Last year, Policy Exchange and YouGov carried out a major polling exercise about what voters want, and there are lessons from it for all the main parties. For the Conservatives, it highlights four (overlapping) ways in which the party needs to do better.

First, they need to do better outside their southern heartland. In the south and the east of England the Tories have nine out of every ten seats. In the Midlands they have about half, and in the north less than a third. In Scotland they hold a single seat.

Second, they need to do better in urban areas. The Tory problem in the north and Midlands is a specifically urban one. There are 80 rural seats in the north and the Midlands. The Conservatives hold 57 of them (or 71 per cent). But there are 124 urban parliamentary seats in cities in the north and Midlands, of which the Conservatives hold just 20 – or 16 per cent. That is why only two Conservative MPs have Premiership football teams in their constituencies – even though there are 20 teams in the League.

It will take a while to change this. In many cities the Tories face a structural problem. In the councils of cities such as Liverpool, Manchester, Sheffield and Newcastle, the Tories do not have a single MP or councillor and have a drastically diminished activist base. London is the Tories’ other urban problem – there they hold just 38 per cent of the seats. In many cities, voting Tory has become countercultural and the Conservatives have become stranded in a distant third place, replaced by the Liberal Democrats as the official opposition to Labour. Being stuck in third place is very self-reinforcing, because no councillors means no activists, and that makes it hard to win seats at general elections.

Third, the Conservatives do badly among ethnic minorities. Fewer than one in eight voters of Pakistani origin voted Tory, while nearly six out of ten voted Labour. Among black voters, fewer than one in ten voted Tory and eight out of ten voted Labour. Brit - ain’s ethnic-minority voters are usually concentrated in urban areas.

Finally, the Conservatives need to do better among ordinary working people. Polls show two-thirds of voters agree that “the Conservative Party looks after the interests of the rich, not ordinary people”. Even among Conservative voters, more than a quarter agree. They are voting for the party despite this problem. (And no, that isn’t because these people think they are rich and that they will benefit.)

Although class differences in voting patterns have declined, there are still large numbers of people who think that the party is “not for people like them”. This is a problem for the party everywhere, but particularly outside the south-east. People in the north are more likely to perceive themselves as working class than people doing the same jobs in the south.

So was Tory modernisation off target? What was the first phase of Tory modernisation? Ask a Westminster journalist and he would talk about hugging huskies, promoting greenery and not wearing shoes.

That’s a misleading stereotype. In reality, efforts to reassure voters about the National Health Service and economic competence were much more important. That first phase of modernisation succeeded far enough to make David Cameron Prime Minister, but not to get him a majority. That is because the most important part of the modernisers’ agenda isn’t done yet.

In 2002 the arch-moderniser Francis Maude wrote: “We are widely believed to be the party of caste and privilege, and therefore by definition unable to understand the dayto- day concerns of ordinary people . . . the stereotype persists: if you are a Conservative MP, you must be white and male, have been at a posh public school and be rich.”

Ten years on, that is still true, and it’s the reason why Cameronism is an unfinished revolution. The modernisers “get” the problem, but efforts to address it have been uneven and too limited. The deficit makes it tougher.

Blue-collar modernization

If the Tories were to restart the process of modernisation from here, where should they begin? The first phase of modernisation shook off the Tories’ reputation as the nasty party. Cameronism meant that middle-class people no longer felt guilty voting for a party that had previously looked homophobic, bigoted and old-fashioned.

This was a big achievement, made in the teeth of opposition from the right. However, the more blue-collar and economic aspects of modernisation have made less progress. And the recession has made the economy and jobs the central battleground in politics again. Parts of the Midlands and the north still associate the Tories with unemployment and deindustrialisation, and therefore the Tories have to make substantial efforts to be seen as the party fighting unemployment and encouraging job creation.

Voters want to see overall economic competence. But the recession has also made the cost of living a hot issue. And being seen to be doing something about jobs and unemployment is particularly important for the Conservatives, given their history and the perception that they are the party of the rich.

In the research that Policy Exchange carried out last year we found that voters think that politicians don’t understand people’s struggles with the cost of living because they are insulated from it by wealth, expenses and unfair perks. Driving down the cost of living should be one of the core ideas of Tory modernisers.

How could they do it? Polls show voters’ number-one issue is energy bills (particularly in the north). There is an opportunity here. Our current green policies favour expensive technologies such as offshore wind. Instead of trying to pick winners, politicians should create a level playing field for different carbon-reducing techniques. At Policy Exchange we calculated that with better policies the government could still hit its green targets and save each household £400 a year.

Fares on trains and public transport are another big bill that people could do without. The Department for Transport has tended to increase the cost of the railways by specifying fares, trains and timetables in great detail: the more unprofitable the services it specifies in franchise agreements, the higher the average cost will be. Yet the department has a long tradition of micromanagement that will not be easy to reverse.

The flip side of rising prices and bills is that tax cuts for those on low incomes have become more popular because people feel so squeezed. They are one of the few ways that politicians can tangibly and immediately improve people’s lives. But how to pay for further reductions?

There are still things the government could do to bring spending under control. Digitising public services could save billions: a benefit claim made online costs a hundredth of the cost of the conventional approach, shuffling papers around the country. The government could allow private organisations to provide new school places, taking the pressure off the Department for Education’s capital budget, or make better use of the empty space that exists in underperforming schools. The Home Office has lots of opportunities to save, too. We could save money on expensive prison places if we made community sentences tougher and better at deterring people from committing further crimes (half of all community sentences aren’t even completed).

Creating a real jobs market in prison could also save the taxpayer a considerable amount of money. People expect prisoners to work in jail but under the current system most do not, and prison work has been in decline for decades. We need a new regime of prison work with private companies hiring more prisoners in full-time paid jobs. That way, we can make prisoners more employable, which will reduce reoffending, while they pay something back to society and victims who get nothing at present.

The biggest cost of all for most people is housing. Rents are still rising sharply, and house prices have risen three times faster than wages over the past decade. The average age of a first-time buyer is now 37. Reviving housebuilding is also crucial to getting the economy moving.

In the UK, rents and mortgages are made more expensive by restrictions on supply which are unusually tight compared to our competitors. The current plans for reform of planning don’t do enough to break from top-down planning by local authorities. Nor do they do enough to ensure that houses are built where people want to live or that businesses can locate where they think is best for their business. The coalition has moved some way towards a bottom-up planning system, but the present incentives are still spread much too thinly over a whole local authority area, which does little to placate local people affected by development. By loosening the planning laws, so that houses are built where people actually want to live and businesses can start up where they think is best for their trade, the government could help northern cities expand, regenerate and discover a new vibrancy. Planning reforms should be explicitly marketed as a way to generate growth in northern cities and to help young people get on the housing ladder.

We could also learn from the Continent. In France and Germany people have the right to buy a plot of land on which to build a house. In these countries nearly half of all new housing comes from people building their own homes (or rather, getting local builders to build one for them). For the millions of people priced out of owning their own home, a “right to build your own house” could have the same political impact as the “right to buy” did in the 1980s.

A fifth of households still occupy social housing, and more could be done for them, too. About a fifth of social housing is worth more than the average house in each region. If we sold off the most expensive housing as it became vacant we could use the money to build more new social housing. That could enable the largest social housebuilding programme since the 1970s, creating up to a third of a million jobs. Instead of housing one lucky family in an expensive area, we could house two or more families that have been waiting on the housing list for too long.

Reforming planning also has the potential to regenerate run-down down town centres. In the north, one-fifth of high-street shops are vacant. The government has been discussing plans to allow empty shops to be turned into housing. This is very important, because shabby town centres drag down economic confidence and remove the sense of community from the heart of these areas.

Yet town-hall officials seem determined to keep an excessively strong grip on changing the use of buildings. The internet has permanently reduced the demand for shop space; but even at a time when there is a shortage of housing and a glut of empty shops, officials are determined to stick to their outdated masterplans and so forbid changes of use that could benefit their towns.

The government has flirted with the idea of building new garden cities. They are a great idea – and could have the same tangible effects as Docklands did in the 1980s, creating jobs and raising a fortune for government to spend on tax cuts, too. Moreover, they would show that the government was serious about getting the economy moving (remember those pictures of Margaret Thatcher with a shovel in her hand?). They could also be a good way to concentrate development, rather than just tacking development on to existing towns, or (worse still) filling in the green spaces in our towns and cities. Instead of bitty development everywhere, you can plan infrastructure to support development properly – yet so far there is little sign that anything is going to happen.

“The party of the rich”

In polling earlier in the year, Policy Exchange asked what might make people reconsider their view that the Conservatives are “the party of the rich”. Cutting tax for low earners, reducing the cost of living and reducing unemployment are the main ways it could shake off the tag.

Clamping down on rip-off business, tackling poverty and raising taxes on the rich came next. And there is much more that the coalition could do to reduce unemployment. The government is in the process of simplifying the benefits system. This is important, but there is still more to do.

Our welfare system is not very personalised. Most people who claim Jobseeker’s Allowance will find themselves a job with little need for help, but some will struggle. At present, the system waits to see who fails to find a job, and after a year on benefits people are sent to the Work Programme for coaching and more personalised support. After a year on the dole, however, it becomes much harder to find them jobs – people get depressed and rusty and have a big hole in the CV, which puts off employers. We should provide a more personalised service so that we can predict at an earlier stage who is likely to struggle. We could learn from other countries such as Australia, which has developed a system of personalised welfare in which jobcentres find out more about claimants’ problems at the first interview.

Any strategy to recapture Tory votes will need to be connected to a focus on job creation in the north and Midlands and an acceptance that, through an industrial strategy, the government can help to form the right conditions for new employment opportunities. Planning reform could act as a catalyst for job creation. Only by becoming actively associated with economic renewal in the north and the Midlands will the Tories be able to shake off their association with deindustrialisation and unemployment in the 1980s and 1990s. That is why it is so important that Tory ministers associate themselves with every piece of economic good news in the north and the Midlands.

The Conservatives also need to show northern voters – especially those living in urban areas – that they do not only represent the south-eastern shires. An example of how far the Tories have fallen back in some northern cities can be found in Liverpool. In the city’s mayoral election in May, the Conser - vatives came a miserable seventh, behind Labour, the Liberal Democrats, the Greens, a “Trade Unionist and Socialist”, a Liberal candidate and an independent.

The extent of the Tory decline is clear when you consider that, in 1959, six of Liverpool’s ten MPs were Tories. There is no silver bullet to solve the party’s problems in northern cities, but it needs to move quickly to strengthen its position, otherwise it will always find it difficult to gain a sustainable parliamentary majority.

The Conservatives could do more to “look and feel” more northern and working class, but there is no point in Tory MPs seeming more representative if northern voters don’t like the policies they are standing for or aren’t prepared to listen to what the Conservatives have to say. Localising pay bargaining, which aligns public-sector pay with the local cost of living and encourages employers to set pay rates based on performance, not time in post, is controversial but the benefits could be huge, especially for northern cities.

However, the politics of reforming national pay bargaining will be going nowhere unless the government can show that not a penny will leave poorer regions – the benefits of reforming public-sector pay should all be ploughed back into boosting local growth and reducing unemployment, particularly in northern cities.

At present it makes no difference to your pay whether you are working in an expensive city such as Manchester or a much smaller town such as Macclesfield, where housing is a lot cheaper. Tying pay to performance could boost public-sector productivity and the private sector would be able to compete on wages and be drawn to areas of the country dominated by public-sector jobs. If the government can show how reform of national pay bargaining would transform northern cities this could be a vote-winner. Mishandled, however, it could be a disaster, reinforcing the Conservatives’ image as a “southern party”.

Sorting out public transport would be welcomed by commuters, and investment in the northern rail hub is a good start. It is estimated that the hub could create as many as 30,000 private-sector jobs across the north of England. Businesses on both sides of the Pennines would be able to recruit from a wider pool of talent and their employees will be able to get to work more easily. Business will also enjoy greater flexibility and access to bigger markets. The journey time reductions that the hub will deliver across the north will allow rail to compete with road to provide quicker and more efficient journeys between city centres.

The Conservatives start from a low base in many northern cities and need to do some big things to show that they are serious about trying to build on success. There are still large parts of the government machinery that could be moved to northern cities, like the BBC’s Salford project.

Change to win

When he became leader of the Tory party, David Cameron said that it had to “change to win”. He noted that the Tories had been stuck on about 33 per cent of the vote for many years. And that is exactly where they are in the polls now. Cameron has rescued his party from the scrapheap once, but his modernisation is still a job half done.

Until the party does more to connect with ordinary working people, particularly in the north, Cameron’s mission will remain unfinished business. The Tories must change again if they want to win.

This is an edited extract from David Skelton’s chapter in “Tory Modernisation 2.0”, published on 16 January by Bright Blue.