It is budget day. Inside Conservative headquarters on Victoria Street, central London, 30 press officers and party officials are hard at work in the war room. Some peer at computer screens; others watch Gordon Brown on Sky News.

The chancellor is announcing help for pensioners on council tax. Within five minutes a Tory official has phoned Sky with the party “line”, pointing out that the council tax rebate applies only for a year whereas Brown has implied that the bonus will carry on indefinitely.

Party officials have all the figures on council tax before them, and the media monitoring unit is taking down what every radio and television commentator is saying. Some of their points are hastily sprinkled into news releases.

It has not been this organised at Tory HQ for a long time. The party moved last year from Smith Square, a Georgian rabbit warren that was not suited to modern campaigning, into an open-plan building. With the help of a £2m facelift officials now wield all the slick weapons that Labour’s famed 1997 election machine had.

Their computers are equipped with killer “rebuttal” software. BlackBerries are distributed so that officials on the move have access to e-mails and an hourly summary of news headlines from all sources. It is at last a highly professional operation.

This is the heart of the Michael Howard blue revolution. Most the staff are no older than their mid-thirties, with none of the hang-ups from the Major years or the landslide defeats. They are good-looking, self-confident young men and women.

Within yards of the war room, separated by a temporary partition, is the policy unit. A few years back policies appeared to be made on the hoof by ambitious shadow ministers jostling for position. Now they are “tested to destruction” in the policy unit before they are announced.

In recent months the Tories have, as Howard claimed at his party’s spring conference in Brighton, “been making the political weather”. Policies such as council tax cuts for pensioners, quotas for asylum seekers and immigrants, 5,000 more police, tougher school discipline, even abolishing speed bumps have had Labour on the back foot. Only the Howard Flight saga, in which the former party deputy chairman implied there was a secret agenda to make bigger cuts than the £35 billion promised, has briefly taken the wind out of the sails.

The Tories have come up with individual case studies to demonstrate government failings in the health service, such as the “battle of Margaret Dixon’s shoulder”, the pensioner who had her operation cancelled seven times, and forced Blair into concessions on anti-terrorism legislation.

At the same time Labour’s negative attacks on Howard, comparing him to Shylock and a flying pig, have backfired under a measured counterattack. At times, including last week on the day the election was announced, opinion polls have shown the Tories closing the gap to within two or three percentage points of Labour.

Are things really about to turn for the Conservatives after eight years in the political wilderness? Or will Howard’s tenure be merely another milestone on a much longer road to recovery? At the heart of the fightback is Lynton Crosby, the election guru who arrived last October from Australia, where he had masterminded four successful campaigns for John Howard, the prime minister.

Crosby is quietly spoken but what he says is blunt. (He also swears a lot and refers to nearly everyone, including Michael Howard, as “mate”.) He believes that while there should be a clear national message, and that Howard should set the agenda as much as possible, there should be a focus on local campaigning.

His first task was to convince the Tory leader to focus on 100 or so marginal seats. His second was to challenge the “bullshit” put around by most Westminster commentators that the Tories have no chance of winning office.

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