William Hague and his wife, Ffion, arriving at the celebratory dinner

In a speech marking the 20th anniversary of Margaret Thatcher's election as prime minister, the Tory leader vowed his party would mount a battle to defeat "the moral emptiness and media obsession of a New Labour Party that will say anything, do anything, promise anything to seize power and hold on to it".

Tory leaders past and present gathered at the Hilton Hotel in London to commemorate Baroness Thatcher's coming to power in 1979.

'Bond of understanding'

Mr Hague warmly praised Lady Thatcher: "You set the British people free, you released the true instincts of our country that had been suppressed for too long, and you made Britain great again."

Hinting at radical reforms within the Tory movement, Mr Hague said: "We changed Britain. It would be a tragedy if the one institution in Britain that didn't change was the Conservative Party.

"We allowed the bond of understanding between ourselves and the British people to break - a bond of understanding which you, Margaret, always instinctively knew was the Conservative Party's unique strength.

"We are going to re-establish that bond of understanding. We are going to reconnect with the values of the British people. We are going to rediscover the British Way."

Accusing Labour of making it more difficult for UK business to compete, the Tory leader said his party would "lead a fresh enterprise revolution that we will carry into the boardrooms and workplaces of British businesses".

But Mr Hague stressed it was a great mistake to think that the Tories were not a party committed to public services. There were "limits to the role of the free market", he said.

A distinctly Conservative approach could "offer a real transfer of power away from Whitehall to schools and hospitals, patients and parents".

'Moral emptiness' of New Labour

Mr Hague said Lady Thatcher had defeated old-style socialists. "Now we face just as important a battle to defeat the moral emptiness and media obsession of a New Labour Party that will say anything, do anything, promise anything to seize power and hold on to it."

Tony Blair: Baroness Thatcher has no time for his "Third Way"

On Northern Ireland, Mr Hague said the Tories would work with the government for peace. "But every Conservative believes with me that until the paramilitaries start handing in their weapons they should not be admitted to the new executive and no more terrorist prisoners should be released."

And on Kosovo, he stressed the need for "clear objectives" for the armed forces.

Baroness Thatcher, in her speech, warned that "behind the new Labour mask, Old Socialism smirks".

"If you go into politics, as the socialists did, because you believe that big government is the answer, how can you now agree that big government is the problem?"

'What have they got against Denis?'

She scorned the "Third Way" promoted by Tony Blair. "This silly catch phrase demonstrates that our new masters still cannot admit that everything they and their forbears stood for was utterly and catastrophically wrong," she said.

She said that in the eyes of the current government "we are all just children - beef on the bone, Benson and Hedges, duty-free. They are all endangered. Just what have these people got against my husband?"

Sir Edward Heath, no fan of Margaret Thatcher, also attended the anniversary celebration

Lady Thatcher said: "The painful paradox is that we Conservatives, here and abroad, have won the arguments but lost power. Our very success has made us seem dispensable."

Yet, she went on, the post-Cold War world was "more dangerous than ever".

Both Baroness Thatcher and Mr Hague paid warm tribute in their speeches to Sir Edward Heath, who was also a guest at the dinner.

At the start of the evening's events, the three Tory leaders took part in a photo-call during which Lady Thatcher said to Sir Edward: "You should be on my right".