The Conservative rank-and-file were told in no uncertain terms today that David Cameron and his leadership team would not budge on their refusal to commit the party to tax cuts ahead of the next election.

The message was delivered to the party conference in Bournemouth by George Osborne, the Shadow Chancellor, who even borrowed a line from Margaret Thatcher as he pressed the case for the Conservatives to put economic stability first and foremost.

The issue has become a litmus test for the party's direction under Mr Cameron, who has given it a massive opinion poll boost since he was elected leader ten months ago but is determined to shift the party even further to the centre.

As Mr Osborne delivered his keynote address to conference this afternoon, he told delegates that as a Conservative he did believe in lower taxes to make Britain freer and more competitive.

"But let me tell you something: there is no such thing as a tax-cutting Shadow Chancellor," he declared. "Surely we must have learnt from three election defeats this simple truth.

"We must win the argument on the economy. We will never do that if people believe our tax policy comes at the expense of their public services. That will not happen."

Insisting that he will not make commitments now for the 2009 Budget, Mr Osborne said: "To those who want us to make upfront promises of tax cuts now, we say: 'We will not back down. We will not be pushed or pulled. We will stick to our principles. We will do what is right.'"

Yesterday, a series of rightwingers broke ranks to attack Mr Cameron on the tax issue. Among them was Lord Tebbit, the former party chairman, who waved tax-cutting policies from the manifestoes of 1979 and 1987 that won Lady Thatcher landslides as he addressed a fringe meeting.

Today, in reply, Mr Osborne invoked the Iron Lady in his defence. "Let no-one ever portray sound money as an abandonment of Conservative principles. For sound money is the oldest Conservative principle of all," he told delegates.

"As Margaret Thatcher said: 'I am not prepared ever to go on with tax reductions if it meant unsound finance.'"

But the grumbling continued off-stage. As Mr Osborne was speaking, the senior backbencher Edward Leigh, who heads the influential Commons Public Accounts Committee, told a fringe meeting that the party should commit itself to lower taxes if only to keep its core supporters on board.

He also said the leadership should not "turn down the volume" on issues such as immigration - which does not even feature in Mr Cameron's "Built to Last" statement - or Europe, or supporters would desert the Tories for the BNP or UK Independence Party.

"It's obviously vital if we are to win the next election that we remain loyal to our traditional supporters. You can't just assume that your traditional voters will remain on your side," he said.

"If we don't speak out on these issues there's a real danger that we can become a recruiting agent for UKIP and BNP," Mr Leigh said.

"Of course you've got to be on the centre ground in politics, but you've got to drag the centre ground towards you."

Mr Osborne received repeated applause and a standing ovation from the conference for his speech, which included proposals for a "simpler, flatter and fairer" tax system and a pledge never to link the pound to the single European currency or to join the euro.

But it was noticeable how delegates streamed from the hall as the ovation began, suggesting that the battle is far from over.

Many within the party believe that Mr Cameron has deliberately chosen tax as the battleground on which to take on the Tory old guard, knowing that by doing so he helps to shift the party towards the centre in the mind of voters.

But the Tory leader appeared to score something of an own goal this morning when, pressed by a television interview on whether tax cuts would help working-class families, he said that his mother had taught him that there was "actually more to life than money".

Lord Tebbit for one has been unafraid to mock Mr Cameron for his privileged social background and Eton education. Given that Mr Cameron was born to the second daughter of a baronet, today's remark seemed ill-judged.

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