative manifesto of 1979 is unaccountably missing the section headed "Cutting Income Tax", which begins, unambiguously, "We shall cut income tax at all levels."

I very much hope that the next Conservative manifesto also has a section entitled "Cutting Income Tax". But I also hope that its first sentence is slightly different from its predecessor 27 years ago. It should instead begin: "We shall cut income tax at the lowest level." This is something which Maurice Saatchi has been unsuccessfully attempting to persuade a series of Tory leaders to do, and I can do no better than to quote what he wrote on the subject four years and three party leaders ago: "The poorest 10 per cent of the people now pay a record rate of between 50 and 63 per cent of their income in tax. The least well-off pay the highest rate. It is outrageous that 3.6 million people who earn less than half the average - in other words within the official definition of poverty - pay any income tax at all. At present the Government first taxes such people on their incomes. Then it offers them benefits to compensate them; then, finally, it taxes some of the benefits, with the poorest people paying the highest burden."

It seems to me that, in Maurice Saatchi's increasingly hoarse pleas, David Cameron will find the answer to the Conservative Party's biggest problem : how to seize control of what he rightly sees as Tony Blair's most valuable insight, the simultaneous pursuit of social justice and economic prosperity.

More pertinently, perhaps, for those who rightly believe that the Conservative Party should find its inspiration from its own history, rather than the soundbites of a Labour Prime Minister, it would help to realise what Disraeli declared in his great Crystal Palace speech of 1872: "The historic function of the Conservative Party is the elevation of the condition of the people."