When George Osborne became Shadow Chancellor, a veteran Labour MP heckled him about the position he had taken on the poll tax. Mr Osborne was able to reply that when the poll tax was introduced he was studying for his A levels. The time frame between the election of Margaret Thatcher as Conservative leader and the present day is now roughly the same as that between her election as Tory leader and the arrival of Winston Churchill as wartime Prime Minister. It is the slow retreat of the Thatcher years into history that make David Cameron and his leadership of the Conservative Party possible.

David Cameron’s inner circle has acquired the name “the Notting Hill Set”. But they didn’t meet by bumping into each other outside the Gate cinema and starting to chat about politics. They met in the Conservative Research Department (CRD) just as the Thatcher years gave way to the Major years. Cameron, his Shadow Chancellor, his chief strategist, his chief of staff, his deputy chief of staff — the gang, really — share the experience of working in Conservative Central Office. They should properly be regarded as the “Smith Square Set”.

The Smith Square Set signed on for service with a party that was at the tail end of one of the longest periods of success in British politics. The experience of the advisers they replaced was of unbroken victory, huge selfconfidence, total domination. Their own experience was to be of decline, feuds, defeat, downfall. Much that is controversial in Tory politics is simply the difference between the lessons they learnt and those that shaped the politics of Conservatives even just a few years older.

When Tony Blair became leader of the Labour Party, his message of change was powered by the experience of decades of disappointment. The only Labour Government that members felt any affection for had fallen in 1951. The party had not won a proper working majority in nearly 30 years. Everyone, or nearly everyone in the mainstream, realised that things had to change.

This was not the case in the Conservative Party. Margaret Thatcher’s Government had been fantastically successful. It had transformed the economy, changed the very nature of policy debate and swept all before it electorally. This meant that for many Tories the answer to almost any political problem was to ask themselves: “What would Maggie have done?”

In the years between the fall of Margaret Thatcher in 1990 and the rise of David Cameron 15 years later, the brilliant success of her government came to seem almost more of a curse than a blessing to successive leaders. Policy innovation became very difficult without reopening old factional splits, social renewal could look frivolous, drawing a line under unpopular old policies could look like betrayal. Margaret Thatcher’s own appearances, greeted with fully deserved adulation from Tory audiences, often made life difficult for the current incumbent.

David Cameron had the inestimable advantage of the passing of those long years. The old factions had become meaningless. old battles half buried, people who hate each other had begun to forget what it was they had been arguing about. It was possible to move on. The almost unsolvable puzzle — how to deal with the Thatcher legacy — became easier to resolve.

First, recall and celebrate Margaret Thatcher’s period in office. It was controversial, of course, and no one wants to resurrect old disputes, but Conservatives have a right to be very proud of what she did. They should not be forced to be defensive about it. The dire fiscal position that the next government will inherit allows David Cameron to talk more openly of the Thatcher Government’s finest hour — the way it tackled economic decline.

Second, be guided by what she did and not by the myth of Thatcherism. Most Tories recall that the Thatcher Government cut taxes. They do not recall that the first Budget by Sir Geoffrey Howe, her Chancellor, raised taxes to reduce borrowing. When Mr Cameron and Mr Osborne said they would always put stability before tax cuts, a number of Conservatives were angry. Mr Osborne simply replied to them by quoting Sir Geoffrey.

Third, remember that Margaret Thatcher was a politician to her fingertips. While she may have been clear about her direction influenced by free market think-tanks, she always, always understood that she was a politician running for office. As Leader of the Opposition she was clear about her direction, but sparing in giving details about what she would do. The careful preparation for office was notable, as was the political caution. In office, she backed away from her first confrontation with the miners because she thought she wouldn’t win.

Fourth, understand that this is a different era and that the social values of the 1970s and 1980s were different. Margaret Thatcher was modern in 1985, but so was Lionel Richie. Conservatives have to change to accept the modern world — one that is more tolerant, liberal, socially aware — or risk being rejected by a modern world they appear to disapprove of.

Fifth, take advantage of the many innovations in Conservative policy thinking that there have been since 1990. New ideas in crime fighting, for instance, or of how to strengthen society without expanding the State. Mr Cameron has also shown interest in the relatively new field of behavioural economics — how to nudge people’s behaviour without burdensome regulations. Little of this thinking was taking place in even the most advanced think-tanks in the 1980s.

And finally, the tone of Thatcherite politics was set by the extraordinarily combative politics of the period. Now, however, David Cameron has been trying to reinvent his party to ensure that it doesn’t seem arrogant, uncaring, overbearing, pleased with itself. So history, the mere passing of time, has been Mr Cameron’s most powerful ally. But the Thatcher legacy remains strong. Anybody who has studied social psychology cannot remain unamused as they watch Conservative conferences, and notice that party members gradually begin to look, sound and dress a little bit more like David Cameron every year. The more politically successful he has been, the more marked this transformation.

But, if he stumbles? If he finds his first couple of years in office difficult? Margaret Thatcher the active politician may not be there. Margaret Thatcher the memory certainly will be.

Daniel Finkelstein is Chief Leader Writer at The Times and was director of the Conservative Research Department under John Major and William Hague

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